Monday, February 08, 2016

The Ponzi Economy and The Rise of the Looter Class

We're already well into our eventual environmental meltdown. Are we now also on the cusp of a global economic meltdown? There is a growing chorus of voices warning that the end really is nigh for this enormous House of Cards we built for mankind in the wake of WWII.

Like most of us, I didn't dwell much on the environmental or economic State of the Planet until the twitch first set in somewhere around the turn of the century. Since then the looming perils have indeed materialized.

The fact is, we've been on a multi-generational bender of sorts and now it's hangover time. CBC business reporter, Don Pittis, writes that, "If you ever thought there was a group of smart people who really understood the economy and you were just too stupid to figure it out, now is the time to disabuse yourself."

It's an interesting article, a worthwhile read. Pittis focuses on British economist/journalist Martin Wolf of the Financial Times. Wolf suggests Britain's redemption lies in either a full-blown purgative depression or "helicopter money" which is a term for a guaranteed annual income plan.

Pittis concludes that the real problem isn't with the economy or the various proposed solutions.  Our Achilles' Heel, is a terminal problem.

"For leaders who make policy, it is almost impossible to try radical and unproven medicine that might work, for the simple reason that it might instead precipitate a crisis for which they would be blamed.

"So long as the global economy seems to be muddling on, governments and central bankers prefer to kick the can down the road just a little further, and keep praying for a miraculous, spontaneous cure."

What Pittis and Wolf and the rest of the like-minded cannot seem to grasp is that our economic model has a systemic, mortal flaw. Neoclassical economics of the sort taught to Wolf and Harper by Friedman and Hayek resting on a foundation of perpetual, exponential growth is a hoax introduced in the post-war era that worked really, really well but only for a few decades and only for those it was aimed at benefitting.

Sometime in the next century, when mankind's population has stabilized at somewhat under one billion, our era may be named something like "The Great Bloat," the era in which civilization swelled to the bursting point - and then burst.

The whole growth-based paradigm was a hoax, a contrivance crafted from some unsustainable circumstances and assumptions. Things that, by logic, didn't fit were dismissed, labeled as "externalities." Resource shortages, cost of resources, damage to the environment - mere externalities that must never be permitted to cloud the model.

This gave rise to the theory, the belief that was enshrined as orthodoxy, that the economy could and should grow larger than the environment. It has. That's the world of 7+ billion heading for 9+ billion we live in today. We're already consuming the planet's resources at 1.7 times their natural replenishment rate and still our appetites are growing. The miners' canary in this is that all other forms of life, marine and terrestrial, have declined in total number by half over the past thirty years. We're taking so much of everything they also need to survive that their numbers are collapsing.

Pittis may write of "leaders who make policy" but he abuses the word "leader." We don't have leaders today - not in the Liberals, nor the Conservatives nor the New Democrats. They're all self-interested, feckless can-kickers, the lot of them.

The tragedy of this is that you can no longer rely on the head of your preferred political party for leadership. You're going to have to self-educate. You've got to make up your own mind on just about everything - social, political, economic and environmental.

There's plenty of top-quality information out there. Read Joe Stiglitz. Read Phil Mirowski. Read James Galbraith. Read John Ralston Saul.  Below is an interesting lecture by Galbraith to the Post-Keynesian Conference. Pick it up around the 19-minute mark.

Of particular interest is Galbraith's description of the American economy and, to a lesser extent, the economies that are driven by it, in the post-2008 world. He describes it as a Ponzi economy exploited by a class he calls "looters" by which he means the 1%. He contends the looters see what's going on and they know it can't last so they're using their wealth and their influence, economic and political, to bleed the whole thing dry.

Fortunately we have fearless political leaders to keep us safe from these predators. What's that? Oh...


Northern PoV said...

"There's plenty of top-quality information out there. Read Joe Stiglitz. Read Phil Mirowski. Read James Galbraith. Read John Ralston Saul. Below is an interesting lecture by Galbraith to the Post-Keynesian Conference. Pick it up around the 19-minute mark."

Economists (even good ones) are trapped in the 'dismal science'.
I found more insight in biology & evolution: "The Social Conquest of the Earth" by E.O. Wilson

Hugh said...

"The whole growth-based paradigm was (is) a hoax"

My feeling exactly. Economic growth is now equated with economic health. As though a stable, sustainable non-growing economy is considered unhealthy.

The Mound of Sound said...

What the growth-based paradigm inevitably leads to, Hugh, is robbing from the future. We're at this point today. In reality we've been exceeding the planet's renewable resource carrying capacity since the early 70s. That has left us to predate the planet's reserve resources.

The critical factor that's almost always overlooked is how completely dependent we have allowed ourselves to become on the continuation of this self-destructive practice. Our global economy is so vastly larger than our environment that it's hard to imagine anything other than collapse bringing it back into balance. We won't do it voluntarily no matter how conclusive and obvious the need for that becomes. If I'm wrong and there is a god, surely it is on this that we will together be judged.