When You Run Out of Stuff

One of the most recurring themes on this blog over the past six years has been the prospect of running out of stuff.  As the first truly global civilization, mankind is running out of stuff.   Not everything, mind you.  We're running out of stuff that we need but we're building up dangerously big surpluses of stuff that we don't need, that could just kill us.

For example, around the world nations are running out of fresh water.  We have a huge and rapidly worsening fresh water crisis on our hands.  Maude Barlow gave an updated overview of the problem just last week.  With the exception of just a handful of countries, the world is running out of biomass, the renewable natural resources that not only underpin our economies but provide us with the clean, safe environment we need in order to live.  Anthropogenic global warming, man-made climate change is multiplying the magnitude of these crises and sapping our strength to implement solutions.

In many posts over the years it has been argued that we have to jettison our neo-classical growth-based economic model because it no longer works for us but rather works against us and traps us in a vicious circle of inequality and decline.  I know that Justin Trudeau and Tom Mulcair, like Stephen Harper, are constantly praising growth but they are  just blowing smoke up your ass.

Which brings us to Chris Hedges and Avner Offer, an economic historian and Chichele Professor Emeritus of Economic History.

Neoclassical economics, [Offer] says, is a “just-world theory,” one that posits that not only do good people get what they deserve but those who suffer deserve to suffer. He says this model is “a warrant for inflicting pain.” If we continue down a path of mounting scarcities, along with economic stagnation or decline, this neoclassical model is ominous. It could be used to justify repression in an effort to sustain a vision that does not correspond to the real world.

Offer, who has studied the rationing systems set up in countries that took part in World War I, suggests we examine how past societies coped successfully with scarcity. In an age of scarcity it would be imperative to set up new, more egalitarian models of distribution, he says. Clinging to the old neoclassical model could, he argues, erode and perhaps destroy social cohesion and require the state to engage in greater forms of coercion.

“The basic conventions of public discourse are those of the  Enlightenment, in which the use of reason [enabled] us to achieve human objectives,” Offer said as we sat amid piles of books in his cluttered office. “Reason should be tempered by reality, by the facts. So underlining this is a notion of science that confronts reality and is revised by reference to reality. This is the model for how we talk. It is the model for the things we assume. But the reality that has emerged around us has not come out of this process. So our basic conventions only serve to justify existing relationships, structures and hierarchies. Plausible arguments are made for principles that are incompatible with each other.”

The corruption of neo-classical economics.

Offer argued that “a silent revolution” took place in economics in the 1970s. “Economists,” he said of the 1970s, “discovered opportunism — a polite term for cheating. Before that, economics had been a just-world defense of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. Game theory was about cheating. Public-choice theory was about cheating. Asymmetric information was about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating there is no longer one outcome. It is what economists call multiple equilibria, which means there is not a deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.”

The problem, he said, is that the old norms of economics continue to inform our policy norms, as if the cheating norm had never been introduced.

 “Let’s take the doctrine of optimal taxation,” he said. “If you assume a world of perfect competition, where every person gets their marginal products, then you can deduce a tax distribution where high progressive taxation is inefficient. This doctrine has been one of the drivers to reduce progressive taxation. But looking at the historical record this has not been accompanied by any great surge in productivity; rather, it has produced a great surge in inequality. So once again, there is a gap between what the model tells us should happen and what actually happens. In this case the model works, but only in the model, only if all the assumptions are satisfied. Reality is more complicated.”

On the Need for Social Cohesion in a Post-Growth Society

Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases and increasing scarcity of water and food create an urgent need for new models of distribution. Our two options, he said, will be “hanging together or falling apart.” Offer argues that we cannot be certain that growth will continue. If standards of living stagnate or decline, he said, we must consider other models for the economy. Given the wealth and resources of industrialized nations, he said, a drop in living standards to what they were one or two generations ago would still permit a good quality of life.

Offer has studied closely the economies of World War I. Amid this catastrophe, he notes, civilian economies adapted. He holds up these war economies, with their heavy rationing, as a possible model for collective action in a contracting economy.

“What you had was a very sudden transition to a serious scarcity economy that was underpinned by the necessity for sharing,” he said. “Ordinary people were required to sacrifice their lives. They needed some guarantee for those they left at home. These war economies were relatively egalitarian. These economics were based on the safety net principle. If continued growth in the medium run is not feasible, and that is a contingency we need to think about, then these rationing societies provide quite a successful model. On the Allied side, people did not starve, society held together.”

However, if we cling to our current economic model — which Offer labels “every man for himself” — then, he said, “it will require serious repression.”

“There is not a free market solution to a peaceful decline,” he said.

“The state of current political economy in the West is similar to the state of communism in the Soviet Union around 1970,” he went on. “It is studied widely in the university. Everyone knows the formula. Everyone mouths it in discourse. But no one believes it.” The gap between the model and reality is now vast. Those in power seek “to bring reality into alignment with the model, and that usually involves coercion.”

We have a choice.  Either we continue with our neoclassical economic model that now serves mainly to vest wealth and political power in increasingly fewer hands and consign our grandkids to a future of coercion and repression or we create a movement to lead our country out of this trap.  That can begin by using government to undo the creature of its own making - inequality - and making our government's priority the restoration of the most robust, broad-based middle class possible.  It is only through the rehabilitation and expansion of that now shrunken middle class that we can hope to achieve the degree of social cohesion and collective will to transition Canada to an economic model we need and future generations will need for the 21st century as we progress into a post-growth era.  We either control our fate or our fate will be decided by others for us.

Canada's Mythical Middle Class and the Quislings of Parliament Hill

The government likes to say it's all about the middle class.  So, too, the opposition parties.  On Parliament Hill it seems Canada's middle class is virtually surrounded by a sea of friends, each clamouring to outdo the other to lend a hand, give a leg up.  With friends like that in high places, those of the middle class can surely look forward to a bright and prosperous future.

Except that it's a load of crap.

An internal report prepared for the Harper government by Employment and Social Development Canada and pried out of the cold dead Tory hands by Canadian Press via a freedom of information demand, paints a much different, far less rosy picture of the state of Canada's middle class and the future that awaits them.

"The wages of middle income workers have stagnated," it says, referring to the period from 1993 to 2007. "Middle-income families are increasingly vulnerable to financial shocks."

The document, drawing on three years of "internal research," was prepared for the department's deputy minister, Ian Shugart, shortly before the resumption of Parliament last fall.

"In Canada, political parties are making the middle class a central piece of their agendas," notes the presentation.

"The market does not reward middle-income families so well," says the report. "As a result, they get an increasingly smaller share of the earning's pie" compared with higher-income families.

The Cheney-inspired, neo-conservative government of Harper, Flaherty, Oliver et al, seem happy enough to watch the middle class devolve into an American-style 'precariat' while the spoils of their labour increasingly accrue to the wealthy.  Mulcair and Trudeau, with their pledge not to increase taxes, appear to be walking in lockstep with Harper.

"Over the medium term, middle-income Canadians are unlikely to move to higher income brackets, i.e., the 'Canadian dream' is a myth more than a reality."

When judging the culpability of our parliamentarians for this deplorable condition, remember this.  Most inequality today and most of the stagnation of the middle class isn't market-driven or merit-based.  It is legislated, the creature of statutes written and passed on Parliament Hill.  Harper knows it.  Mulcair knows it.  Trudeau, unless he's an idiot, knows it.  It's about time we got some straight talk from these characters - not from Harper of course but at least from our own.

Coming Soon - 3-Billion More "Big Mouths" to Feed

The world's middle class is on the verge of a population explosion.   Sorry, Earth.  Of the 7+ billion people on the planet today, about 1.8-billion are considered middle-class or make that consumer class.  By 2030 that sub-2 billion is expected to burgeon to just under 5-billion strong, churning away on their computers to order crap from Amazon.

Middle-class consumers will increase to 4.8 billion by 2030 and 95 per cent of them will be from developing countries, said United Kingdom Foreign Secretary's special representative on climate change, Prof Sir David King.

He said, currently the world has 1.8 billion middle-class consumers and that three billion more were expected by 2030.

"Ninety per cent of that growth will be from the Asia-Pacific region as cities in the developing world face the steepest challenge," King said at the Low Carbon Cities (Opportunities and Challenges) forum held at British High Commissioner Simon Featherstone's residence in the capital, Monday.
King said due to the increasing middle class consumers, several challenges included the fact that 95 per cent of food production was highly dependent on oil, 80 per cent of the world's population live in areas with high threat to water security.

He said 60 per cent of the world's ecosystem was already either degraded or unsustainably used and 11 per cent of remaining natural areas could be lost by 2050.

"Based on climate change such as rising sea levels and temperatures, it is clear we must radically change our behaviour soon," he said.

Could this really happen?  Could the planet stand up under the weight of five billion mega-consumers?  Can we do this without triggering collapse?  The answer is pretty obviously, "no." 

Around the world we're  running a huge ecological deficit.  We're already consuming renewable resources - mainly water and biomass - at 1.5 times our planet's replenishment rates.  The evidence is inescapable from rivers that no longer flow to the sea, aquifers so severely drained it can be measured by satellites, the collapse of global fisheries, deforestation and desertification, plus air, soil and water contamination of all forms. 

And then there's this crushing reality - world population density.

Ninety per cent of this massive, new middle class growth is expected to come from the Asia Pacific region which already struggles under the highest population density on the planet.  That's also the region tagged to be hardest hit by climate change.  Can anybody say "street scene from Blade Runner"? 

To try to put this in perspective, a study came out several years ago that examined America's 100-million post-war population increase.  It concluded that those 100-million, by virtue of their formidable middle class footprint, were the equivalent of a billion Indians.   So this report claims we're going to be adding not just a hundred million but three billion new mega-consumers. 

Here's something else to bear in mind.   In a world running out of stuff, especially renewable resources essential to production of goods and services, this new 3-billion will be looking for a bigger share of what you probably already consider your pie.  There's only so much stuff to go around and you're going to have to give up some of your stuff so that they can have their share.  Don't worry, the market will see to it if we haven't already gone for our guns by then.

Are We Going to Stand By as Our Kids' Future is Stolen?

Jimmy Carter recently observed that today's American middle class is coming to resemble America's poor back in the pre-Reagan era.  That's the bad news.  The worse news is that Americans aren't alone.

Last week the International Red Cross warned that Europeans face decades of poverty, mass unemployment, widening inequality, social exclusion and collective despair from austerity measures inflicted on them by their own governments.

Like much of Europe, Britain's middle class is also being ravaged by chronic unemployment and mounting inequality.

The social mobility and child poverty commission, established by David Cameron, is expected to warn that government initiatives have all too often been aimed at the poorest 10%.   Yet the inability to get on in life is now a major and growing problenm for middle-class children and this group is in dire need of attention, it is expected to report.

A Whitehall source said:  "This will be controversial, but for the first time in over a century there is a real risk that the next generation of adults ends up worse off than today's generation.  This is a problem for the children of parents with above-average incomes, not just a problem for those at the bottom.   Many, many children face the prospect of having lower living standards than their parents.

With nihilistic corporatism firmly entrenched in the ranks of Canada's Conservatives, Liberals and New Democrats, our kids and theirs face the same future.  It's only a question of degree that will distinguish them from their American or European counterparts.  And it's not a matter of whether they'll be able to afford a McMansion either.  They're already being herded into the Precariat Corral. As their economic strength is sapped, their political power will also be siphoned off.  That's the way the slide works.  Our failure to look out for them today means our kids and theirs will face an awful fight tomorrow.

Don't Get Uppity. Remember Your Place.

These are hard times for the honest man and they may get a lot harder yet.

There's a societal sort of continental drift underway.   Our once cohesive, strong society is ever so slowly but nonetheless steadily being divided, separating.   This is apparent, in part, from the growing gap between rich and poor.   It is manifested in the decline in equality - of wealth, of income and, most importantly, of opportunity, the latter evidenced by such things as the weakening of our healthcare and public education systems.   The ladders of social mobility are being withdrawn.

What is emerging in their place?  A nominal, two-tier society made up of the Plutonomy and the Precariat and the chances are very, very good you're in the Precariat even if you don't recognize it.

Noam Chomsky was inspired by a CitiGroup brochure circulated in 2005 heralding the arrival of the Plutonomy and by then Federal Reserve Board chairman Alan Greenspan's remarks concerning the Precariat.

"In 2005, Citigroup came out with a brochure for investors called “Plutonomy: Buying Luxury, Explaining Global Imbalances.” It urged investors to put money into a “plutonomy index.” The brochure says, “The World is dividing into two blocs -- the Plutonomy and the rest.”

"Plutonomy refers to the rich, those who buy luxury goods and so on, and that’s where the action is. They claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them adrift. We don’t really care about them. We don’t really need them. They have to be around to provide a powerful state, which will protect us and bail us out when we get into trouble, but other than that they essentially have no function. These days they’re sometimes called the “precariat” -- people who live a precarious existence at the periphery of society. Only it’s not the periphery anymore. It’s becoming a very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing.

"So, for example, Fed Chairman Alan Greenspan, at the time when he was still “Saint Alan” -- hailed by the economics profession as one of the greatest economists of all time (this was before the crash for which he was substantially responsible) -- was testifying to Congress in the Clinton years, and he explained the wonders of the great economy that he was supervising. He said a lot of its success was based substantially on what he called “growing worker insecurity.” If working people are insecure, if they’re part of the precariat, living precarious existences, they’re not going to make demands, they’re not going to try to get better wages, they won’t get improved benefits. We can kick ’em out, if we don’t need ’em. And that’s what’s called a “healthy” economy, technically speaking. And he was highly praised for this, greatly admired."

Take your pick - Stiglitz, Krugman, Robert Reich, Wilkinson & Pickett, the list goes on and on.  Any of them will explain to you the utter scourge that inequality inflicts on our societies.   The bottom line is that there is underway an enormous transfer of wealth and, with it, political power from the great many to the very, very few or, as the Occupy movement puts it, from the 99% to the 1%.   And the most important thing to remember is that this is a continuing process.  It's not over yet.  You can't breathe a sigh of relief and assure yourself that you're okay, you made it.

Think Chesley Sullenberger, the U.S. Airways pilot who brought his crew and passengers to a safe forced landing on the Hudson River.   Think he's not of the Precariat?   Think again.   Before he left U.S. Airways in 2010, his salary had been cut a massive 40% and his pension was lost, forfeited in an airline restructuring.   So much for the American Dream.   Today's fledgling airline pilots may work for less than a Starbuck's barrista's takehome pay and put in ridiculous, potentially hazardous hours to boot.

Although Canada trails well behind the United States on the inequality index we are trending in the same direction and we, all of us, face similar outcomes especially for our kids and grandchildren.  Indeed, one of the reasons we're still getting by fairly comfortably today, is because we're acquiescing in the looting of our kids' and grandchildren's future.  We're piling up mountains of debt in various species for them to pay down - fiscal, environmental, even societal.   Yet we're also undermining their future ability to meet the burdens we bequeath them.

We have to fight back and that begins by reversing the last three decades of inequality.   We have to collect what's due from the rich.   We have to recover that wealth and invest it in rebuilding our nation for today's young and the generations to come.   The free ride has to be over not just for the rich and the multinationals but for the rest of us too.   We can't have it all, nobody can, because that won't leave anything but a crappy deal for those who follow us.

I doubt it was accident that saw the oligarchs divide the middle class, taking the upper middle class into their camp.   After all, with a gaping chasm dividing the "haves" from the "have nots" who wouldn't want to be safely on the side of the "haves"?   Did I say "safely"?  There's the thing.

Inequality is fueled by illusion.    It requires a lot of people of some means thinking they're far better off than they are, believing their prospects are far grander than they are.   The elite, the 1%, need the next 20% to support them in order to extend the advantages they derive from inequality.   Yet we know that 20% is misled.   Stiglitz will tell you, so will Reich.   Wilkinson and Pickett will show you their empirical evidence, their science.   Inequality serves only the 1%.   Everyone else, including the top quartile, do better in more equal societies.  That's right, equality benefits the wealthy just as it does the middle and the poor.   That's because it's the middle - the middle class - that is the engine of our economies, not the rentier class, the 1%. 

We have to rebuild healthy levels of equality - in income, in wealth and in opportunity - the lifeblood of a healthy, vibrant, robust and expansive middle class.   Without that, we're sunk and so is Canada.  The 21st century will be extremely challenging to every country.   Canada is blessed with many advantages common to just a handful of countries but they're easily squandered without a determined, cohesive society and we won't have that without restoring our middle class.

So remember your place and remember that your place is in the middle class.

And, as an aside to you Liberals, understand that your party has been instrumental in allowing the spread of inequality in our country.   Yes, Harper is worse but so what?   You are about to select a new leader.   Make sure you choose someone with real vision, someone who will resolutely commit to fighting inequality and the other neglected challenges facing Canada.   No more celebrity leaders.  Remember, in Canadian politics today, you're on the outside looking in.   If you want back in, you'll have to earn it.
 

Fixing America's Economy In Under 2:15

I know this is beginning to sound like a broken record but, as Robert Reich explains in under 2 minutes, 15 seconds, America's economic future depends on restoring that country's middle class.