Looking Forward to Sustainable Growth

By Joe Mancini, Good Work News, June 2008

There is a fundamental weakness embodied in the way we have structured our economy. It is dependant on a model of economic growth that is unsustainable. In 1992, in an issue of Economic Justice Newsletter (the forerunner to Good Work News) we featured an article with the headline, Some Reasons to Question Economic Growth. The article highlighted in bullet form ecological damages that would inevitably afflict the human race if we refused to come up with an economic model that respects the finite nature of the world around us. We were asking, what would happen to rich northern societies if the poor south consumed their share of resources with the same voraciousness as the rich north? In the 1990s, the north consumed 80% of the resources with only 20% of the world’s population.

Board member, Ken Westhues critiqued the headline, pointing out that as human beings we need ‘growth’ more than anything. He was arguing for the importance of growth in our human societies where we could evolve beyond greed, war and exploitation and instead reconnect with the values of human betterment at the community level. Thomas Berry in his book, The Dream of the Earth published in 1988, stated the need for human growth in these terms,

“The time has come to lower our voices, to cease imposing our mechanistic patterns on the biological processes of the earth, to resist the impulse to control, to command, to force, to oppress, and to begin quite humbly to follow the guidance of the larger community on which all life depends. Our fulfillment is not in our isolated human grandeur, but in our intimacy with the larger earth community, for this is the larger dimension of our being. Our human destiny is integral with the destiny of the earth”.

Sixteen years later, the vision of growth discussed by Ken Westhues and Thomas Berry is still a long way off. Instead, our growth is dependant on the exploitation of finite resources, the generation of green house gases that wreak havoc on the atmosphere, and the manufacturing of endless, throw away consumer junk.

The early 1990’s were a time of recession and high unemployment. For those without work, it was a long, five year period of adjustment with significant plant closings and layoffs. However, by 1992, other parts of the growth economy were already in gear. Northern and southern economies went on an unprecedented 16-year period of economic expansion.

Now, in June 2008 the economic landscape and our understanding of what we have just gone through is changing rapidly. George Soros, who has made himself a billionaire exploiting the financial system, sees the present scale of financial distress as the worst crisis since the Great Depression.

In The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, Soros shows that we are not witnessing an ordinary boom and bust cycle but the culmination of a super bubble that got under way in the early 1980’s.

“Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former president Ronald Reagan called the magic of the marketplace and what I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing the participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves. Nevertheless, market fundamentalism emerged as the dominant ideology of the 1980s, when financial markets started to become globalized.”

During this time, the US has managed to become the depository of China’s new found wealth. James Fallows writes about this in the January Atlantic Monthly in an article entitled The $1.4 Trillion Question. He is perplexed by a system where the rich U.S. uses Chinese dollars to subsidize North American consumers with cheap loans. Meanwhile Chinese grade school children are schooled in unheated buildings to name just one example of the types of hardships the Chinese population faces daily.

According to Soros, “globalization allowed the U.S. to suck up the savings of the rest of the world and consume more than it produced. ...The financial markets encouraged consumers to borrow by introducing ever more sophisticated instruments and more generous terms. The authorities aided and abetted the process.” The super credit bubble has been growing since the 1980’s as financial regulation has weakened to the point of being a sideline cheerleader at best. Soros refers to this process as a “shocking abdication of responsibility”.

As North Americans, what type of a society did we build during this period? Was this new found prosperity directed into productive activities that build resilience to weather economic downturns or have we lived from paycheque to paycheque drawing down our resources? The answer in almost all respects is that we have not planned for the future. Politicians have catered to North Americans with tax cuts and low interest rates, little of which has made our communities energy efficient.

A CIBC World Market report on the ‘Efficiency Paradox’ in November 2007 made the point succinctly, “North Americans have made great strides in improving energy efficiency, but have consumed all those gains with gas-guzzling cars, monster homes and an electrified lifestyle.” For example, automakers have improved the gas consumption of vehicles by up to 30%, except that now larger vehicles that are travelling longer distances have all but wiped out the savings. Air conditioners and furnaces are significantly more efficient except that the number of air conditioner units has grown by 36% since 1990 and the average house has grown from 1000 square feet to 2,500 square feet. Also adding to this is the exponential growth in power consuming appliances that are now ubiquitous in every household.

Recent economic data shows the trend continues towards consumption rather than savings. Retail sales were up .5% in April 2008 while credit card debt grew by 6.7%. This means that consumers were keeping the economy going with increased debt. Despite record high gas prices, gasoline consumption in Canada grew by 3.6% last year. Air travel overseas increased by 9.8%. Commentators in United States see “over capacity at every corner, and insane overbuilding of both commercial and residential real estate.” They claim that 70% of the US economy runs on the fumes of home construction, financing and consumer spending. Oakville Member of Parliament Garth Turner has produced a similar analysis in his book, Greater Fool: The Troubled Future of Real Estate. His goal is to shake the complacency of Canadians who think only Americans fell for subprime-type mortgages when in fact the Canadian consumer economy is a mirror of the American one. Where would the Canadian economy be without the 101,000 jobs that Stats Canada reported were created in the construction industry? What happens when, as Garth Turner predicts, Canada follows the US with the bursting of our own housing bubble?

Back in 1992 it was timely to ask hard questions as we did. 16 years later, it seems little progress has been made to adapt our prosperous economy into something that is remotely sustainable. Wendell Berry, almost exasperated, entitled a recent essay in Harpers Magazine, Faustian Economics – Hell Hath No Limits.

“The general reaction to the apparent end of the era of cheap fossil fuel, as to other readily foreseeable curtailments, has been to delay any sort of reckoning... The dominant response, in short, is a dogged belief that what we call the American Way of Life will prove somehow indestructible. We will keep on consuming, spending, wasting and driving, as before, at any cost to anything and everybody but ourselves. This belief was always indefensible – the real names of global warming are Waste and Greed – and by now it is manifestly foolish.”

At The Mayors’ Dinner this year, I talked about alternative ways to think about local development. The Working Centre’s experience over 25 years has focused on interdependent projects that build ecological and social resilience. There is real interest locally in developing sustainable initiatives that are inclusive and productive.

This means creating new work through recycling, small scale production of food, clothing and furniture at home or on a co-op basis, wide ranging community services that connect people to others, enhancing volunteerism by giving people real opportunities, and new ideas that integrate skill building and income generation.

The resulting new work, the increase in small scale recycling, the control over one’s work, the pride from skill and craft, and the friendship and caring that grow through informal links serve to lessen alienation and build commitment to the wider community. Directing initiatives towards making it easier, cheaper and efficient to get around, growing food, generating local power, to crafting goods sold locally, these are the real tasks of the local economy.

This way of thinking is in stark contrast to the dominant mode of economic development. Local communities may once again face the choice of working towards a small is beautiful future as the ecological and economic realities take hold.

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