The Economy Should Stop Growing

SUBHEAD: Why the Economy Should Stop Growing—And Just Grow Up.

By David Korten on 4 May 2016 for Yes Magazine -
(http://www.yesmagazine.org/planet/why-the-economy-should-stop-growing-and-just-grow-up-20160504)


Image above: "Urban Density" by Jorg Dickman. From (http://en.yellowkorner.com/photos/1282/urban-density.aspx).

“How do we grow the economy?” is an obsolete question. Local initiatives across the world are looking for maturity instead as they rebuild caring, place-based communities and economies. 

Listen to the political candidates as they put forward their economic solutions. You will hear a well-established and rarely challenged narrative. “We must grow the economy to produce jobs so people will have the money to grow their consumption, which will grow more jobs…” Grow. Grow. Grow.

But children and adolescents grow. Adults mature. It is time to reframe the debate to recognize that we have pushed growth in material consumption beyond Earth’s environmental limits. We must now shift our economic priority from growth to maturity—meeting the needs of all within the limits of what Earth can provide.
Global GDP is currently growing 3 to 4 percent annually. Contrary to the promises of politicians and economists, this growth is not eliminating poverty and creating a better life for all. It is instead creating increasingly grotesque and unsustainable imbalances in our relationship to Earth and to each other.

Specifics differ by country, but the U.S. experience characterizes the broader trend. Corporate profits as a percentage of GDP are at a record high. The U.S. middle class is shrinking as most people work longer hours and struggle harder to put food on the table and maintain a roof over their heads. Families are collapsing, and suicide rates are increasing.

The assets of the world’s 62 richest individuals equal those of the poorest half of humanity—3.6 billion people. In the United States, the 2015 bonus pool for 172,400 Wall Street employees was $25 billion—just short of the $28 billion required to give 4.2 million minimum wage restaurant and health care workers a raise to $15 an hour.

Humans now consume at a rate 1.6 times what Earth can provide. Weather becomes more severe and erratic, and critical environmental systems are in decline.

These distortions are a predictable consequence of an economic system designed to extract Earth’s natural wealth for the purpose of maximizing financial returns to those who already have more than they need.

On the plus side, as this system has created the imperative for deep change, it has also positioned us to take the step toward a life-centered planetary civilization. It has:

• Globalized awareness of humans’ interdependence with one another and Earth,
• Produced a system of global communications that allows us to think and act as a global species,
• Highlighted racism, sexism, and other forms of xenophobia as threats to the well-being of all, and
• Turned millennials into a revolutionary political force by denying them the economic opportunities their parents took for granted.

We cannot, however, look to the economic institutions that created the imbalances to now create an economy that meets the essential needs of all in balanced relationship to a living Earth. Global financial markets value life only for its market price. And the legal structures of global corporations centralize power and delink it from the realities of people’s daily lives.

Restoring balance is necessarily the work of living communities, of people who care about one another, the health of their environment, and the future of their children.

The step to maturity depends on rebuilding caring, place-based communities and economies and restoring to them the power that global corporations and financial markets have usurped. Local initiatives toward this end are already underway throughout the world.

“How do we grow the economy?” is an obsolete question. The questions relevant to this moment in history are “How do we navigate the step to a mature economy that meets the needs of all within the limits of a finite living Earth?”

How do we rebuild the strength and power of living communities? How do we create a culture of mutual caring and responsibility? How do we assure that the legal rights of people and communities take priority over those of government-created artificial persons called corporations?

Living organisms have learned to self-organize as bioregional communities that create and maintain the conditions essential to a living Earth community. We humans must take the step to maturity as we learn to live as responsible members of that community.


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Unmanipulate manipulated economy

SUBHEAD: Breaking the stranglehold of vested interests of g an economy totally dependent on manipulated money and statistics.

By Charles Hugh Smith on 20 January 2015 for Of Two Minds -
(http://www.oftwominds.com/blogjan15/unmanipulate1-15.html)


Image above: Illustration of American bubble economics by Victor Juhasz. From (http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405).

The word manipulated has the sour taste of officially sanctioned distortion in service of an Elite's interests. At a minimum, manipulation smacks of intent to defraud. If there is no intent to defraud or mislead, then what's the purpose of manipulating statistics, media coverage and official narratives?

As a result, the unsavory reality of our massively manipulated economy is masked by insipid words such as stimulus, easing and investing in our future--as if borrowing and squandering trillions of dollars to further enrich the few at the expense of the many is anything but blatant grift, fraud and embezzlement of taxpayer funds.

Regardless of what slippery words are deployed to mask the manipulation, it doesn't change the reality that the U.S. economy remains a manipulated mess that is dependent on monetary and statistical manipulation.

If you doubt the economy is dependent on monetary and statistical manipulation, then ask yourself what will happen to the economy should the Federal Reserve's zero-interest rate policy (ZIRP) be rescinded, and interest rates return to historic norms.

Ask yourself what happens if the Federal government actually declared the increase in public debt as the true measure of fiscal deficits rather than the ginned-up deficit number--a number that is much less than the actual deficit reflected in the annual increase in public debt.

Ask yourself what the gross domestic product (GDP) would be if hedonic adjustments and other flim-flam were eliminated from the calculation.

Ask yourself what the unemployment number would be if the federal government only counted living-wage jobs (i.e. full-time jobs, those with multiple part-time jobs that equal a full-time job, the self-employed who net a living wage, etc.) and counted every resident of working age who is not disabled as employable.

Left unmanipulated, the statistics would no longer be rosy, and both the economy and our perception of the economy would tank.

The irony of relying on manipulation to prop up an economy designed to serve vested interests is the manipulation becomes permanent, as every participant in the manipulated system optimizes their behavior to exploit the manipulation. Once the manipulation is withdrawn, the economy falls to pieces because participants have optimized their actions to extract the maximum benefit from the manipulation.

To attempt to invest productively makes no financial sense whatsoever. Those who win big in manipulated-money economies are those who leverage bets in what's incentivized by manipulation - debt and speculation.

Instead of seeking constructive investments that generate increased productivity in the economy, players optimize their investments to influence the manipulators in charge (politicos, regulators, central bankers, etc.) or speculate with the excess funds flooding the system as a result of monetary manipulation.

An economy optimized for indebtedness and speculation is akin to a spoiled kid who is rewarded for sitting around playing video games and eating chocolate cake and potato chips. The sugar-high of the chocolate-cake diet feeds the psychological addiction of playing counter-productive, meaningless games all day, and the kid's expanding waistline and deteriorating fitness go unnoticed.

Withdrawing the manipulation that rewards debt and speculation is akin to demanding the spoiled kid start running laps and doing push-ups on a diet of broccoli and carrot sticks. The spoiled kid's tantrums will be epic and unending, as he pulls every trick in the book to escape the discipline of reality and seeks a return to the easy life of squandering his health playing games and eating junk food.

That the game-playing and junk food diet are ultimately destructive are lost on the spoiled kid. In the exact same fashion, the U.S. economy will throw a screaming tantrum the second the monetary and statistical manipulation is unwound, and those sectors that have benefited the most from the manipulation will scream the loudest and longest.

Like the spoiled kid who threatens to hold his breath until he expires (anything to escape the discipline of a functioning market), the sectors that have grown fat on the manipulated money will claim they're having a fatal spell, and that their demise will take down the entire economy.

The only way to save the spoiled kid from the destructive lack of discipline is to call his bluff: go ahead and hold your breath until you expire. Everybody knows it was a bluff, and the kid will grumpily re-enter reality once his bluff has been called.

There is no way to painlessly unmanipulate an economy that has grown dependent on manipulation. Addiction can only be broken by going cold turkey: ending all the manipulation and forcing the economy to adjust to the discipline of reality and an unfettered market for money, credit and risk.

The U.S. can survive the demise of its bloated, unproductive banking sector, the Federal Reserve that enforces the sector's power, and the eradication of its numerous classes of parasites and leeches. Every parasitic vested interest will claim it is essential to the well-being of the nation; the truth is entirely the opposite--each is terribly and intrinsically destructive to the fabric of the nation.

Each parasitic vested interest will sob and moan and threaten to hold its breath, whimpering that the discipline of reality and the unfettered market will kill it. If the discipline of reality and the unfettered market will kill the vested interest, then it is in the best interests of the nation to hurry its demise, as breaking the stranglehold of vested interests is the essential step to rebuilding an economy that isn't dysfunctionally dependent on manipulated money and statistics.
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The Degrowth Market

SUBHEAD: Phantom economies tend to give rise to gray and black markets in proportion to their deviance from reality.

By Charles Hugh Smith on 7 February 2014 for Of Two Minds -
(http://www.oftwominds.com/blogfeb14/degrowth-market2-14.html)


Image above: Seems a bit heavy for this overtaxed donkey in Ethiopia. From (http://www.planetstillalive.com/africa/ethiopia/ethiopia-people/).

"Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality." - Peter D.

College graduates around the world are discovering that getting a university diploma no longer guarantees the conventional success story of a secure job and a life of ever-rising consumption. Doing all the things that the Status Quo said would lead to success no longer yields success, for the simple reason that the Status Quo is failing on a structural/systemic level.

The system is rigged to protect the Status Quo mafia from competition. As noted in The Mafia State of Mind (February 6, 2014), the Status Quo is a set of overlapping monopolies/extortion rackets. The system needs a trickle of new technocrats and apparatchiks to manage the rackets, but there is no place for the tens of millions of college graduates who are flooding into the job market every year around the world.

New conventional enterprises face essentially impossible barriers: sky-high rents, absurdly lengthy and costly permitting processes, onerous fees and reporting requirements, and a host of other barriers reputedly imposed to "protect the public" but whose real purpose is to eliminate small-enterprise competition to corporate dominance.

Which organizations have the cash flow, financing, legal expertise and political influence to meet all the requirements and pay the insanely overpriced leases? Global corporations and the state--two sides of the same kleptocratic coin.

The high costs of launching and operating a legitimate Status Quo business serves two other primary purposes: maintaining high returns on capital for crony-capitalist financiers and funding the state's enormous cadre of functionaries at above-market-rate salaries, benefits and pensions. Recall that median personal income in the U.S. is about $40,000 for full-time workers, and compensation above $82,500 annually puts one in the top 10% of all wage earners.

The California Public Policy Center has just posted its own searchable site of state and local employee wages and pension benefits, TransparentCalifornia.com. Some of the results were rather revealing – and should be shocking to taxpayers: There are 31,527 retired public workers in the "$100,000 pension club" and 582 who are receiving pensions of at least $200,000 a year. Including wages and benefits, there are 227,059 state and local workers earning total compensation of at least $100,000 a year.

Some may argue that these large figures apply to a relatively small portion of public employees, and that the average public employee receives modest compensation. However, a CPPC analysis revealed that even average compensation is startlingly high. Average compensation for full-time state employees was $93,851 for public safety employees and $68,282 for all other employees. Adding benefits boosted these totals to $129,388 and $90,402, respectively. The figures for city and county employees were even higher.  - Source: Public sector's growing $100K club

Two forces are disrupting this cozy interlocking mafia of financiers, corporate cartels and state functionaries: the End of (Middle-Class) Work and the rise of the peer-to-peer, self-organizing business models such as AirBnB, car-sharing, ride-sharing, farmers markets, etc.

See the following:
Russ in Redding: The Human Face of The End of Work (September 2, 2011)
America's Social Recession: Five Years and Counting (August 28, 2013)
The Ten Best Employers To Work For (Peak Employment) (March 28, 2013)
The Python That Ate Your Job (December 11, 2013)

The high costs of legitimate business (needed to keep rentier/financial profits and state functionary pay/pensions high) are effectively destroying middle-class jobs and pay scales: the only organization that can afford to pay high salaries and benefits, regardless of costs or the business climate, is the state.

Even the financial sector and global corporations can only pay middle-class salaries for technocrats and managers in what are effectively quasi-state agencies (sickcare, workers compensation insurance, the defense industry, etc.)

So what are the tens of millions of college graduates supposed to do for a livelihood if there are only a few slots open in the moated mafias of financiers, corporate cartels and the state? To answer, let's start with this obvious statement: that which cannot be paid will not be paid.

All the infrastructure of consumption depends on tens of millions of college graduates making enough money to pay high taxes, service their student loans, buy homes, autos, particle-board furniture, electronic gadgets, dozens of pairs of shoes, etc. etc. etc. If they can't make enough money to buy and own all that stuff, then they won't be buying and owning all that stuff.

And if they can't earn a living within the Status Quo mafia, they will do so outside the mafia in the gray and black markets.

This destruction of consumption is supposed to be a disaster, but it's only a disaster for the moated mafias of financiers, corporate cartels and the state that depend on tens of millions of workers voluntarily becoming debt serfs and tax donkeys. If young workers cannot make their student loan payments, those loans become worthless. As the old saying has it, You can't get blood from a stone. (Alternatively: You can't get blood from a turnip.)

If young workers can't make enough to buy autos, homes, etc., the market for those goods and services implodes. And if all the financial/debt churn generated by consumption goes away, so do the fees and taxes the state depends on to pay its armies of functionaries.

Rather than a disaster, this wholesale loss of middle-class incomes and aspirations is enormously liberating. Instead of the yoke of debt-based ownership, young people are finding sharing to be better than owning: one shared car can provide transport for 10 people. Ten people no longer need to own 10 cars to get around.

One way to grasp how deeply the mafia state of mind has taken hold is to ask: how many middlemen have to be paid to produce/buy a good or service? In Greece, liberation starts by eliminating the middleman, which of course includes the voraciously corrupt state: After Crisis, Greeks Work to Promote ‘Social’ Economy.

The state is naturally in full freakout mode, as self-organizing sharing/no-middleman enterprises are outside the debt-serf/tax donkey system that funds the state. In response, the state is frantically trying to impose the same fee structure that has crushed conventional small businesses on the sharing/no-middleman organizations.

The problem for the state is that its success in imposing exorbitant fees and taxes will simply drive low-income people scratching out a minimal living in the gray market to other networks that do not even have a corporate structure to tax. To wit: "The more you tighten your grip, the more systems will slip through your fingers."

If making a living in the gray market becomes untenable, then people will be forced into the black market, which is whatever trade can be done outside the reach of the state. As noted previously, that which cannot be paid will not be paid.

As correspondent Peter D. recently observed: "Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality." If we believe that phantom economies of moated fiefdoms, mafias and cartels are "reality," then the rise of liberating degrowth networks is distressing and confusing.

But if we look past the propaganda and see the debt-serf/tax donkey system for what it really is, a predatory system of oppression and exploitation, then we can see how degrowth, de-consumption, de-debt, etc. is liberating.

See also:
TEDx Tokyo: The "De" Generation (8 minutes) (de-ownership, de-materialism, de-corporatism)
Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013)


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