Sunday, June 5, 2011

Dick Smith, Sustainability and Steady-State Economics.

 Much time and energy is expended by those concerned with transition initiatives iinto ways of addressing resource depletion. The most obvious one is actually moving to a way of living that we call "sustainable", which we usually define as using resources no faster than they can be replaced by natural ecosystems. That much abused word has spawned a hundred oxymorons courtesy of the sophistry of PR drones in every industry and field of commerce. Even in the certified organic sector, where, to many green consumers, sustainability is automatically implied, we have grotesquely unsustainable practices such as daily alternate row spraying of lime-sulphur on Hawkes Bay apple trees during the fruit forming period this year. This permitted input chemical consumes a huge amount of energy in its production, and sulphur, one of it's constituents, is rapidly becoming a depleted mineral, not to mention the number of tractor passes required to apply it to the crop.  Sustainable economic growth must be the ultimate fantasy that is pedalled to us with monotonous regularity by the empty- headed spin-doctors of mainstream thinking.
 The single biggest driver in all this, arguably the only driver- is the growth model of economics. Apologists for the growth model will argue that iti is possible to have economic growth without commensurate resource use growth by expansion of non-physical goods such as the knowledge sector but I think most of us agree that the number one desire in the consumer society is more physical goods, as in our society these are encouraged to be seen as talismans of well-being and success.
 It was interesting to hear Dick Smith, founder of the electronic goods retail chain on the Kathryn Ryan programme on Radio New Zealand National. He tended to focus on the issue of population growth, but the point he was making was that countries such as Australia, indeed most countries, with the exception of a few such as the Kingdom of Bhutan, I think he mentioned, see population growth as the most reliable driver of economic growth. Advanced countries such as the developed countries of europe (Italy springs to my mind personally) are terribly worried about the economic consequences of the demographic shift of low birthrate. Many see immigration as a solution, but it is a very dubious one, as it has so many cultural implications.
 Dick Smith pointed out that, in Australia, the Murdoch Press ridicules and vilifies anyone of note, himself included, that speaks out in opposition to the concept of unbridled economic growth. Interestingly, he observes that the impetus for this positioning seems to come from the executives, rather than from Mr Murdoch, who, Dick Smith says, is a "decent bloke" who has taken the initiative to make his company "carbon neutral".
 Here we see again the "tail wagging the dog" as we see in so many relationships between proprietors and executives in both private business and public bodies such as councils. My own personal view is that this is because the executive class is largely composed of up-and-coming individuals who are willing to take a high level of risk (mainly I would add, with their proprietors assets) in order to further their own ambition, and hence are willing to buy into the Ponzi scheme that is unfettered growth. They cross their fingers and hope the house of cards doesn't fall until they've made their fortune. The proprietor class, being already very wealthy, tend to display a high level of risk-aversion in times of instability. One can only surmise that the proprietors, and in this category I would include the citizens of democratic nations and the electorate of local government bodies, have lost control of the game and the executive are wildly out of control. Compare this with Congressman Ron Pauls unofficial state-of-the-nation address recently in the USA. It seems that the executive, or professional managers, have contrived to subvert the relationship they ought to have with their proprietors by bamboozling them with clever "insider" talk designed to intimidate the uninitiated and to portray  the notion that modern business administration is far too complicated for anyone without an M.B.A. to understand. In short, they have turned themselves into "indispensable men"
 It seems that what Dick Smith is arguing for here is the establishment of a  steady-state economy, although I'm not sure he actually uses this term in the interview, he mentions the characteristics of such an economy several times. My feeling is that he was trying to keep the tone of the interview nice and down-homey and not to use too many ideological sounding terms. An interesting observation from him was that of course business would still be possible under zero-growth conditions, but business people would have to be smarter about how they do business and not expect to make outrageous fortunes from their activity. I would add here that one compensation for this would be that business would be less risky without the boom-and-bust cycles that are a feature of the growth model., He observes that "any fool can make money in a growth economy". He is definitely not talking about a Soviet style command economy here. Market forces would still be at work to determine what gets produced and at what price.
 Dick Smith did not expound on the minutiae of how to achieve the desired steady-state within the economy, but we know that is to remove the ability of the banks to create new money as debt and have all new money supply added to (or even removed from) the economy by a central authority whose remit is to keep economic activity at a level that is sustainable according to the usual definition as described above, Another advantage of this is that the government would have the right of Seignorage, or first-use of any new money entering the economy, which it could then use for any purpose, but capitalising the transfer from depletive to sustainable industry in the public sector such as transport and power generation would seem like a good place to start.
 Naturally the banks aren't going to like this and will fight dirty in order to retain their right to create money. There will still be a banking business, but it will be about managing customers' money according to their wishes dependent on whether they desire safe-keeping or investment for profit at some risk. Of course the bank may do with it's own money what it wishes, but at its own risk, and not by gambling with depositors cash.
  At the moment, government is definitely part of the problem rather than part of the solution. This is largely due to the fact that central government executives, as "international players" identify strongly with trans-national corporation executives, a phenomenon known as "status grouping". These  executives will continue to promote "business as usual" as they really don't have a strategy for dealing with the failure of the growth model except to presume on taxpayer bale-outs because they are considered to be "too big to fail".


  1. Steady state is bs, utter bs in the face of the current biosphere collapse and resource deletion ala The 6th Mass Extinction and Peak Everything...
    Dr.Bill Rees was very good in his presentations in Smart Decline:
    And also this Degrowth item:

    We'll need quite a period of descent/collapse before things settle down to a level where we could even dream of steady state...

    According to Prof.Guy McPherson we have a choice between "civilisation" and a healthy planet:

  2. Absolutely, Ted. But the mechanism of a steady state economy also allows for degrowth without hyperinflation by enabling the treasury to remove currency from circulation at a rate appropriate to the rate of degrowth. Of course, this should have happened decades ago. In fact, those who know the history of fractional reserve banking know that system should have never been born. The whole basis of it is a criminal fraud perpetrated by the mediaeval goldsmiths that governments, instead of crushing, bought in to- as it allowed them to raise money for wars on a "buy now- pay later" basis.
    Arguably, it is now too late to institute these reforms in time to avert catastrophic collapse. However, It is still necessary to state that there is an alternative in order to discredit the present norm in the minds of those we wish to influence.
    There is no doubt in my mind that banking with money created as debt is the main driver of resource depletion and all associated woes. Ironically, intrinsic unavoidable growth was probably a consequence unintended by the original perpetrators of the "goldsmiths fraud". They would have seen it as a simple way to extract extra value from the economy without actually owning the required capital.
    It is not for no good reason that, despite the obfuscation of modern clerics, usury is forbidden to Jew, Christian and Muslim alike, and most likely in all other religions too. It was seen as the most damaging evil. How much more evil then to perpetrate the "uber-usury" of lending money that doesn't yet exist?