If you divide land area in the UK by population you discover that each person is entitled to approximately 4000sqm. Assuming 25% of the land is uninhabitable then this means that on a plot of land 60x50m each person must live, work, play and grow all their food and material needs to lead a sustainable existence. This is a sobering thought. To accommodate growth we have instead had to stack people vertically in cities and create intensive farming systems fuelled by the discovery of oil. Property and the State provide a system that enables the chaos of housing millions of humans to be ordered while providing a safety net for those in society that might be better suited to living off the land but who can’t. Can this system sustain eternal growth?
Growth is a driving force for civilisation and provides purpose and direction to the human species but isn’t sustainable because it requires ever greater resource consumption. Also our focus on GDP growth hasn’t helped solve problems of extreme poverty but has strengthened the divide between rich and poor. This is shown in Prosperity without Growth by Tim Jackson who also suggests that our personal happiness doesn’t increase beyond a certain level of wealth. He suggests that many people could afford to work less and enjoy more leisure time providing employment opportunities for others and a redistribution of wealth. An alternative viewpoint is the Infinity Loop model which suggests companies have a responsibility to the whole human species and that once the happiness of our own community has reached a tipping point we should be looking to help others who are suffering. Growth is not a bad thing but, just as humans stop growing physically in their 20’s and instead grow intellectually, there needs to be a balanced assessment of what society needs to grow and when rather than an obsessive fixation on forever growing GDP at any cost.
GDP growth is a journey of cyclical dilution. Wealth accumulates to a peak and then an event causes a crash and financial gridlock. Quantative easing can be used to get money flowing again, generally leading to a dilution of capital, but it doesn’t solve the problem of increasing resource consumption. Replacing the focus on GDP with carbon and social factors could help shift society’s focus away from the desire for pure wealth accumulation. Each person could be given a carbon allowance. If they used above the allowance they would be taxed and if below they could trade the credit. This shift in thinking would make people more aware of other intangible commodities such as community, identity, creativity and the important value they bring to society’s well-being. It is a shame we need to impose yet another restriction on life to draw attention to our unsustainable lifestyles but as populations grow some sort of rationing that doesn’t hurt the bottom of society seems necessary.
Economic risk also needs rebalancing. The splitting of high street banks from investment divisions will help reduce excessive risk but the term investment needs to be better defined. Investment should not be about pure gambling but about investing in the future of a positive company to benefit the planet. Allowing short selling, derivatives, etc is not investment but a form of linear thinking which exaggerates problems rather than balancing them. Intangible assets such as risk (loans) and peace of mind (insurance) are an important part of civilisation but a significant proportion of tangible capital must be owned to counter any defaults. This creates an inherent paradox as capital is accumulated for the sake of leverage which even ideas such as Islamic Finance don’t seem to solve. Risk is a fundamental part of life but when you start to look into the economics of a country it is amazing how complicated finance has been allowed to become. This occurred because it was believed that the complexity of a free market would inherently resolve itself and lead to perfect stability. This probably would happen eventually but at what cost to humanity?
Society is questioning how countries have failed to balance their books, something that most citizens have to achieve day to day. Why didn’t economists see this problem coming despite history, as shown in the graph below, predicting a bust was due? Game Theory, which has been used to predict evolutionary stable systems in nature, may help society factor ‘moral sentiment’ into deciding how best to balance the ‘invisible hand’ of the future. What do you think?
US GDP growth 1923-2009. Boom and bust at what cost?