Vancouver's Leader in Transition toward Strong, Resilient, Complete Communities
VV groups: Economics and Livelihood groups-- Local Economy, Ecological & New Economics Study group
In the triad of significant threats to modern human society--peak oil, climate change, and economic instability--the latter reflects a world economy that has never in history been more fragile. The reasons for this exposure are many and varied, but they relate to peak oil, climate change and social inequality.
The current global economic model is built upon two connected pillars: cheap energy and continuous growth. For the past few centuries of human existence, it has been the cheap and plentiful access to coal, oil, and gas--fossil fuels--that has fueled the global food system, public health and medical advances, enormous population growth, settlement expansion to all corners of the planet (including the Arctic and Antarctic), the growth of cities, and consumerism. The expansion of our commerce appeared to free the human race from the natural and ecological limits to growth that constrain all other life on earth.
All other sources of power, such a hydroelectric, nuclear, solar, and geothermal make up a tiny portion of our global energy use, and their medium of delivery, electricity, cannot easily be stored or transported.
Our global economic system today is built upon the huge leverage that fossil fuels grant mankind to produce more and more with ever greater efficiency of human labour. The primary determinant of agricultural productivity today is hydrocarbon inputs into seed stock, fertilizers, pesticides and herbicides, tractor engines, processing, bulk shipping, refrigeration, and retailing. Without cheap and portable energy from fossil fuels, the whole system collapses, and the industrial food system stops or slows to a trickle. Either way, our primary need as living beings--food--begins to disappear from market shelves. Look around the world at the most volatile and unstable national economies, and you will always find expensive and scarce food there. Recent studies tie increased food costs to social unrest. Agricultural industrialization also creates high levels of rural unemployment as millions are thrown out of work.
The debt system of money creation and the highly complex social and economic welfare system in developed countries are both predicated on rapid economic growth, which is just as threatening as the loss of cheap energy and food. Every corporate business model, every pension system, our medical care model, and local and national infrastructure of all types--from roads and bridges to sewers and electricity--is built upon debt. Our entire economy depends on a rapidly expanding population of young workers to finance both the interest on this debt and the ongoing maintenance of the system and services for the rapidly-growing number of retired people.
Yale anthropologist David Graeber writes in DEBT: The first 5,000 Years about debt ceilings, subprime mortgages and credit default swaps as if they were the exotic practices of some self-destructive tribe. Palace coups, revolts, and wars throughout history have been inextricably linked to escalating debt burdens.
Every developed country on earth has seen unfunded future liabilities for social programs--pensions, medical care, and infrastructure--grow geometrically, while perennial deficits force borrowing just to meet current expenses. One needs to look past the massive and now downgraded $15+ trillion current debt of the US government to see another unfunded liability of over $220 trillion of mandated future entitlement payments to and infrastructure support for all US citizens alive today. This enormous current debt and far more crippling future unfunded liabilities--which every developed country faces--are being foisted upon and can only be paid by future generations.
Meanwhile the rich get richer and the poor get poorer. Wealth distribution has become increasingly more skewed to support the rich. Massive protests over the bailouts that enriched and rewarded the financial sector for their risky and immoral behavior, such as the Occupy Wall Street and other city occupation movements, are only one of many responses to the concentration of wealth in the hands of the few. Increasing civil disobedience, including the resistance against home foreclosures even from law enforcement agents, is now becoming broadly and popularly supported and threatens the social contract and "rule of law" underpinning all western societies.
The people, like the fictitious chimp Caesar in Planet of the Apes, are finally articulating a loud "NO."
And this is a resounding "NO" to one big, global Ponzi scheme, a system set up to allow "early investors" to fleece everyone else until the game is up.
Well, the game is finally up.
Whether characterized as a Ponzi scheme, irrational exuberance, or just "business as usual," this intergenerational scam lasting more than a century is coming to an end. We are not, cannot, and should not encourage more "investors," also known as young people, to keep this self-serving and unsustainable global financial system going.
Resilience is the ability of our economy to weather shocks and to rebound, and we have never had less. The globalization of most industries--from transport to food production--is associated with ever slimmer margins, highly leveraged financing, and the wringing out of all slack and redundancy. Alongside growth, capitalism requires ever greater production efficiency, which include just-in-time supply chains, interlocking credit agreements, 24/7 interdependent global financial markets, parsimonious social insurance as a spur to labor, and a reduction in governmental or social spending at all levels.
All nations compete to offer cheaper and faster production in a head-long race to drive down labor and capital costs and attract global business investment. But this drive to the bottom wrings out public and private capacity and surplus, both social and financial, leaving an ever more lean and brittle system of correlated economic relationships that cannot absorb even mild economic or ecological shocks. Once-localized market failures become globally catastrophic and self-reinforcing, and spark chain reactions that bring on systemic collapse.
We had a glimpse of this in September 2008, the start of a financial shockwave that bled trillions from the global economy and is driving nations to the brink of insolvency. A single earthquake in Japan in March 2011 provided another proof of global economic interdependence. The inability of a downgraded debtor nation like the US to extend its quantitative easing program in the face of rising long-term unemployment in 2011 shows this metaphorical end of the road for fiscal policy to help drive a Keynesian rebound. Economic resilience requires spare financial capacity, but this has already been wrung out of the system.
The tremendous social and cultural shift that has proven Malthus wrong and stopped population growth in the developed world is bringing us to the precipice of financial and economic default. As they say, 'watch what you ask for.' We knew to fear our population explosion, and now the developed world faces the inevitable consequences of contraction. A shrinking base of new, young workers faces geometrically expanding liabilities to provide healthcare and pensions to the retired and maintain aging and crumbling infrastructure, and to do this without jobs or cheap energy.
The pressures on today's youth are unprecedented and overwhelming; they've been set up to fail by a system stacked against later arrivals, as is true of all Ponzi schemes.
For those developed countries lucky enough to have strong job markets and net migration, newcomers will postpone the crisis, but not end it. Immigration confers the same overall social welfare costs and future liabilities as indigenous population growth, albeit alocated differently. International mobility is has many social and economic benefits, but further increases of people in any one area--high density clumping--will ultimately exacerbate the crisis there--ecologically, socially, politically, and financially.
In other words, our free pass to dominance over all other life on earth did not come without costs, and was not in fact free. Just like all growth in all natural systems, limits are reached or exceeded, and collapse or retrenchment is inevitable. On the way, nature pays the way until she can pay no more.
Mankind will simply become unable to maintain all of the physical, social, economic, cultural, and political institutions that were fueled and maintained by fossil fuels and growth. This collapse or gradual shrinking of our global economy--a microcosm of which is discernible in Japan today--is unimaginable for most and truly mind-bending.
It is crippling to the heart and soul of many of today's youth. They know they have been set up, sold out, and abandoned on the altar of economic history. They know their recent forbearers have violated the most basic principle of sustainability: “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Commission, 1987).
So, what could happen when we cease being able to afford to pay back our national, let alone personal debts? What happens if a country defaults on its debts just as many banks have done since 2008, starting notoriously with Lehman Brothers? (Remember, countries were able to bail out many of the banks, but banks are too small to bail out a country--if they even had the will to do so.) In modern history only one developed country has ever defaulted on its foreign debt: Argentina in 2002. (North Korea also defaulted in 1987, and Russia's 1998 partial default was only to internal investors.) Ask an Argentinian, and she'd say a brutal decade followed, but falling exchange rates helped the country to export again to more stable countries, along with alternative sources of state financing from counties like Venezuela.
What if not just one, but many countries defaulted? Right now on the watch list are Greece, Italy, Portugal, Ireland, and Spain, with trouble in Brazil, Mexico, Australia, France, the UK, Poland, Venezuela, Pakistan, the Ukraine, Lebanon, Vietnam, Dubai, AND the United States, which just had its debt downgraded for the first time in history. Standard & Poor's actually now considers default by the US government a possibility, albeit remote. But is a 0.17% chance of default so slim, when over $15 trillion are on the line? And that's just the US. I'd love to see the accounting entry to correctly recognize this very real liability.
It is one thing for a single country or even several million people to default or go bankrupt (as happened during the Great Depression), but what happens when it spreads more widely? What happens when the money supply dries up because no one can afford more debt, and no one is lending anyway? After all, over a quarter of Americans are under water on their home mortgages; they can't borrow and are if fact geographically trapped because they cannot sell.
Welcome to economic instability, the all-too-necessary result of the Ponzi scheme of rapid economic growth fueled by a depleting natural resource--petroleum--and financed through debt-based money creation. There will be many losers, especially the global youth, but also the poor and middle classes who have seen their real incomes and quality of life decline precipitously since the 1970s. Those who expected to "live better"--aka consume more--than their parents are in for a big surprise. Their parents may also face a severe shock when the entire social welfare system, especially the increasingly expensive medical care juggernaut, collapses.
All it takes are a few more people to just say "NO."
The Transition Solution
For some, however, this crisis can mean freedom, freedom from the continued ecological destruction of all of earth's ecosystems, freedom from dependence on fossil fuels, freedom from cataclysmic global climate change, and freedom from the "rat race" that fuels our consumer and entitlement culture.
Transition is about delivering on this freedom by helping people to develop stronger local ties, greater independence from multinational corporations, more involvement in local government, the opportunity to grow their own healthy food, share their tools and recreational equipment, share a meal, ride bicycles together, issue a local currency that is not debt-based, produce their own renewable energy, care for each other during illness, and work together to build relationships that will endure through hard times and until last days. Our air, water, food, and shelter will be cleaner, healthier, and more secure if we plan appropriately. Our communities will certainly be more vibrant and supportive.
We have a choice: learn to collaborate and cooperate, or go back to the wars of the early 20th Century--the two World Wars--when hundreds of millions died to secure a fair or larger share of nature's limited and diminishing resources. No other known species on earth has ever warred against itself, and if one ever did, it became extinct long ago. But the human impacts of global war--over the last drops of oil, fresh water, or arable land--will pale in comparison with the collapse of our financial systems. Economic collapse will touch everyone, and everyone will become a casualty unless we relearn how to collaborate and cooperate as early mankind had to do to survive in a hostile world.
The core values of permaculture--earth care, people care, fair share--provide a way forward...not that that is a simple answer. Permaculture is a systemic way of living and doing everything as if your future and your childrens' future mattered. Permaculture design, designing as nature does--if applied to everything from our money system to our homes, social security to global security, and of course our food system--is the basis for truly sustainable living.
We have a choice between total politico-economic collapse and full cultural renewal; let's make the right choice.
Additional Sources:
[This first draft was written by Randy Chatterjee on 30 July 2011, on the eve of the US debt downgrade. Please add comments below or edit this text directly, depending on your site privileges.]
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