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Monday, February 2, 2009

Lets get our economy growing again

I strongly suspect that President Obama will succeed brilliantly in getting the world economy back on track. Surprisingly, I think some of the small things he does such as his anti-sleaze proclamation for congress and his shutting down the Guantanamo's around the world will be his most effective measures. It won't hurt also if he succeeds in pushing through his health reform, a project that has stymied president after president. These measures will give the world confidence that a strong, moral, sensible person is at the helm. We all know how important confidence is for world markets. And it scares the socks off me.

The economies of the world have elements of a pyramid (Ponzie)* scheme. They always need to be growing to prosper. We talk sustainability but no one has a clue how to structure an economy which is sustainable (read not growing) while still keeping everyone reasonably well off. Recently the only way we could keep the economy growing was to give ridiculously easy credit by, for instance, no deposit housing loans and pushing credit cards on people with higher and higher spending limits. This allowed people to buy more and more 'stuff' much of which they didn't need and perhaps, if you looked deep down, didn't even want. Pyramid schemes always collapse and this one did as expected.

We are now in the situation of the bacteria who (yes! who) was put in a test tube full of food. It doubles every minute and in one hour will have used up all the food. At the end of the hour the tube is full of bacteria and no food is left. (with apologies to Dr. David Suzuki). Dr Suzuki then poses the question "when will the test tube be half filled with bacteria". The answer, of course, is not at 30 minutes as many people answer but at 59 minutes**. The run of the mill, fairly intelligent bacteria would look around at 59 minutes and ask "Why are the doom-sayers panicking. The test tube is still half empty". Well we are in the 59th minute in more and more parts of the world with respect to more and more of our resources.

Civilizations have collapsed again and again over history. In fact, it seems to be the eventual fate of all civilizations.*** However, the collapse of a civilization in South America (Aztecs), for instance, had no effect on a civilization in Europe. One didn't even know the other existed. This is the first time that we have had a global, highly linked world civilization (multinational globalization) and this mini economic crisis of 08-09 has shown us how closely we are linked. The closer and tighter the links, the faster an economic-quake in one part is transmitted to every other part. If the ecoquake occurs in the largest economy of the world, the intensity of the quake is huge.

Add to that the very good chance (Jim Hansen of Goddard Space Inst.) that we will soon reach a tipping point that will shift our climate into a different stable state resulting in a shift of growing zones for wheat, rice and so forth. We once had a year's supply of food for the world stored up in our warehouses. They don't exist any more. The burgeoning economies of the East have bought them up. Some estimates suggest our food reserves are a little under 2 months at present. Even if it only takes a couple of years to learn how to handle agriculture in the new climate regime, we will have starvation that will make the historic Asian famines pale in comparison; that is if we can adjust at all. More worrying is paleantological data that suggests that when the climate changes suddenly there is a period in which it flick flacks back and forth between the two phases. Such instability would be even more devastating than a sudden change to a new stable climate regime.

The present economic down turn may be our savior. It is shutting down our economies to an extent, reducing our mining of minerals, use of fossil fuels, excess consumption and our production of garbage and Carbon dioxide. It just may give us the necessary breathing space to get our act together and stop our precipitous slide toward the destruction of our ecosystems which give us so much of our wealth for free (pure water from an uncontaminated catchment, for instance). Here Obama may be our salvation. One, amongst many of his aims is to have America produce all her energy within the borders of America and much of that energy from renewables. His other policies are equally essential, looking far beyond his 8 years in the White House. That is if he can overcome the opposition of the Republicans and even many Democrats with huge vested interests (shares in oil companies for instance) in the status quo.

However, if he does get world economies back to a modest 2% growth rate, that will result in a doubling of our economies every 35 years (log2/log1.02). How many economies do you know that could find twice as much water, twice the amount of minerals and wood, produce twice as much garbage and pollution and still have any quality of life left. Not many. Certainly not America's.

ps. The IMF, just the other day, announced that they expect the world's economy to be back to 3% annual growth rate by 2010. Doubling time 23 years (log2/log1.03). I hope they are wrong. We have seen our future and it won the Academy award for best picture this year. (who wants to be a milonair!!!!)

We are standing at the edge of a precipice. The last thing we need is a great leap forward.

*In a pure Ponzie scheme the operator takes money from investors, saying he is going to invest it in something and he guarantees great returns. He invests in nothing. He then uses the money from later investors to pay off the first investors including the interest he has promised. The investors who have got this windfall tell their friends who, seeing a chance of getting something for nothing, invest their money. At some point along the pyramid, when the operator feels that he has the maximum amount of money possible, he scampers. Unfortunately, many legitimate investment companies also have elements of a Ponzie scheme and even some banks have adopted some policies that edge on Ponzie schemes. Many have recently collapsed.

**if you double the number of bacteria each minute going forward in time, you half the number each minute going backwards in time. Full at 60 minutes, half full at 59 minutes, quarter full at 58 minutes etc.

***Huricane Katrina that hit New Orleans gave an indication of how fragile the largest economy of the world is and how over extended. No one before this disaster would have predicted how ineffective America's response would have been to a crisis of this magnitude on her own soil. Katrina was tiny compared to the economic effect that climate change along with a fairly rapid rise in sea level would cause. (New York Subways flooded with sea water, for instance) Note that continental ice sheets are not melted much by the huge amounts of polar radiation that fall on them in the winter. They are melted by Foen winds. By what we might expect with a new climate regime.

1 comment:

Eben said...

These truths we hold to be self evident. Not one to stay focused on the doom scenario, I am watching the rain. What does a sustainable life ... look like? and in particular, for folks in new england...where I find myself today. I am unconvinced, given all the pertinent info, most folks raised on TV and comfort would willingly begin the adjustment to a lifestyle required for sustainability.