Tag Archives: zero growth

Zero Growth

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This Alternet article explores the concept of ‘zero growth’.

What is zero growth?

I would argue that zero growth is a reflection of true, basic capitalist economics where money isn’t being printed and competition exists between suppliers, ensuring that average increase for prices, wages and other inputs grow at exactly zero percent.

It’s certainly better than collapse!

Read and please feel free to discuss.

The Financial Crisis: Why Current Actions Won’t Work

I put a couple of articles on the back-burner, waiting for a chance to read both before commenting on them.  As it happens, this most recent article reminded me a little of this one so I thought it was time to explore them a little further.

Ultimately, the conclusion that both seem to have is that we’re going to run out of taxpayers.  And the problem with the financial crisis is that it’s nuclear:  we might be able to bail out a few banks now, but we’ll have toxic debt issues related to the bailouts for generations to come.

The solutions offered were mixed.  The Reality Sandwich article is really only in ‘Part I’ of a series, but towards the end, they seem to speak fondly of nationalization of the money creation process.  This would marginalize the demands placed on all capitalist countries by the financial community to borrow as they print money.  Instead, they would simply print money.  As someone who warns against the ills of abusing those things that come for free, this solution might create more ill than good.  It’s called inflation.

However, inflation only comes when people expect more from their economies.  Perhaps if we tuned ourselves to think in terms of zero growth (zero growth of money supply (unless under economic ‘duress’), zero growth of economies, zero growth of wages, etc), it might actually be feasible.

Good luck with that, though.

Enter the Socialist Project, with another lengthy and more current article, focusing mainly on the use of Keynesian philosophy and who’s doing it better.  They argue that China and other countries are better positioned to jump-start their economic bodies because they have a healthier attitude towards Keynesianism, but again, I’m concerned that we’ve really missed the point: we no longer have the luxury of infinite growth .

All of these policies, be they monetarist or Keynesian or whatever, simply don’t account for the notion that it’s irresponsible to fashion economies around the principles of endless consumption.  At some point, the party has to end.  We’ve already talked about the impact that demographics will have on our current situation , but the truth is that we don’t think anyone is listening.  There are too many special interests at risk (big banks, big unions, big government, etc etc etc).

What are your thoughts on this situation?  What do you think our governments should do to pull us away from financial ruin while trying to also encourage people to have a positive attitude about their futures?  Post your thoughts below.

Why Can’t We Just Spend Our Way Out of Depression?

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The Canadian government has made a commitment to spend an unprecedented amount on ‘stimulus’.  So has the US.  The British government has bought many banks (along with the US) and will likely buy several more over the coming months.  The EU has reduced lending rates in order to encourage people to borrow, spend and borrow some more.

Through this process, the world’s economic ‘power houses’ are going broke and are printing unprecedented levels of money with an intent to encourage people to spend again.

There’s just one problem.  It won’t work.

Someone needs to remind them of a simple concept:  demographics.

During the 1950s, we saw a unique boom in suburban development and home building.  Why?  The Boomers were coming home in the swaddling clothes and their parents were in a massive nesting mode.

In Canada, the 1960s and early 70s saw the growth of programs, particularly social programs devoted to teen Boomers and their desire to get an education, start taking care of themselves and repeat the cycle all over again that their parents had started 15-25 years earlier.

Universal medicare, education and child support programs quickly became the norm and the best way to buy votes by leacherous politicians hoping to get into office and to stay in office.  As the programs expanded, the world’s leading economies – Canada included – saw their debt flower into surprisingly large numbers.  Conservatives will never forgive the ‘Pearson-Trudeau’ era because they felt their government had sold them out … and that’s exactly what happened.

But at least they had a plan.  I’ll come back to that in a moment.

Again, in the 1970s, we saw other economic shocks.  Gas prices spiked, not once, but twice.  First in 1974 and then again in 1979.  Why?  Well, there were thousands of reasons why, but I attribute a lot of the opportunity for OPEC with one thing:  demand.  As Boomers were graduating from their BAs and MAs, they wanted the one thing that America seemed to be good at producing:  a car.

All of those cars and all of those roads, in addition to all of the other by-products that came from oil (plastics, etc) meant the demand for oil exceeded demand for nearly any other commodity.

The oil shocks reached their peaks in 1979, but the prices of all other commodities kept climbing because Boomers were after another thing:  a house that needed lots of aluminum, copper wiring, rugs, furniture, 2×4 studs and so on.  More importantly, with housing demand, came unprecedented levels of demand for loans.  The cost of borrowing skyrocketed and interest rates in the range of 15-20% were not uncommon.

Phew.  It doesn’t end.  Once they bought their houses, they started saving and leveraged some of that capital and began to pump it into the market.  They kept pumping until we had our first massive correction in 1987 and another one in 1991.  The world economy didn’t really emerge from the first stock shock until the mid 1990s, only to be beaten down in 1999-2000 by the exceptionally irrational Dot-com boom/bust.

And then life seemed to happen to all of us while the Boomers were making other plans.  They kept saving, they kept borrowing and they kept spending, leading the charge for all of us as we entered a fantastic era of growth and prosperity.

Like all life cycles, that of the Boomer must come to an end.  The Boomers who haven’t retired are starting their retirement plans.  As they pull what little money they have left from the plummeting stock markets, they are forced to re-evaluate their intense levels of consumption and demand for anything and everything and focus on how they’re going to put food on their tables for the next 10, 20 or maybe 30 years.

Houses are being sold for smaller, more affordable (and probably downtown) locations.  Cars are getting smaller and, in many cases, they’re not needed at all.  Mainstream publishers are suffering as old hippies finally start to ‘tune out’.

So let’s not fool ourselves:  part of what we’re experiencing today (and I’m sorry … I don’t have numbers to show exactly how much) is just another stage in the long, continuous cycle of the Baby Boomer.  As they retrench, the world retrenches with them.

That’s why governments are just plain stupid if they expect that throwing a bunch of cash around is going to make one iota of difference in the grand scheme of things.  We’re entering the retirement of our vast, seemingly ever-expanding economies and the Boomers are leading us down the path.

What’s the solution?  Manage our expectations and start managing quickly.

OK … What’s the REAL solution?

  • Start creating an exit plan that includes a genuine way to manage economies, pre and post-Boomer.
  • Start building retirement homes instead of more roads.
  • Implement extremely efficient mass transit that will transport Boomers from one offspring’s home to another with little disruption or stress as part of the program.
  • Ensure that you have a realistic downtown intensification program, regardless of what size your city is, because Boomers will want to get from A to B as quickly and privately as possible.
  • Create public policies that give benefit to people who volunteer their time.  Volunteerism will become the greatest social activity over the course of the next 20 years.  If we don’t make it a part of our economy as well, we’ll be vastly undestating what’s happening in our country.

From a tax policy perspective, you’d better start thinking of ways to extract some of the massive wealth that’s about the be transferred from one generation to the next.  If policy makers don’t have the spine for that, at least have something in place that will capture the spending of the new-nouveau riche Echo generation.

What are your thoughts?  I know I’ve simplified the argument and I haven’t provided a single data point of research to back up my claims, but I feel like I’m on solid ground.