There is good evidence that the US economy is coming to the end of growth. For most Americans incomes have been dropping for 30 years, and all the recent growth periods were simply economic bubbles, with housing being the final one that tipped the applecart big time. But we still need prosperous communities. What is your plan for full employment in Rhode Island as the size of the monetary economy diminishes, and how will you keep a full suite of governmental services, something more critical for managing such dangerous transitions?
There are probably no good political answers for this, especially given the American predilection to only elect people who tell us good news. We are among the most good times craving people in the world, and therefore very prone to a swinging gate in politics, with neither party able to effectively govern when things go wrong. Our parties are poor at middle ground, but even weaker at realizing something other than the deficit has gone over the edge.
Manifest Destiny continues to define our approach to economics, and especially our view of the ecology/economy interface. While we have many conservationists there is continuing pressure to allow more and more resources to be used up faster and faster on the grounds that it produces a few jobs, but mostly because it makes a few fortunes. Everything is about outsourcing because those with fortunes no longer want to pay decent wages, so if it is not outsourced to a low wage high pollution place, the workers have been outsourced by machines.
The first thing to understand is that given the state of the world wages in the US will continue to come down, moving towards the global mean. The speed at which the wages sink is directly correlated with the state of inequality in America. If the rules continue to be skewed so that 1% of the population receives 93% of the new wealth, wages will drop very fast. If we adopt a strong policy of use less, share more, un-American in every way, but critical in the age of climate change and extinctions, the economy lands much better for most of us.
Another part of use less, share more is interest rates, and the use of credit. Clearly capitalism could not have evolved without the extensive use of credit. It is a major change from what came before, in that it demands a constantly growing economy in order for debts to be repaid. The immediate result, often the first result since forests and wood products are the building block (literally) of all civilizations, (because of wood’s versatility and properties, and because it can be appropriated as a free good by killing and displacing the the people who live in it) Is to cut down all of the forest. To this day everywhere economies are seeking to grow swiftly forest people are being displaced to cemeteries if they resist, or shanty towns and slums if they do not. Cultures often crash after the forest is gone because they lose their soil and water.
Given this incredible reliance on forests (try imagining your community without wood products or the flood control that forests do) One would think that the first rule of keeping communities healthy would be do not cut the forest faster than it grows. This would mean that loans for businesses that work in the wood and wood using industries can not be expected to pay more than about 2% interest if they are to leave healthier forests than they found via management and wood removals. In other words a 2% return on investment is all that is proper in places like New England given that in a very good year a New England forest will increase in woody biomass by about 3% and our depleted forests need rebuilding
Fisheries and other animal based systems can stand higher harvest rates, but soils and substrates build even slower than forest biomass, turning farming and fishing into soil and ocean bottom mining rather than sustainable activities if they are harvesting too much. Farming must become about building soil if it is to feed 9 billion of us each year. That says 2% loans, 2% return on investment is all that can be produced while healing the ecosystems.
Another factor to consider is that using fossil fuels to work the land constantly displaces people while contributing to greenhouse gas emissions that threaten the food supply and forest health. I often say, only a bit in jest, that there is enough oil on the planet to destroy all of the forest. People can work the land much more lightly than machines, and are able to build soil much more effectively without large machines. Or cut more selectively or fish less intensively. A factory trawler tries to catch everything. Catching with rod reel or similar technologies leaves fish behind to breed. And takes more people rather than investments in technology.
Which gets us back to how are we going to create more jobs as the economy shrinks. We are going to have more farmers, fishers, and forest workers using less technology and paying a lot more attention to the health of the ecosystem they are working in.
Yes, I am aware of the idea that working the land will never pay the wages that a modern economy pays, but the reality is that planet Earth can not pay them either, so we have an plan that fits the reality of a diminished capacity on planet earth.
As to how we maintain government services under such dire circumstances, we need to figure out what our communities really need. And the first thing we do NOT need is the war machine. Start by reducing military spending by 10% each year. Take half of that and spend it on education for people of all ages, research, development and implementation of clean energy and working the land and oceans properly, and rebuilding infrastructure for the 21st century. This then allows us to massively shrink the prison industrial complex, again diverting the money to maternal and child health, good food for all, and healthy housing. Finally, tax the rich, tax speculative investments, tax carbon emissions, and take sufficient royalties for the community for the use of the commons and for patenting things developed from living things to support critical services including preparing our lowest income communities for climate change by building up their resilience.
What role does economic inequality play in the overall health of the economy?
Evidence is pouring in that the more inequality in an economy the less well it functions. Too many stick points for markets to work efficiently, too poor a distribution of resources, which creates a need for additional services, either health and education or police and prisons. With a higher percentage of our population in poverty, prison, and ill than almost any other industrialized nation, clearly we have chosen poorly by increasing inequality. Often writers on the topic such as Nobel Prize winning economist Joseph Stiglitz think that if we can reduce inequality we can get the economy growing again. I disagree, the economy is not going to grow, but clearly reducing inequality will make the economy function much better.
All politicians know a bit of math, and if I said to you that a community was spending 135% of its income each year, you would likely be looking at a community with a massive debt problem. Now consider the Earth. People are using 135% of the biological productivity of the planet each year. And just as towns, families, businesses hemorrhage money if expenses are 135% of income, the Earth is losing forests, soils, fisheries, wildlife, clean water at a rate that is only partially covered up by the vastness of the Earth, and shows up every day in the lives of people with less to eat and the loss of the resource base that feeds them and their families. It is likely that we shall be unable to maintain community prosperity if the resource base is too degraded, so what is your plan to return the health of the ecosystem, in other words reduce the amount people are using until it is below the carrying capacity and the systems can be rebuilt, and how does it fit in with your plan to balance the budget, since ecological disasters will overwhelm any budget you create that harms ecosystems and does not account for the need to heal them in your fiscal expenditures.
While politicians are apoplectic about the budget deficit, they seem almost completely undeterred by the ecological deficit our economy is running. Unfortunately ecological deficits are more likely to cause collapse than budget deficits. Politicians have gotten so used to be bailed out and supported by the huge storehouse of planet Earth that they forget how much conditions have changed in the last 65 years. Population has tripled and the amount of stuff used per person has increased even more,so our ecological footprint has skyrocketed beyond all reason or ability of the Earth to stay healthy.
Politicians always assume a growing economy will help them balance the budget, but in our case the more we try to grow, the further behind we fall. Therefore the only things that will balance the budget are spending less on things that harm us and taxing the things that harm us and the rich at higher rates. Prime places to reduce spending include the police/prison industrial complex, payments to insurance companies (which can be replaced by a less expensive health care system based on prevention) and subsidies to industries that increase inequality in the economy. Taxes on the income of the wealthy, capital gains, and speculation should all be increased. Taxes on carbon should be implemented,