Alternations of political power and the economy
Alternations of political power and the economy Greg Gerritt Fall 2010
For weeks after the 2010 elections media was filled with stories on the election that began with the premise that the American electorate is very good at kicking out the party in power when the economy is not doing very well. Not doing so well appears to mean the economy is not growing fast enough, at least 3% and preferable 4 or 5% a year. Without this rate of growth unemployment rises and a swath of Congress pays with their seats. The stories often followed up with some comments along the line that it appears that neither of our large parties is any longer able to govern effectively, which appears to mean get the growth going again in the economy in a way that reaches most Americans or at least appears to do so. The various authors state that Republicans will find that their policies may have little positive effect and that the Tea Party can not jettison the New Deal and much of government spending if they do not want to crash the economy and get kicked out of Congress, just as Democrats find that they can not jettison all of the agenda their liberals find loathsome without some other sort of disaster that gets them kicked out of Congress. This pattern makes both parties crazy. Neither party has been able to find a path out of the endless morass we find ourselves in, at least not using the conventional wisdom and approach to governance. So we end up in gridlock and a holding pattern that allows the large corporations and Wall St to continue to loot America while the rest of us struggle. We throw the bums out of Congress whenever we have to bail out the rich after another bubble bursts. We replace them with other bums who will continue to bail out the rich. Such is progress
Many of the authors of these essays make very interesting points about economic policy and American politics and much of what they write does explain various aspects of what we face. A few have even mentioned the costs of empire, not only the cost and the blood spilled, but also the hollowing out of the American economy to create modern economies around the world, with America simply being the home of consumption as our schools fail and our cities flood. None of the essays I have seen specifically tackles the possibility that economic growth may no longer be possible in the United States. If economic growth is no longer possible, and yet both parties base all of their hopes on it, it is after all integral to the American Dream, alternations and gridlock are inevitable in the growing disconnect between economic reality, myth, and policy.
My premise, and that of many others who look closely at the linkage between ecology and economy, is that the conditions essential for rapid economic growth are relatively short lived, and no longer applicable to the United States or for the most part on Planet Earth. Cycles of prosperity in the industrial west are becoming ever shorter, and are based more on bubbles and chicanery than actual production. If the US adopted some sort of Full Cost Accounting, refusing to count capital depletion as income, not adding the repair of the damage done to communities by industrialism to the economy, but rather subtracting the damage and cost of repair from the economy, the numbers would show the US economy was actually shrinking, not even registering the phony growth we now see only during bubbles. The key factor in the economic slowdown is not the tax structure or the size of the government. Rather it is the destruction of ecosystems and depletion of natural resources: the overfishing, deforestation, erosion, elimination of wild things, dirtying of the water and fouling of the air, that has caught up with us. Our technology is not going to fix this in a way that opens the door to growth ever after. Until the political parties describe what is really going on, why a gearing down is appropriate and necessary and how they are going to engineer it rather than doing ever crazier things to prop up the appearances of growth, they shall alternate in failed policies and majorities in Congress. Getting the political parties and the ruling class to speak the truth may be the biggest obstacle.
The notion that economic growth may not longer be possible for the industrialized world (and the implications of such an occurrence) has been written about extensively. Herman Daly may be the best known and most honored practitioner. http://www.eoearth.org/article/Herman_Daly_Festschrift_%28e-book%29
Herman Daly,: quoted in Andrew Revkin Growth Economics on a Limited Planet. Interview with Herman Daly October 13, 2008http://dotearth.blogs.nytimes.com/2008/10/13/growth-economics-on-a-finite-planet/
“Growth in U.S. real wealth is restrained by increasing scarcity of natural resources, both at the source end (oil depletion), and the sink end (absorptive capacity of the atmosphere for CO2). Further, spatial displacement of old stuff to make room for new stuff is increasingly costly as the world becomes more full, and increasing inequality of distribution of income prevents most people from buying much of the new stuff—except on credit (more debt). Marginal costs of growth now likely exceed marginal benefits, so that real physical growth makes us poorer, not richer (the cost of feeding and caring for the extra pigs is greater than the extra benefit). To keep up the illusion that growth is making us richer we deferred costs by issuing financial assets almost without limit, conveniently forgetting that these so called assets are, for society as a whole, debts to be paid back out of future real growth. That future real growth is very doubtful and consequently claims on it are devalued, regardless of liquidity. “
Dr. Daly does not practice punditry, so he is not writing about the 2010 election. This is matched by the pundits who do not write about ecological economics. So I offer my take on the relationship among the electorate, the economy, and the ecosystems of planet Earth .
The Republicans sweep nearly all contested Congressional seats
The 2010 election cycle has resulted in a Republican sweep of nearly every Congressional swing district in the country. Democrats held onto seats in almost every Democratic stronghold district, about 180 districts, Republicans held their 180 stronghold seats and swept most of the contested districts. It reverses what happened in 2006 and 2008. What happened? Some of it is the very well funded Tea Party channeling anger, some of it is the Republicans masterly misstating their agenda, some of it is young voters staying home, some of it is racism. But most of it is that the economy sucks when compared to what the American Ruling Class defines as the American Dream, and when the American public feels the unemployment and anxiety, the party in power gets swept away.
One would like to think that the great minds in finance, business, government, and economics could figure out how to get the American economy working well, and that at least one of the American political parties that dominate the electoral system would have figured out policy prescriptions that could provide the framework for long term steady and heady growth, but this appears to be mission impossible, and impossible in ways they never considered. More and more it appears that the American economy is not capable of performing the way the ruling class tells us that it ought to, in other words growth fast enough to provide large profits and inflated stock prices while creating enough new jobs to keep the unemployment statistics from getting out of hand and keeping inflation low. Both parties appear to be more and more ineffective at economic governance. Neither seems to understand what is going on nor have they the appropriate tools to analyze the situation and make the appropriate adaptations in policy and governance. Something is missing in their analysis and models.
The ruling class, corporados, media and their well funded henchmen (the economists, think tanks, and Congressmen) have been unwilling to look around and accept how the world, the living system that is planet Earth, has changed in the recent past and what that means for the people who live on it. No longer is the Earth a place of vast untapped wealth. All the easy pickings are long gone. No more new forests to cut, no more arable soil to bring into production, fresh water is scarce, mineral deposits are harder to find, there are no easy to tap oil wells, only those at the bottom of the sea, and the fish are disappearing fast. The flip side is that there are no longer any cheap and easy places to throw all the garbage, at least those that do not come back to bite. Global warming is the most obvious example of this. The economists, uber rich, politicians, and governments seem to ignore is ecosystem collapse which is progressing at an ever faster pace. The mantra the spokespeople chant is any manner of community prosperity depends on growth and we shall get the growth going again. No other approach to prosperity is allowed to be discussed. The official policy is that rapid growth is the norm and that any other ways of thinking about the economy are deviant.
The election results leave us swung towards greater governance by the Republican Party, though the result is likely to just be more of the same bad news. The Republicans are the only political party on the planet to officially deny that climate change is being driven by human pollution. If a political party can not accept the reality that pollution is warming the planet in ways that have settled science at their cores, and an abundance of evidence beyond, then why would anyone believe their pronouncements that “There is No Alternative” to the current economic system and that growth is around the corner if only you gave the rich another tax cut. The Democrats are only marginally more believable, and their results are similar. Both parties are papering over the frantic death spiral of an ever “growing” economy. The Economy of the Empire continues to have no clothes, only a waterboard.
By the Numbers:
How was your Recession
Regionally, the Rocky Mountain area performed the best last year and the Great Lakes the worst. At the state level Nevada clearly had the ugliest 2009, with a drop in state output of 6.4%, while Oklahoma did the best, enjoying an increase in output of 6.6%. Only 10 states had economies that grew in 2009. Michigan’s economy has shrunk by more than 9% in the last 10 years.
From 1999 to 2009 median household income rose in only five states, and in four of these the gains were driven by soaring commodity prices. The biggest drops in income were all in states that depend on low-skill industries: Michigan, Indiana and Ohio.
Nationalizing banks <http://www.informationclearinghouse.info/article26803.htm> Joshua Holland, Information Clearinghouse –
The states with growing incomes include the 4 with the lowest unemployment rates in the US now; Wyoming, N Dakota, S Dakota and Nebraska. All states with large resource sector economies. Small populations, wide open spaces, agriculture, and minerals. North Dakota has had the best economic performance overall, and has a special resource as well, its State Bank.
Nicholas Kristof <http://www.nytimes.com/2010/11/07/opinion/07kristof.html> , NY Times – The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series <http://www.slate.com/id/2266025/entry/2266026> on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana. C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.”
<http://www.measureofamerica.org/wp-content/uploads/2010/11/AHDP-INCOME-FACT-SHEET.pdf> The wealth of the top 1 percent of households rose, on average, 103 percent (to $18.5 million per household) from 1983 to 2007. The poorest 40 percent of households experienced a 63 percent decline in wealth during the same period (to $2,200 per household).
The global ecosystem:
70 percent of the world’s natural fishing grounds have been over fished.
Besides the immediate crisis of overfishing, habitat destruction is also an issue.
Catch records from the open sea give a picture of declining fish stocks.
In 2003, 29% of open sea fisheries were in a state of collapse, defined as a decline to less than 10% of their original yield.
Bigger vessels, better nets, and new technology for spotting fish are not bringing the world’s fleets bigger returns – in fact, the global catch fell by 13% between 1994 and 2003.
But it’s not just bluefin tuna that is in serious trouble. According to a report on the state of seafood, “Turning the Tide,” published by the Monterey Bay Aquarium in October, “Most commercially important populations of ocean wildlife have been in decline for decades. Food webs are becoming less robust, and marine habitats are continuously being altered and degraded.”
Deforestation is clearing Earth’s forests on a massive scale, often resulting in damage to the quality of the land. Forests still cover about 30 percent of the world’s land area, but swaths the size of Panama are lost each and every year.
The world’s rain forests could completely vanish in a hundred years at the current rate of deforestation.
Global Forest Resources Assessment 2005 UN Food and Agriculture Organization
The report, Global Forest Resources Assessment 2010 (FRA 2010), shows that global forest loss slowed to around 13 million hectares per year during the 2000s, down from about 16 million hectares per year in the 1990s [NOTE]. It finds that net deforestation declined from about 8.3 million hectares per year in the 1990s to about 5.2 million hectares per year in the 2000s, a result of large-scale reforestation and afforestation projects, as well as natural forest recovery in some countries and slowing deforestation in the Amazon.
The GLASOD study estimated that around 15 per cent of the Earth’s ice-free land surface is afflicted by all forms of land degradation. Of this, accelerated soil erosion by water is responsible for about 56 per cent and wind erosion is responsible for about 28 per cent.
This means that the area affected by water erosion is, very roughly, around 11 million square km., and the area affected by wind erosion is around 5.5 million square km.
The area affected by tillage erosion is currently unknown.
Because soil is formed slowly, it is essentially a finite resource. The severity of the global erosion problem is only now becoming widely appreciated.
Carbon Dioxide Information Analysis Centerhttp://cdiac.ornl.gov/trends/co2/
Since 1751 roughly 321 billion tons of carbon have been released to the atmosphere from the consumption of fossil fuels and cement production. Half of these emissions have occurred since the mid 1970s. The 2005 global fossil-fuel carbon emission estimate, 7985 million metric tons of carbon, represents an all-time high and a 3.8% increase from 2004.
Earth’s Limited Supply of Metals Raises Concern” LiveScience Staff
19 January 2006 08:39 am EThttp://www.livescience.com/strangenews/060119_scarce_metals.html
Debt and growth
Our modern economy seems to require debt for its operation. An economy based on debt requires growth for its functioning just so people can pay the interest on the debt. Any time there is an economic slowdown, people can not pay back debts with interest, and bad debts and a shrinking pool of money to pay back loans pinballs through the economy. For this reason the practice of using the creation of debt to trigger the creation of more money has evolved. Unfortunately planet Earth is not infinite, nor do the ecosystems of the planet continue to increase their conversion of sunlight into the stuff of living cells when they get burned, buried, paved, or poisoned in the pursuit of economic growth. As ecosystems collapse before the human onslaught there is less conversion of sunlight into living cells just when we are asking for more, so we have to wonder about the mismatch between an economic system that uses debt to grow, the planet, and the people who still need to eat.
The current depression is the result of any number of factors converging. The deindustrialization of America as a way of lowering the wages of workers. Outsourcing and Free Trade, twin angels of the apocalypse when it comes to jobs in America, but an important source of prosperity and cancer in the countries willing to let the corporations do their dirty deeds, dirt cheap. The depletion of global resources. Peak oil. Shortages of minerals. Blood coltan. Eradicating forests and calling the destruction of capital income. Loss of farmland to the automobile and soil to industrial farming. Wars for the preservation of the Empire. A deteriorating infrastructure.
But the proximate cause was the financial games the rich were playing to give themselves bigger and bigger fortunes as the real economy shrank. Zero real growth, driven by forces that are not amenable to solution by financial chicanery (such as ecosystem collapse and climate change) seems to induce the rich to create crazier and crazier bubbles so they may get richer. Each boom bust cycle sinks us further into debt as the rich order the government to bail them out. Everyone else is taxed to pay for it which results, as expected, in shifting more and more of American wealth to the 1%. Millions lose their homes, Goldman Sachs is made whole. Unfortunately most of what we really need to understand as a community is off limits in either government or media discussions. Therefore, each boom bust cycle leads to another throw the bums out election without ever actually addressing the issues.
What growing economies need
Immanuel Wallerstein in his world system writingshttp://www.iwallerstein.com/the-article-list/ describes several factors critical for the continuing growth of economies. The world system does not have all the answers, but it suggests major exploitation of previously uncut forests and the massive migration of rural people to urban sweatshops are intimately connected with rapid economic growth (as long as we only add and never subtract the losses we suffer as a community from deforestation and displacement), and that places without access to new forests and other natural resources and/or large scale population migration will be slowing down economically. We live on a planet with fewer and fewer places to exploit for the first time (more than 50% of the global forest is gone, nearly all arable land is currently in use, all the easy places to find oil and minerals have been exploited), while the growing population and an ever complexifying built infrastructure place ever more strain on resources. Even when each particular item uses less stuff per piece, the goal is to sell more of them, so that total resource use expands. And getting more dollars per tons of stuff ripped from the earth adds to the inequality.
These days all the economic buzz revolves around the BRIC countries (Brazil, Russia, India, China) They all have economies that have been growing relatively strongly through the current recession and they are being looked to for models of growth. They are also expected to supply the buying power that Americans no longer bring to the table due to the end of American growth. It happens that the world system factors describe what is going on in the BRIC pretty well. Brazil has everything right now. New energy sources, large areas of un cut forest (expected to be ecologically gone in 30 or so years), huge swathes of rural poor streaming to the urban shanty towns, a vibrant democracy, and an innovative social safety net. Russia has forests, hydrocarbons, and a shrinking population. Once Russia recovered from the disaster that western economists created when the communists fell, it became a gangster capitalism natural resource economy, and non renewable commodity prices are good, providing the same sort of economic boost being experienced in the Dakotas, Nebraska and Wyoming, the American states doing best right now. Commodity prices will remain high as long as supplies of natural resources continue to diminish until the economy completely collapses. Natural resources are not going to be abundant and accessible ever again. India and China have huge very poor rural populations rapidly urbanizing. China is using the state to build huge infrastructure projects and bulldoze the people off the land. India is using GMO’s to trap farmers into debt, driving farmers from the land either by suicide or foreclosure. The next stop in both places are urban slums and low wage factory work. Their middle classes and consumption are rapidly traveling up the success ladder, while per capita income remains low due to the hundreds of millions of people still on the farms. But both see some of the handwriting on the wall. It is only by exploiting the forests of Myanmar and Indonesia that their wood needs are met. Both are running out of irrigation water, experiencing massive floods, fighting disease causing air pollution, and unable to adapt to climate change effectively despite ever greater efforts. In China there are about 300 anti government demonstrations each day that have something to do with ecological harm to communities and the efforts by the people to retain their lives. In addition a considerable share of the economic growth is being eaten up on repair projects repairing ecosystems and the lives disrupted when the ecosystems were harmed.
What happens after the party of virgin forests and massive migration
The US is actually gearing down. A system of Full Cost Accounting would clearly demonstrate less is available after subtracting all the damage. The new immigrants wax and wane according the the relative strengths of the economies in their home communities and what they would be able to send home from their jobs in the USA. As the economy of the Colossus of the North spirals down, staying home is a more viable option. Our old forests are gone and we struggle to keep the second growth we have regained. Our oil is depleted and more and more found in very difficult places to work like the bottom of the Ocean. Food is cheap but has a huge carbon footprint and more and more of our soil sits at the bottom of the Gulf of Mexico creating dead zones. We have already made it harder for working people to retire safely, have made medical care harder to access and ever more expensive, fallen behind the rest of the world in clean energy production, our bridges are failing, and the talk is of shrinking government investments that ameliorate the worst effects of the games the rich play. Detroit is coming back as an agriculture center, not a builder of cars.
Rhode Island is probably a bit further along the road to ruin than most places. The starting point for the Western Hemisphere’s industrial revolution, Rhode Island is highly urbanized, has few natural resource industries, dammed rivers, poor soils, depleted fisheries, little agriculture, slowly recovering forests (the flip side to little agriculture), and more industrial brownfields than you can shake a stick at. It has some design based industries, many artists and other knowledge workers, but what it has placed its hopes on, besides windpower, seems to be the medical industrial complex, which is by far the biggest industry in the state. One of the problems with that is that the faster the medical industrial complex grows, the more it sucks the life out of the rest of the economy by making health care for all unaffordable, and draining resources that might be productively utilized elsewhere. ( http://prosperityforri.org/?page_id=37http://prosperityforri.org/?page_id=29 “Health Care in the Economy” RI Policy Reporter issue 17 March 29, 2006 ) Healthcare is acknowledged and encouraged as the biggest engine for growing the private economy, so it comes as no surprise that what it really costs to grow the healthcare industrial complex is left out of all the discussions about how to get to affordable healthcare. The unacknowledged fundamental incompatibility between using health care as a growth industry and affordable healthcare for all, and the squeeze this puts on businesses, households, and communities has become unbearable and an economic disaster but has not yet made it to the legislative chambers or city halls. Like Detroit, the fastest growing industry in Rhode island is agriculture.
Could we do something else?
Part of our problem is how we measure the economy. More and more the idea that GDP is a useful measure is fading. Measuring GDP means counting every penny that changes hands as a positive no matter what manner of human created disaster harmed a community and how much it costs to clean it up. Spending more money is considered good under any circumstances except when the government spends it. Maybe we could try to measure things such as the Gross National Happiness Index or the General Development Index. Maybe then we can come to peace with understanding that borrowing more money from China to keep up the frenetic buying will not help either our communities or our planet.
US debts, both individual and governmental are astronomical. Instead of managing the shrinkage of the economy intelligently we have raged in the darkness demanding more, unelecting any politician willing to tell us that we shall have less in the future, and creating a mercenary army willing to make any place on earth safe for corporate profits. The US has military personnel on more than 700 bases in 175 countries. It is as if China is propping us up, lending us money, simply so we can keep weakening ourselves faster, spilling our blood and treasure to protect the profits of the corporations while kids are malnourished and more and more folks live on the streets. The bi partisan consensus on foreign policy is indistinguishable from that of a failing empire pushing out faster and faster to avoid looking at the decay within.
Look at the results of intentional blindness by our governing class. The parties reward their paymasters with tax cuts and bail out Wall St when it loots the economy and crashes. The public gets bad schools, falling bridges, damaged ecosystems, more folks losing their homes, an over extended military bankrupting the country, more people living on the streets including veterans of the new Asian wars, and America falling ever further behind in developing an infrastructure that will provide resilience in the climate change of the 21st century.
Tax cuts are the ruling class answer for everything. There does not seem much else they can do to pay themselves an ever bigger piece of a played out planet. But it is not working very well. Other than the next bubble, what do we expect. A big rise in health care costs providing the lion’s share of growth and making health care even more unaffordable? The financial services industry paying themselves more and more, but still not solarizing our communities and economies? Dirt cheap food that sends our soil, and lots of poisons to the bottom of the Gulf of Mexico, causing dead zones that were large and growing even before the Deep Horizon disaster? The steady shrinkage of the buying power of the average working family? K Street lobbyists buying Congressman?
A new approach?
Honesty would be a start, a real description of the economy and the war machine, a real measuring of costs and losses in our communities, not one subject to spin doctoring, would help us make much better choices. Maybe we could share the pain more equally and do a better job developing community resilience? Interestingly the state that has done the best in the current recession is North Dakota. ND has natural resources that have stayed pricy in the current economy, but even more it has a state bank that has been able to maintain lending into its communities, insulating them from the business practices of Wall St. Nobel Prize winner Joseph Stiglitz noted <http://www.informationclearinghouse.info/article26803.htm> “that if we want to get off the roller coaster of an economy moving from one financial bubble to the next, a bolder approach is necessary: permanent nationalization of banks that can’t survive without public dollars.
How bad will it get?
The last decade has seen the American public whip sawed by boom bust cycles mostly fueled by a Wall St desperate to make ever greater sums of money and unable to figure out how to invest in a way that will actually produce real useful goods while doing that. So we have seen a high tech/internet bubble and bust followed by what has to rank as the least productive bubble ever, a housing bubble fueled by fraudulent securities and loans to folks that were expected to default on them. It was a license to steal and Wall St walked away with a bundle when their bought and paid congressmen, who buy into the TINA model of cut throat capitalism as it pays for their reelection campaigns, bailed them out to the ever lasting detriment of the American public.
The corporados benefit from both political gridlock and the slow progression towards more corporate rule that gridlock encourages and spend their money accordingly. It almost does not matter which party is in power for the corporate paymasters, both parties pay obeisance to the same growth obsession and corporate paymasters, and propose the same useless solutions to our economic woes. Therefore American voters, more and more frantically, flip flop like a fish out of water and the politicians make it harder and harder for alternative voices and parties to be heard. Expect the looting of America to move full steam ahead with the current election.
A way out of the vicious cycle?
All over America, and for that matter all over the world, people are experimenting with new forms of economic development. Microlending, clean energy, organic agriculture, community gardens, Zip cars, and mass transit just to name a few. It is still on the edge, on the margins, and ignored by Wall St until it becomes the next big thing, such as the pseudo organic agriculture being touted by biotech industries, but it is exactly these new ventures, focused on doing well and doing good simultaneously that are transforming and bringing prosperity to communities undone by Wall St.
Anyone running a campaign to rein in corporate power and ecosystem abuse knows how tough a row to hoe that is. The advertising money flows, the lies and spies are employed, and the media are as implicated in the looting of America as any other industry,. The exclusion of alternative voices on the economy is their choice as well. You almost never see the distinguished peace activist pointing out how many are dying in the crusade and how much it is costing to no purpose on the Sunday Morning Talk Shows, nor an ecological economist pointing out the difference between capital depletion and income. The program that would create a real prosperity in the US is one that focuses on healing ecosystems and ending poverty. It does not get the publicity, but it is starting to develop and mature. Every day people are rebuilding forests and soil, creating low cost housing that uses no fossil fuels, eliminating cars and moving to clean mass transit systems that generate their own electricity from clean sources. We see more local production for local needs, often beginning with the revitalization of local agriculture to eliminate food miles. Use less, share more. Produce lots of compost. Create prosperity without growth by sharing the wealth and substituting community for doodads. Blasphemy to corporate economists who insist that growth is the only answer. Common sense for the ecological economists who see the desperate straights the planet is in, how much damaged ecosystems are costing us, and the cost of the militarism that seems to be what holds together the final threads of the corporate ruled empire passing for a democracy in which we find ourselves.
The American election system is broken. A poll in The Economist found 77% of respondents believed that. Some of the new tools of democracy would help. Ranked Choice votes and proportional representation would help insure that all voices are heard and that new ideas have an opportunity to filter up from the practitioners. But any democracy would be threatened if basic honesty about the conditions we find ourselves in are kept from the discussion. Until discussion of the American economy takes into account ecosystem collapse and the end of growth, we shall continue to get governments that can not solve the problem and wildly swinging electoral cycles. We shall throw the bums out but keep the mess they made.