Foreclosures, Ecosystems, and the Economy

Foreclosures Ecosystems and the Economy

Greg Gerritt   Prosperity for RI   www.ProsperityForRI.com

February 13, 2009

 

Foreclosures, Ecosystems, and the Economy.  Part 1  Issues, Problems, and Complications

 

Introduction

 

If we had ever been here before we would probably know just what to do.  Never before has the global economy slipped into recession because of new forms of financial machinations at the same time that massive global ecosystem collapse stares us in the face.  What is offered to us as fixes by the economists and the government seem to be missing some crucial elements. This is my contribution to untangling the mess. Part 1 will lay out the problem. Part 2 will contain my suggestions on how to heal the economy.

 

This essay was begun on December 10, 2008, a cold and rainy night as we slid into a winter of global recession. I went to a rally in Providence’s West End.  Some of my allies in the movement for a more just America had organized a rally to highlight the phenomenon of renters who were paying their rent being evicted when a house was foreclosed.  I started writing when i got back to my desk that night.

 

Recessions are a pretty normal phenomenon in the modern world, almost part of the DNA of capitalism.  In society’s economic evolution/trajectory conditions change over time, so no two recessions are identical, either in proximate cause or effect.   I think the current mess forces us to look at some factors that previously were not incorporated into our understanding of the economy.  Until and unless we assimilate these new factors into our equations we are unlikely to be able to remedy the hard times we face.

 

Recessions may be frequent, but even in the most severe recessions there has been enough food to eat in this country, though often it is poorly distributed.  Therefore it is entirely possible that a shrinking economy is a greater threat to the American psyche than to our actual well being, but American pundits and elites seem to obsess on economic growth, ever faster growth, and they react poorly to recessions.  The rest of us get by best we can. So far all of the financial tricks that are usually used to end recessions and jump start growth have been tried and failed.  The next effort is a massive public works effort, which will probably do some good, but only some.

 

Immanuel Wallerstein, in his writings on the World System(1) points out that growth of the economy over the last 500 years has been very dependent upon two things.  Having new forests to exploit and having rural, and especially forest populations, to bring into the western industrial economy as low wage workers and then as consumers. Wallerstein would admit that is a simplification, but there is still much truth in that statement.

 

Forests in North America and Europe are slowly expanding with deciduous forests returning as farms are abandoned and more land is placed under conservation protections.  On the other hand tropical forests are disappearing rapidly, with Rainforests reduced from 14% of Earth’s surface to 6% over the last century and a half. Overall Earth’s forests are shrinking by millions of hectares a year. (2)

 

More than half the people on the planet now live in urban areas (3). By definition urban dwellers are producers and consumers in the global marketplace, meaning that finding more and more consumers may be a more difficult process over the next few years.  Already just about every country takes part in the global trade networks.

 

Conditions on earth have changed. Changed in ways that are not acknowledged by the economists, government, or the pundits. The changed conditions that are not acknowledged relate primarily to the collapse of the life support system of the planet, the ecosystems.  Wallerstein’s analysis was that when forest loss and urbanization collided we would be in for a rocky road.  Other voices, with David Korten (4)  among them, have emphasized different subsets of resources that are constrained, but in every case the authors note how their vantage point blends well with the overall analysis of resource limited economic conditions springing up. Peak oil is among the most well known of the constraints in front of us, along with its flip side Global Warming, but there are many others.

 

The natural bounty of planet earth, was so large that until very recently people were able to ignore the destruction of the global resource base and the filling up of natural sinks when contemplating the future trajectory of the economy.   There are many examples of local depletion leading to the collapse of economies and communities, but it has never been a global phenomenon until now.  Massive depletion of the global patrimony is a new thing, which is probably why depletion of the planetary resource base does not appear to fit into how economists think, or how markets are structured.

 

Over the last few years we have reached a point in which more than 120% of the yearly biological primary production of the Earth is being taken by people for their uses (5) 50 years ago we were no where close to global over exploitation.  A simple illustration of the speed of recent changes is that it took 150 years of industrialization to move the CO2 concentration in the atmosphere from 280 parts per million to 315 parts per million, a rise of less than .25 ppm per year. In the last 50 years it has gone from 315 ppm to 385 ppm, a rise of more than 1 ppm per year, more than 4 times as fast, with the current rate of increase approximately 2 PPM per year. (6)   The speed of environmental destruction has exploded and I would suggest that the recent over exploitation of natural resources is starting to catch up to us in ways we have a hard time fathoming and will effect the economy more rather than less until we develop an ecologically sound economy that meets human needs well and heals ecosystems so they can continue to provide resources for us to use. .

 

 

A quick fix?

 

Despite much evidence that ecological collapse is progressing full bore, and effecting the economy, no one can say exactly where in the arc of collapse we are or what will happen on any given day, so it is possible the wizards of Wall St and the Government will find some way to get some growth going again, or at least the appearance of it .   Maybe the wizards of Wall St have one more round in them and maybe Mother Earth is a bit more resilient than we have a right to hope, so it is possible the reality of a shrinking economy can be delayed for another economic cycle or two.  But this time I think the practitioners of the Washington Consensus model of development have stuck their foot in it and the tar is ensnaring them.

 

If the massive stimulus planned, and the concerted efforts of various governments and the international financial system return us to some sort of temporary economic growth it will be at a very heavy price. There will be more debt for more dollars in circulation based on the printing of borrowed money and the depletion of natural capital, but can you really call that growth? . In the modern world we create more dollars per unit of natural resource, and therefore can grow the numbers of phony dollars using only a bit more stuff.  But for the poorest among us, the most basic food stuffs and other necessities of life require basic stuff and the multipliers and froth do little good.   We can also expand the service sector of the economy with a relatively minimal expansion of stuff, and many services like health care and education could use a boost, but efforts to expand the economy will be like robbing Peter to pay Paul.   As natural resources deplete, the faster we go, the behinder we get.

 

 

A deeper exploration

 

The Housing Crisis and the Financial Crisis

 

 

This essay began when I attended a rally on the foreclosure crisis, so lets start our efforts to dig a bit deeper into what is going on there, though we could start almost anywhere, life being round.   I went to a rally to stop the evicting of tenants from  foreclosed multi family houses. It seems the tradition when a multi family house is foreclosed is to evict the renters so as to sell an empty house and avoid damage.  I suspect in hot real estate markets the relatively quick sale and the higher price means that the stupid real estate developer/banker trick does not impact the bottom line in a particularly negative way.  But one would think that in a full blown recession like we are in now that the rent money being paid would be welcome by the repossessing bank, on the idea that some money coming in is better than no money.  Despite the damage to communities of having large numbers of abandoned and empty houses eviction is a tradition we are having a hard time shaking, Thankfully Fannie Mae has decided to discontinue the practice in homes it holds the mortgages on and legislation to stop the practice is at least being discussed.

 

But I was also sort of disappointed with the message of resistance being offered by my friends and allies at the December 2008 rally.  It was fun singing “We Shall Not Be Moved” in both English and Spanish.  It brought back memories of singing it at summer camp in the days of the freedom rides.   But the solutions offered seemed to lack innovation, lack a program that actually would help create prosperity in the community or fix the financial system.  They seemed stuck in the idea that real estate speculation is part and parcel of the proper functioning of our economy, that rising house values will and ought to support ever more consumption, and ever growing consumption is a good thing, necessary for our prosperity, and something that we can continue to do on planet Earth.  This is disappointing because housing is already unaffordable for many in our community. So much of the work of my friends and allies is focused on the lack of affordable housing, so why are they hoping for a market turn around and rising prices? (7)  Why not just a community wide write down of the price of houses adjusting mortgages at the same time, just eliminating lots of debt and permanently shrinking the financial system.  Nor are my allies thinking about the foreclosure crisis and how it is part and parcel of the collapse of ecosystems, so they are not challenging the idea we can grow our way out of the recession.    My friends were exhibiting the same tunnel vision as the economists.

 

 

BUBBLES

 

Economic Bubbles have been a feature of modern capitalism since the Dutch and English invented it beginning around 1500 AD.  Modern capitalism grew out of the urbanization of Europe and was partly fueled by the resources and trade that came with the European conquest of the western hemisphere and colonization of parts of Africa and Asia.   The history of capitalism includes the tulip bubble, bubbles based on countries getting the investor class to buy and sell bonds on their national debt in return for trade monopolies or land, bubbles based on building railroads, bubbles based on buying stocks on margin, and more recently the High Tech bubble.

 

These bubbles did alot of damage to people who had more money than they needed to eat each day, but they were usually based on some innovation, something new as we moved along the technology conveyor belt, some new lands to exploit, some new spice. And they effected only a very small percentage of the global population. The railroad and the internet bubbles are prime examples of technology bubbles that both harmed many people and built real infrastructure, and even these seemed to have a much smaller reach than the current crash.

 

The High Tech bubble,  was a part and parcel of ushering in the digital age, building the world wide web and connecting millions of people to it.  A lot of the bubble was built on scams, businesses that went public with no revenues and no real plan for any, but even some of the biggest busts built something we continue to use.

 

But we are experiencing our second bubble/crash in a decade, and they seem to come faster and faster as the demand for ever faster growth becomes more incessant while the world gets fuller, has fewer resources per capita, and sees more hungry children each day.  In some ways a bubble/crash cycle based on real estate and the securitization of debt seems both old fashioned, and like the end of the line.  It is the kind of thing speculators would do when they run out of productive ideas and actual resources but want to continue to get richer and more powerful.    Real estate speculation is an old tradition, though it was taken to new heights recently with the creative use of credit, allowing prices to rise beyond what anyone could pay.   The ever increasing percentage of the economy (now 95%) in financial transactions produces no real wealth, just paper wealth, but it allows the investor class to usurp a bigger and bigger share of the life giving resources of the earth and consolidate its hold on politics. It takes food out of the mouths of children in poor countries and gives diabetes to the rich.

While a real estate bubble seems old fashioned, what makes this a totally 21st century crash, is that new technologies, the same ones that allow monetary transactions to  be twenty times larger than the actual transactions of the economy, allowed businesses to take all that debt, repackage it, pretend that it was wisely invested and was therefore a safe investment, and sell it.   This put huge sums of money into the pockets of the mortgage companies and Wall St, while more people struggled to keep a roof over their head. An entire house of cards, the financialization of nearly everything, was built on selling the debts of people who could not actually afford the houses they were buying, and could only do this is when the rise of housing prices made housing even more unaffordable so they could borrow more money.  The debt/toxic financial products were then sliced and diced and sold around the world. Not quite as blatantly fraudulent as Madoff’s Ponzi scheme, but close.

 

 

The housing shortage and the bubble

 

The National Low Income Housing Coalition in a recent publication (8)  noted that given the number of very low income families in the US, and the number of apartments available at rents these families could afford, there is at least a 2 million unit shortage of affordable units in the United States.  Further, the NLIHC estimated that as some of the units available at rents very low income folks can afford were occupied by folks with slightly higher incomes, there was a shortage of around 5 million units for very low income families and individuals.    Is it any wonder someone froze to death under an overpass in Providence recently and that all the shelters are overflowing with people sleeping on tables in lounges as there are no rooms at the inn?  Last year about 7000 different Rhode Islanders were homeless at some point in the year, and every state is facing record numbers of homeless people, with children making up a larger and larger percentage of the homeless sector of the population.

 

 

Beginning in the 1930’s, coming out of the Great Depression, going forward until the 1970’s, the Federal government shouldered some of the responsibility for making sure there was an adequate amount of affordable housing available to low income people.   It was the era of the greatest equity in the distribution of wealth in the US, and the most prosperous. Eventually the movement that created the “Contract on America” pushed the pro markets/anti government/anti poor agenda hard enough to get the Federal government out of the business of providing housing for our poorest people.

 

Over the last 20 years the “Contract on America” has wreaked havoc on the stock of housing for low income people.  The lack of affordable rental housing leads to the desperation lower income Americans  feel when looking for a place to live as prices and rents have spiraled ever upward; much faster than wages have risen.  This was combined with the propaganda campaign to BUY A HOUSE if you really were to be considered an American and the deregulation of the banking and investment industries, which allowed the creation of all sorts of toxic financial products. The result of this is a time when millions of Americans are losing the housing they could not afford  but pretended to own because there seemed to be no alternative if they wanted a decent roof over their family.

 

BANKERS

 

Accepting rent money and keeping renters in a foreclosed house seems to imply that a bank accepts that the house was overpriced and that the next sucker to come along willing to pay even more might be a long time in coming. The act of actually accepting a lower value for a house, writing down the mortgage,  then triggers the collapse of the financial house of cards built around the securitized mortgage derivatives sold based on a house that was too expensive to begin with.  So the renters have to go and the facade of ever rising values for houses is preserved as much as possible.

 

This house of cards, beginning with the securitized mortgages and credit swaps based on millions of overpriced houses sold with financial tricks, has become an integral part of the the global economy, or at least the financing of the activities of the wealthiest people, so the financial system seems to fall apart if the price of houses does not remain inflated and unaffordable.   Obviously there was a hitch in the git a long on this scheme, so trillions of dollars of paper value has evaporated, and with it a big piece of the economy of the United States.

 

The strangest thing about this whole mess is how much debt the banking industry was willing to create, and pay to themselves, for unaffordable houses sold to people without the income to adequately pay for the loans. It is also amazing how so many people who thought of themselves as really smart could have devised a system in which the entire global financial system was based on money loaned to people who could not afford the payments.  Any wonder the Wizards of Wall St. can not understand ecosystem collapse and how it effects them?

 

Real Estate speculation and the economy

 

Real estate speculation is integral to the American psyche.   Whether we are talking about stealing a continent from the native inhabitants, that our first president, George Washington, made his fortune via land speculation, or the Capital Center Commission aiding developers in the building of overpriced condos along Providence’s rivers, land development has been a big part of the American economy. Land development has always been among the leading sources of wealth in our communities, and is among the leading sources of money to finance local politicians so they can facilitate ever more “development”.  It is clear that real estate speculation and development is of critical importance because if you go to City Hall, the State House, or Capitol Hill politicians facilitate/subsidize development, facilitate/subsidize the churning of real estate, the building of iconic buildings, the development/sprawling of suburbs, as much as anything else they do.

 

As an aside, the domination of our politics by development interests also makes the passing and enforcement of environmental regulations of any type much more difficult.  Bankers occasionally accept that bailouts for screw ups require them to accept a bit of regulation for a few years, but I have seen no headlines of coal mine owners acquiescing to any more regulation and enforcement when the coal ash slurry dam broke, nor the mall builders asking for stronger wetland regulations when the river floods the mall.

 

The private housing market has never served lower income people well, and with the Federal government getting out of the housing business after the “Contract on America” the gap between the number of people needing low priced housing, and the supply of low cost housing, widened considerably, resulting in the NLIHC figures cited above. The shortage of affordable housing contributes to rising prices and an ever more desperate search for affordable housing for families.  People do desperate things including signing for mortgages they do not understand or that have outrageous escalator clauses in them.  The banking/real estate industry sold houses to people who could not afford them because the bankers and lenders were betting that house prices would rise forever despite the unaffordability of housing, and they made oodles of money when they could force up prices and take larger fees and then sell off the debt as if it were grade A.  If house prices rise forever, the credit swaps and all of the other recently invented toxic financial instruments can pass for profitable grade A debt despite that the bonds were ultimately  based on loans to people buying houses they could not afford, with deceitful mortgages they did not really understand.  In some ways it was a way to continue to use the American people as the consumers that drive the world economy without giving them a raise, which might cut into the profits and dividends of the investor class. Except for the wealthiest Americans, wages have been stagnant since 1973.  Rising house values allowed Americans to use their houses as ATM’s to make up for the stagnation of wages, until it all collapsed. Now many houses are under water, foreclosures are increasing, the number of families that are homeless is increasing,  and global climate change is moving faster every day.

 

DEBT

 

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. 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 and the planet.

 

The Federal Reserve

 

For a long time there have been people in the United States with serious objections to the Federal Reserve system, on the grounds that it favors the wealthy and the banks, against the people.  One of the objections is that it takes money creation out of the hands of the community and puts it in the hands of the banks, which then make money from the creation of money.  Nobel prize winning economist Paul Krugman(9) points out there is hardly any difference between the government  borrowing from bond holders or just running the printing press except that borrowing it further enriches the already wealthy, and adds much to the debt of the government and the people.

 

If the government created money without pretending the banks created the debt that added to the collective buying power by loaning money backed by the government, then we would not be borrowing from China to pay for upgrades to our infrastructure.  And economic growth to pay the bond holders would not be necessary.

 

There are examples, usually on a fairly small scale, of governments simply printing money to pay for infrastructure rather than borrowing it.  Guernsey printing money to pay for rebuilding is seawalls is the example one reads about most (10)

 

 

Credit markets and bailouts

 

The US government is completely immersed in of the system of debt driven growth. The people running the government can not even picture a world without growth and the games that drive it. The idea of a steady state economy geared much more closely to taking proper care of planet and people is beyond the pale. Therefore the first response of the US government, and other industrial nation governments’ to the current economic crash, was to try to reinflate the credit markets, in other words bail out the banks and the investors. This was the priority, not helping homeowners, productive businesses, and communities, or finding a relatively straight forward way to put people back to work, such as reinvigorating depleted ecosystems or building windmills.  The first efforts were to right the credit markets. Billions, and ultimately trillions dollars of  borrowed money will be poured into the effort. First things first as they say, we have to keep the economy using debt to grow and give the bankers money to lend.  Eventually the lousy results of this process, and the ways the banks used the money to pay bonuses and buy each other instead of helping homeowners, or getting money into the hands of profitable businesses that wanted to use it to develop their business, led to a greater willingness to talk about helping underwater homeowners, but the bailout is still a very iffy proposition and is directed at the wrong goal;  growth, instead of prosperity.

 

Too Much STUFF

 

Businesses claim they can not get credit, and the banks are hoarding and paying their big wigs rather than loaning out the money, but in the big picture the problem is not with the credit markets. The problem is that we try to fix our economic problems by trying to unstick the credit markets by borrowing more money and handing it to those who created the mess so they can continue to stuff their pockets and we can buy more stuff. We have an economy based on selling ever more stuff in a world where that gets harder to do every day because resources are depleted, debt is increasing, and we have more stuff floating around than people can actually use.   The growing debt is pulling us into a vicious cycle of debt, growth, more stuff, and depletion. Borrowing money so we can deplete ecosystems faster seems to make little sense when it makes our long term prospects ever bleaker.

 

The over abundance of stuff, the stuff glut, manifests in a variety of ways.  One is the bloated feelings of people in the industrial nations, with obesity and diabetes  becoming an ever greater epidemic, while nearly everyone buys more and connects less. Children play video games all day instead of getting exercise playing outside or using their imaginations. We are bombarded with advertising to buy more stuff faster, though rarely does more stuff improve our lives. Could this be one of the reasons that the RI Buy Nothing Day Winter Coat Exchange (11) distributes more coats each year than the previous? The flip side of this is the malnutrition of children in the poorer nations, caused by the export of food and resources that once fed local communities and the hundreds of people who come to Buy Nothing Day to get a much needed free coat before it gets really cold.

 

We also have a problem with the distribution of wealth.  There is currently enough food on Earth to feed everyone.  Grain stocks are at their lowest in 40 years (12), but if we distributed food equitably there is enough for everyone to eat a healthy diet. But nearly a billion people go to bed hungry every day.  In the same way, there is enough housing to shelter everyone in the US, but some people like John McCain have more houses than they can count, while millions have no home or extremely substandard housing.

 

 

The Service Sector

 

Instead of farming or manufacturing, most Americans now work in the service sector of the economy  It is both a reflection that we can create more dollars per unit of resource, and a reaction to the displacement of so many people by machines.  It is hard to ignore the retail sector of the economy, the US economy is 72% consumer spending, but retail is primarily a reactive industry, responding to increased dollars sloshing around a community, rather than putting many there.  Low wages selling stuff made in China and fast food from industrial farms do not build an economy.

 

There are parts of the service sectors that communities work to recruit. Rhode Island, like more and more places, seems to want the Financial, Insurance, and Real Estate industries to locate here and spur growth, complemented by the medical industrial complex.

 

If we read the headlines, the wonders of the Financial, Insurance, and Real Estate Industries are well known.  AIG, Bear Sterns, Lehman Brothers, Countrywide, are well known for failing completely, criminality, and taking big bucks from Uncle Sugar to keep from taking the entire financial structure down with them. The FIRE industry, fired by greed, is responsible for the current crash and the unaffordability of houses.  This is the industry most responsible for union busting, stagnant wages, a lousy health care system,and failing public services.  They encourage an ever faster plundering of the planet.  They create a greater inequality in the community. Why would anyone with a conscience ask them to come to the community or encourage their growth?

 

The growth of the medical industrial complex and its utilization as an engine of economic growth makes the dream of universal healthcare a cruel joke(13).  The medical Industrial complex  provided 30 to 40% of the growth in the American economy over the last decade, with yearly growth in revenues two to three times faster than the rest of the economy, In 50 years the medical industry has grown from 5% of the economy to 16%, with 25% of the economy in the medical industrial complex predicted for 15 years down the road.  But to what effect? We have by far the most expensive health care system in the world, it is bankrupting thousands of people every year, and delivers lousy care except in high tech specialties. We want health care to be more expensive, provide less coverage to fewer people?  We want drug company profits to get bigger while people decide whether to eat or take their meds each month?  We want this to be the engine of our economy? Give me national healthcare any day and take the growth incentive away by making it affordable for all with a focus on healthy communities.

 

 

ECOLOGY

 

There are many examples in human history of local ecosystems collapsing and taking with them human civilizations. (14)  When the last trees on Easter Island were cut , the island lost access to fish and fell into barbarism and civil war.  The Middle East is dotted with thousands of tells, the remains of farming villages in places that can no longer support agriculture due to depleted water, soils, and forests.  Mayan cities were over run by forests when their agriculture could no longer support the empire.  The Cod on the Grand Banks are gone.

 

Numerous European societies exhausted themselves in endless wars trying to control grain supplies, Rome,Sweden, and Nazi Germany being some of the more obvious examples. The Black Death unleashed economic booms in much of Europe because the diminished population meant there were more resources per capita available, labor became more valuable, and in many places forests returned and renourished the soils.

 

These examples are all localized.  But for the first time in human experience the collapse of fisheries, forests, ecosystems, and the filling of sinks is a global phenomena, with global warming being the manifestation most in the news, but only a small part of the problem. in the past if the soils were no longer feeding Italy, farmers moved the the Americas.   If the fish in the North Sea were diminished, the Grand Banks still had cod in abundance.  When the forests in Maine disappeared Minnesota beckoned and Paul Bunyan moved along. And few people lived in the tropical forests.  Now there is no place left to go.

 

A recent report (15) pointed out there are not enough of a variety of metals in the Earth’s crust to build the level of infrastructure found in the industrial nations in the rest of the world, even if every bit of recyclable material was recycled.  About 26% of the copper found on planet earth is already in use.  This also does not take into account that currently we are using the highest grade deposits in the most accessible places.  If the economy continues with business as usual,  the amount of work and energy need to mine in the future will be much greater, even as it employs fewer people.   Peak oil has been a headline grabber over the last few years, but we still refuse to acknowledge what it actually means.

 

Dead Zones are growing in every ocean fueled by a runoff stew including soil, pesticides, fertilizers, sewage, and hydrocarbons, much of it related to industrial agriculture and urbanization.  The amount of Carbon dioxide in the atmosphere has risen from 280 parts per million 200 years ago to well over 380 parts per million now.  NASA scientists are saying that we need to get back to less than 350 parts per million (CO2 does slowly leave the atmosphere ) to keep the planet livable.  It would take a reduction in carbon emissions of more than 90% to lower human caused emissions sufficiently to allow the atmosphere to cleanse itself in a reasonable period of time and reverse the climate damage we are causing and experiencing. Another part of the damage that carbon dioxide emissions do to the oceans is that absorption of CO2 by the water creates carbonic acid,  changing the ph of the ocean, and dramatically altering the conditions for animals making shells from calcium carbonate.  The oceanic absorption of carbon has dramatically slowed the warming effects, but at a great cost, and with a diminished capacity to absorb more(16).

 

 

The overall catch of wild fish has stagnated at about 90 million tons per year for the last 20 years despite ever greater fishing pressure using ever larger boats and more high tech equipment.  Fishing fleets have gone global and now are overfishing nearly every stock in every ocean (17).  The rise of seafood tonnage eaten each year is completely dependent upon aquaculture, the expansion of which depletes ecosystems and makes communities even more susceptible to epidemics and natural disasters, while at the same time in no way diminishing fishing pressure on wild stocks.

 

I think we need to give alot more thought to the role of forests on planet Earth and take their health into account much more when we think of the economy.    As Chateaubriand noted “Forest precede civilization, deserts follow”.  Modern western civilization is almost unimaginable without wood and other forest products, but with the end of the global forest in sight, timed to run out about the same time the oil used to bulldoze it runs out, we may be about to find out what an Earth with no forests is like.

 

Rainforests have gone from covering 14% of the land to 6% of the land with places like the Philippines having lost more than 2/3 of its rainforest in the last 50 years(18) The flip side of this  is that the only places on Earth where new agricultural lands are being brought into production are where rainforest is being converted to raise soybeans for the global feedlot, sugar cane for ethanol production, or cut down to put in plantations for palm oil. Deforestation is a major contributor to human associated emissions of greenhouse gases

 

Trees in the western United States are dying twice as quickly as they did three decades ago and scientists think global warming is to blame (19).

 

The only places on the planet with more forests and more standing timber are those places in which mechanized agriculture forced farmers off of small plots and the forest returned as the rural areas depopulated.   New England being a notable example.  In formerly agricultural regions where the industrial forest is a major employer the forests that returned during the period of depopulation are again being rapidly depleted (20)

 

San Francisco and New Orleans

 

Just for a minute I want us to think about two great American cities, hit by disaster a century apart.  Following the earthquake and fire of 1906 San Francisco lay devastated, while New Orleans, following Hurricane Katrina was laid waste in the early 21st century.  San Francisco was rebuilt quickly, while New Orleans has languished.  The different responses are telling.

 

There are many things about San Francisco in 1906 and New Orleans in 2005 that are very different.  San Francisco was a rich and vibrant place, at the heart of the Golden State. Rebuilding it was assured.  Much impedes the rebuilding of New Orleans.  New Orleans was among the poorer cities in the country.  With a majority Black population. New Orleans also sits below sea level in an age of rising sea levels, sheltering behind poorly maintained levees.

 

But I want to consider one other factor that may have been important in why SF rebuilt quickly and NOLA has languished.

 

When San Francisco burned, what folks did was go out into the woods of Northern California and cut redwood trees to rebuild the city.  Admittedly this dramatically increased the rate of destruction of the redwoods, and left us with a diminished forest we still can see today, but the fact that wood could be obtained nearby at relatively low cost meant the city could be rebuilt and SF flourished again quite soon.

 

We do not necessarily think of Louisiana as a forested state, but it is.  According to the Louisiana Department of Agriculture and Forestry forests cover 58% of Louisiana and the forest products industry is the second largest manufacturing industry in the state in terms of employment.  It should therefore not be a surprise to find that the most commercially valuable trees found in large numbers in Louisiana, Yellow pine, are being cut 30% faster (21) than they are growing, and that there is no surplus of forest to cut in the region to rebuild a city the size of New Orleans.  No one is talking about it, but the fact that wood is not as easily obtainable today is one of the reasons that it is so difficult to rebuild New Orleans.

 

Ecology and Economy

 

People looking to create economic growth never look at the ecological data, never get an meaningful measure of the depletion of ecosystems and the greater effort required to bring each new ton into the industrial economy. One reason for this is that natural resource depletion does not show up in corporate balance sheets like other things.  Natural resources are considered a free good.  Markets in natural resources are also of kilter, experience market failure, as diminished supplies rarely raise prices enough to diminish the taking of the resource, the rising prices simply making destruction more profitable in the short term. Diminished supplies create ever greater efforts to kill the last one. When the industry crashes it goes looking for a bailout.

 

Global warming is on everyone’s tongue. Some governments are talking a good game about reducing emissions, and Obama has pledged to use a fair bit of the “recession busting” stimulus package for green technologies and alternative non polluting energy sources, but no where on earth have emissions gone down, except as a part of economic collapse such as happened in post Soviet Russia and Eastern Europe, even when they go down per person or per dollar of economic activity. More dollars still mean more emissions, more deforestation, more soil erosion, more climate change, and more hungry kids if we keep running the economy for growth to fuel the plutocrats.

 

The End of GROWTH

 

I am going to quote Herman Daly, University of Maryland professor of ecological economics, and one of the founders of the discipline of ecological economics.  From a recent interview with Andrew Revkin (22)

 

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. “

 

 

This is pretty clear. It is extremely unlikely that we can grow our way out of this crisis, the resources of the planet strongly constrain that possibility. But rather than accepting the end of growth, adapting to the end of growth, planning for the end of growth, and making sure all communities thrive at the end of growth, what we get are western industrial nations, specifically the United States, setting off on a violent spree to control resources with the goal of faster growth, while the Newly Industrializing Countries try to grow at 8% a year to stave off massive unemployment and unrest while their forests disappear, drought gets worse,and shantytowns grow.  We can froth up the economy, play games that help the rich get richer for a bit longer, but essentially the jig is up.

 

Reality check!

 

Those with much power and command of a greater percentage of the earth’s resources are not going to give up that power. Business as usual is well entrenched despite the recent set backs.  Congress will pass a stimulus package. The struggle by the rich to run the country will not cease even as what they do is shown to be more like stealing every day.   Overgrowing the regime will be hard.

 

Do the right thing.

 

Things change.  Keep moving forward. Green jobs are a part of the stimulus package, though in miniscule proportion to the bailout of credit markets. More and more people are seeing the problems with focusing on ever faster growth, and the problems are becoming more and more concrete (pun intended) with each new dead zone in the ocean, each new record damage from a hurricane, each new extinction.  Move the public policy debate, practice eco-eco development in your community.

 

What to do?

 

The quick version is start a massive program to heal ecosystems on the planet. Feed everyone while at the same time healing the ecosystems that feed us.  Use less and share more.  Part 2 will follow relatively soon with some specific actions.  But lets first chew on our understanding of what the issues actually are and how deep is the crisis.  If in a hole, first stop digging.   I am going to work on my project looking for a way to develop an A to Z composting system for Providence for a while and talk to a lot of people before I get back to this writing. I look forward to your comments and taking the time to absorb the discussion.  And I would appreciate your collaboration. 

 

 

 

References and Notes

 

1.  Immanuel Wallerstein  The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press, 1976,

 

This is just one example from Wallerstein.  He wrote many other articles, many available on the web, and there are other authors from that school working today.  I once read an article from this school about how tiger human interactions recorded historically in China reflect where the forest was disappearing in China.

 

2.  Global Forest Resources Assessment 2005  UN Food and Agriculture Organization

 

3. Half of world to live in cities by end ‘08 Tue Feb. 26, 2008 6:51pm EST  Reuters

 

4.  David Korten  Agenda for a New Economy  2009

Other recent authors in this vein include James Kunstler author of “The Long Emergency” 2006 and James Speth author of “The Bridge at the End of the world”  2008

 

5. Alex Kirby Human use exhausts Earth Monday, 24 June, 2002, 21:43 GMT 22:43 UK  http://news.bbc.co.uk/2/hi/science/nature/2062729.stm

 

6. Carbon Dioxide Information Analysis Center http://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.

 

7.  HousingWorksRI  2008 Fact Book http://www.housingworksri.org/matriarch/

 

8.  National Low income Housing Coalition   “Out of Reach 2007-2008  http://www.nlihc.org/oor/oor2008/

 

9. Paul Krugman  Back to What Obama Must Do  Rolling Stone

Wednesday 14 January 2009

 

10. Rob Williams  Lessons from the Island of Guernsey 11/23/2008 – 11:09am.  http://www.vtcommons.org/blog/2008/11/23/daily-maul-lessons-island-guernsey-open-thread

 

11 Ian Donnis  “Buy Nothing Day strikes a compassionate chord”

Providence Phoenix    November 15, 2008   <http://thephoenix.com/Providence/News/27695-Buy-nothing-day-strikes-a-blow-for-compassion/?rel=inf>

 

12.      Only 40 days of global grain stocks left    Green Living Down Under   March 9, 2008  http://chervil-earth.blogspot.com/2008/03/only-40-days-of-global-grain-stocks.html

 

13. Greg Gerritt  “Health Care in the Economy”  RI Policy Reporter issue 17   March 29, 2006

 

14.  Jared Diamond  “Collapse, How Societies Fail or Succeed”  Penguin Group  New York, NY  2005

 

15.  “Earth’s Limited Supply of Metals Raises Concern”   LiveScience Staff

19 January 2006 08:39 am ET   http://www.livescience.com/strangenews/060119_scarce_metals.html

 

16. Ken Caldeira and Michael E. Wickett  Anthropogenic carbon and ocean pH  Nature 425, 365 (25 September 2003) http://www.nature.com/nature/journal/v425/n6956/full/425365a.html

 

17. The State of World Fisheries and Aquaculture 2004   UN Food and Agriculture Organization    http://www.fao.org/docrep/007/y5600e/y5600e00.htm

 

18. Philippines forest surface will be gone by 2025  Brunei Times June 22 2008   http://www.bt.com.bn/en/focus/2008/06/22/philippine_forest_surface_to_be_gone_by_2025

 

19. Alok Jha Global Warming Increasing Death Rate of US Trees, Scientists Warn.  The Guardian    Thursday 22 January 2009

www.guardian.co.uk/environment/2009/jan/22/trees-death-global-warming

 

20. Greg Gerritt  “A Campaign for the Forest” Leopold Press Inc  Raymond ME 1997

 

21.  Paul Chance and Richard Vlosky  Louisiana’s Forests and Forest Products Industries   Working Paper # 11  Louisiana State University Agricultural Center   Baton Rouge, LA   1995

 

22.  Andrew Revkin  Growth Economics on a Limited Planet.  Interview with Herman Daly  October 13, 2008  http://dotearth.blogs.nytimes.com/2008/10/13/growth-economics-on-a-finite-planet/

 

Leave a Reply

Your email address will not be published. Required fields are marked *