Toxic Economics

Toxic economics Greg Gerritt March 31 2017
President Toxic Dump has decided that the best way to stimulate the American economy is to open the spigots and poison your neighborhood and the planet. President Toxic Dump is a true believer that eliminating regulations on banks and all polluting industries is the way to get the GDP growth rate up to 4% a year and make the good times roll. President Toxic Dump is a narcissistic pathological liar, and every economist on the planet will tell you 4% a year GDP growth in the USA is NOT happening.

The President has repeatedly demonstrated an inability to learn and an unwillingness to face facts. That is why it is so easy for him to buy into the Great American Myth of the efficacy of the business climate. Every intellectually honest and professional study of how business climates affect growth rates has shown that the effect is vanishingly small, so small as to be unnoticeable by the public. And yet the well heeled forces that prepared the ground for the Toxic Dump Presidency, the Koch Brothers and their ilk, and the think tanks they fund like the criminally insane Heritage Foundation, have pushed the myth that cutting taxes and regulations will speed up growth. I have written about this many a time, so today i want to just list a few reasons why President Toxic Dump, and all the other lying politicians promising growth if we stop helping the poor, cleaning the environment, protecting endangered species, working to stop climate change, and preventing corporate fraud and crime are just plain wrong. And they have the totally wrong prescription about what to do to create prosperity in our communities. Every assumption in their economic planning is based on some other planet than Earth.

Global GDP growth has been trending down for a number of years. Last year it was 3.4%. This year it is predicted to be 3.1%. That means that many many places will have growth rates below 3.1%. Old industrial places like Rhode Island and much of Western Europe have a hard time getting much above 2/3 of the global average. The USA has had GDP growth of between 2.2 and 2.4% for 8 years running, the slowest bounce back form a recession in our history., and likely permanent.

A number of authors have tackled the issue of the long term trend of slowdown in the GDP growth rate recently. One suggests a slowdown in productivity because all the really amazing stuff that increased productivity and employment together are already in use and that new innovations are not as earth shattering commercially. Another suggests energy issues will permanently slow growth. Another wants us to understand how the disappearance of forests affects economies and others talk about the importance of immigrants from rural areas to cities as a factor driving growth. I tend to think you will never find the one silver bullet, but that these factors are all connected and its all of the above and then some as to why growth is not coming back

Lets just face the reality, growth is essentially dead in the industrialized west and it will play almost no role in the lives of most people in my community, or rather it is likely to make their lives harder. The exception are the owners of capital who continue to amass capital and a pretend we have a growing GDP even as communities crumble.

Even within this slow growth environment there are going to be be places experiencing rapid GDP growth. Places with mineral or energy booms will see short term boom/bust growth followed by a crash. North Dakota had 15% growth in one year during the fracking boom, but it went bust pretty fast and left North Dakota scarred. The other environment for rapid growth is cities being flooded by rural migrants entering urbanity for the first time. No other places will experience rapid growth. In a 3.1% growth world, old industrial places are going to see economic retraction, of necessity, in order for the hungry places of the planet to experience the growth that will provide enough to eat for everyone. If Rhode Island and places like it are growing 4% a year you can be sure famine is gripping large swaths of the world.

Here is a short list with a short statement of the issues and some of the implications.

For the USA, anything cutting off the flow of migration from Africa, Asia, and Latin America is a sure fire way to slow the economy despite the rhetoric. These are the new people keeping the population growth rate and the GDP growth rate up in American cities. American communities tend to complain when population drops, it usually means that the economy has changed and the world has passed it by. But what we need to think of is smaller cites can be much more self reliant and less growth oriented while maintaining prosperity. Turning vacant land into food and greening the city can go along way if we let it.

The formula for growth is especially dependent upon the urbanization of rural populations as they are displaced from the land. The cities then become places of vibrant growth as more people generates more commerce. China is building cities rapidly, but even in China the growth rate has come down from 10% a year to 6%. Already more than half of China lives in cities, so the rate of urban population growth is slowing, along with the economic growth rate. India is behind the curve from China, but is also one of the rapidly growing places with a huge population of rural dwellers being forced into shanty towns.

To supply and provision the growth of cities necessary to keep the GDP growth rates up one must have wood. Cities immediately devastate the forest where they occur, and to keep growing must import wood (try building buildings without wood) (or supplying a city with paper). China’s forest disappeared long ago, so to fuel its boom it has taken the forests of Southeast Asia. China did not actually conquer these countries, the traditional way of stealing forests. But the forest concession business that feeds the Chinese demand for wood, has deforested much of Southeast Asia, with devastating ecological consequences, displacing millions of people, and increased the likelihood of climate, fire, and flooding disasters. And putting a long term damper on growth as finding new forests to turn into cities is getting harder to do. Well over 50% of the global forest is gone and the global forest will not stand up to urbanizing the next 5 billion people.

It is not just wood and forests. Soils, fish in the sea, biodiversity, clean water. Everything is deteriorating with 90% of the large fish gone, 50% of wildlife gone in the last 50 years. We use up all of the biologically available resources on the planet each year by August 8. That means we are depleting ecosystems at at least 1% a year. We deplete capital and call it income.

The rate of Energy Returned On Energy Invested for is dropping. Extreme energy like fracking and deep water drilling requires more energy to extract the oil and gas. It is estimated that when the EROEI ratio drops below 10 to 1 growth stops. It is getting close.

Clean energy is already responsible for more jobs than coal and oil and gas can be produced with fewer and fewer workers. There is no way President Toxic Dump will see more coal mining jobs. And climate change will be a disaster if we do not mitigate it and build resilience into our communities rather than continuing to make the problem worse by drilling, mining, and burning more.

By an honest or full cost accounting growth in most communities in the western world is already near zero or negative. Increasing the amount of harm does stimulate GDP as fixing disasters and treating cancers is expensive. But is this really adding to GDP in any way that improves lives? Is this really growth when just fixing problems that were created by the demand for growth?

In the low growth economy that we find ourselves in the eliminating regulations and taxes is an ineffective tools for speeding up growth.

The Heritage Foundation/Koch Brothers/Gina Raimondo/Nicholas Mattiello/President Toxic Dump./Chamber of Commerce model of the economy, neoliberalism in some circles, is designed for conditions that do not exist and is based on models that are unproven but simply match the ideology of the oil and real estate industries, not the actual conditions of our communities.

Subsidizing the rich has proven an ineffective way to do anything except make rich people richer. Even the World Bank has figured it out, why not American politicians? Tax breaks for millionaires has no demonstrated positive effect on low income communities and usually results in communities getting poorer. How can anyone tout growth in which 90% of the people get poorer?

Currently nearly all “economic development planning” is done around real estate. But the real estate industry is broken. Clearly the models do not work. Or rather the system is rigged so that it can be manipulated by the powerful to line their pockets when nothing else works fast enough. When cities give real estate tax breaks so wealthy people will build new buildings downtown, who really benefits? It is the people owning commercial property who benefit. No one else. And if the industry can not function without tax breaks it needs a totally new model or those “capitalists” should start calling themselves socialists. The jobs created in these new buildings are accessible to only a small segment of the population, rarely the people being impacted by the construction/reconstruction, and it serves to raise rents driving people ever further from housing security if they do not get a job in a gazelle industry. And with robots taking more and more jobs we need to rethink work and livelihoods to keep our communities functioning.

The Heritage Foundation model is based on making the rich (their donors) and only the rich, richer. The result of these policies is growing inequality, and growing inequality harms economies and slows their growth. As Piketty and others point out, it is not just wages, it is assets that determine the fate of economies. Our inequality in wages is overwhelmed by our inequality in assets. The outcome will be bad.

Environmental regulations have had a very large positive effect on the economy of the USA. The Clean Air and Clean Water Acts have generated at least 10 times and maybe 40 times as much in revenue for businesses as they cost in compliance. Regulations have also stimulated innovation creating not only value but new industries. Then add in tourism and fishing, and despite having a few places that were dependent upon some polluting behemoth that is no longer operational (usually because it was too old or depleted to keep running) having hard times, the overall effects of healthier environments and ecosystems is greater prosperity. Communities with greater biodiversity are just plain healthier and more prosperous. There is no intellectually honest study that has found environmental regulations and protections hurt economies. NONE. And since cities are where new value is created and cities in the western world grow based on attracting talent with their qualities of life, the entire attack on environmental protections is likely to have a boomerang effect, destroying much more than it enhances. Especially with Climate Change a factor. Clean water is good for the economy. Losing your beaches to sea level rise is NOT.

Past technological advances have increased employment in urban areas tremendously. But the new innovations seem to be destroying jobs faster than they are being created in many industries., At least some authors believe that the life and economy changing/growing innovations such as telephone, automobile, airplanes, computers, will not be duplicated. New innovations are likely to reduce employment and unlikely to change the nature of our civilization in fundamental ways. This means less growth in productivity, and therefore GDP over time.

We are constantly bombarded with the need to invest in biotech. Unfortunately the model of innovation in the drug industry and the medical industrial complex is completely broken. It is designed to satisfy the investors, not help people be healthy. It gives us the most expensive and least effective healthcare system on the planet. The one part of this that escapes scrutiny is that using the healthcare industry to grow the economy as they are trying to do in Rhode Island is a sure fire way to make health care in your community unaffordable. And subsidizing the growth of the industry with tax dollars is adding insult to injury for all the people who went bust when they had a medical emergency.

The military industrial complex is the money hole of all money holes. Trillions of dollars down the rat hole. And all along making the world less safe, it is making it less safe for democracy, especially in the USA. The tendency of those in the DC Swamp to want to kill people around the world who do not like American imperialism is a staggeringly stupid approach to the world and a huge drain on finances. We would be safer if we gave up being the bully, and we could save billions of dollars and employ millions of additional workers with that money while shrinking government spending by reducing the size of the military to that appropriate for protecting us at home and international peace keeping. Lets use some of the money to rebuild our infrastructure and communities and move to a carbon free economy. War is the biggest source of the government debt. Debt could also be tackled by allowing the government to build infrastructure by spending money into the economy at a reasonable rate instead of borrowing it from the banks. The current system is guaranteed to create frequent bubbles and crashes, which only work to the advantage of the looting class.

I could go on and on. But I leave you with this. The basic assumptions of what the economy will do and who it will work for no longer work in the 21st Century. The so last century neoliberalism with a twist is based on lies and is failing. On a highly populated, resource depleted, climate crazy planet the situation demands a different approach to economic development. Polluting industries, building in wetlands, allowing more corporate raids on the public trust and pocketbook, and starting imperial wars around the world is not gong to bring prosperity to our communities. You will not see a noticeable improvement in the economic prospects of our communities, at least not if you use the index of the number of people standing on corners with signs asking for help on North Main St index with the Toxic Dump and Heritage Foundation models. . Unless President Toxic Dump reduces that index (and not by locking up the poor) he will have done nothing except cause damage to our home planet, many of his own voters, and the rest of us, so we have to keep him tied up. Of course he will help us keep him tied up by hiring those as incapable of learning as himself. Trump’s economic plans will fail, he will blame others, but his failure will be based on his complete unwillingness to look at the facts and act appropriately.