I am not a Conservative in the traditional sense, but I recognise that there is waste when you add unnecessary webs of transactions to our economic system. The proliferation of government bureaucracy and the sprawling banking system have acted as parasites that consume wealth by, in the first case, taxing it, and in the second case, bleeding it off through making profits on new loans. If we are to overcome the many economic challenges modern society faces, then we must inevitably innovate and invent, since modern technology is undeniably insufficient to solve the age old impossibility of continued exponential growth on a finite planet. In theory, there are solutions that we don't know of yet, but if we hold ourselves back by refusing to unleash the market, then we will trap ourselves. For example, perfect economic equality is going to result in a situation where no one person has enough to make the investments in green infrastructure and capital that we will need to adapt to the coming energy and resource crunches. The last crunch was in something that is actually artificial. The credit crunch was odd because it was explained as a shortage of money to lend. This excuse preys upon people's ignorance of what "credit" actually is. If you are a bank and you want to issue a loan, you just invent it digitally. We should not mistake the financial crisis, for the real underlying crisis. It is impossible to have a shortage of something that is infinite. Banks can actually create as much money as they like. Of course they don't, because they would send inflation too high, which would defeat the value of the repayments they receive. The economic crisis is simply a cover up for the peaking of several natural resources. I overheard some people talking about how "nothing was making any money at the moment", but I promise you, they are wrong, the one thing that is doing spectacularly well in the current economic climate is commodities. Take a look at the price data for commodities on the BBC News Website, under Business -- Market Data, and you'll see what I am on about.
The government's should recognise that the value of a unit of money is determined by the other money in circulation. If it takes people a third of their incomes, people will be a third poorer, but if they simply printed the money, there would be no need for the misery of taxation, and the effect on people's earnings would be the same, although it would be impossible to progressively discriminate between people on different income levels. Contrary to what some say, this would not cause hyper inflation. Hyper inflation is uncontrollable, rapidly rising inflation, but if government's simply created all the money they need, this would allow the to spend the necessary money needed to remodel our economy. It would not cause inflation, it would simply depreciate the currency. There is a slight difference. Inflation is how prices correct themselves upwards when there is too much effective demand for the goods the economy produces, but if government's expanded the money supply, they would not increase prices on the whole, and they would also boost the affordability of exports for foreign consumers. This would be very useful, because if we are to undertake a second, Green industrial revolution, then it would enable us to encourage the world to purchase the new inventions.
There is a fundamental difference between economic growth and economic development. The debate is similar to the quantity or quality debate, and like most people, I would opt for the later. Most of us live ridiculously busy lives, doing completely unnecessary things just to fill time, because of some sort of externally imposed obligation. At work, we are expected to spend our time being "productive", but what is accepted as "productive" is quite the contrary these days. The loose attitude to what constitutes worthwhile work has lead to the tick box culture, where people sit around doing office jobs that serve next to no benefit to the economy. In fact, it would be more profitable in some cases to pay people to do nothing, because you wouldn't be paying for all the paper, the pointless phone-calls, and so on. Perhaps Mr. Osborne would like to consider this when he makes cuts to public services. You could simply continue to pay people their salaries without actually requiring them to work, the savings being made from what the consume when they work. In the past people produced a financial benefit to the economy when they worked, and whilst this often holds true today, in some cases, we have "consumer-workers", who cost more on top of their salary to employ.
Whilst I have often written of how society will really struggle in the coming years, I accept that there seems no reason to sit back and let it fail. If we are going to fail anyway, then we might as well do so fighting. I would rather see the productive sector of the economy innovate our way out of the coming crisis, rather than sit back idly. However, a few words of caution are unnecessary, otherwise we may be sorely disappointed if we cannot buck the bad. Some analysts point to the meltdown of 2008 as the end of growth, triggered by the tipping point at which hydro-carbon energy extraction peaked, with led to rising extraction costs for the materials we use to conduct "economic activities". It is all very well however to understand recent history, but we should now ask whether there is any light at the end of the tunnel.
In this months issue of BBC Focus, the flagship science and technology magazine, Stephen Baxter speculates about what the future might look like, or rather "looks ahead 100 years to our high-tech future". We should probably take any long-shot view with a pinch of salt, as remarkably, many of his ideas are highly similar to what people thought the year 2000 would look like, back in the 1970s. Anyway, we should at least investigate whether any of the solutions he proposes are feasible. However, Stephen goes from one predictable rehash of current technology to another. One of the wackiest ideas he proposes is strip mining for water on the moon, which would obviously consume enormous amounts of energy that we simply do not have, but like many futurologists, he fails to make this link. However, in his piece on energy, he talks about solar and wind power- existing technologies. I can tell you now, there are only certain materials which would can manufacture solar cells or wind turbines from. These range from metals such as steel, which will run out within 30 years, to plastic manufactured from oil which will run out in 40, to various other ingenious substitutes for these resources, which will of course also run out. There are simply limits to the maximum amount of manufactured "stuff" you can have standing at any one time. The only long term solution is to hope that population shrinks naturally so that per capita GDP continues to increase, to bring people out of poverty, even whilst the economy overall stabilises or contracts.
Sadly, it is likely that population will not shrink naturally, but instead quite brutally. As oil and gas become too expensive (they won't actually run out- but it will feel like it) then we will have a death of intensive mechanised agriculture. Firstly ammonia is the basic feedstock for most farmed plants, but this is manufactured from natural gas. Crops are planted, sprayed with water, harvested, distributed, packaged, and so on, by machines that run on oil and sometimes "bio-fuels" (which are grown from the ground using oil anyway, and according to some studies actually give a lower energy return than that invested meaning that when you use 1 barrel of "bio-oil" you actually use more than 1 of normal oil anyway). However, we can adapt to lower food yields if we simply distribute what we have better. This is probably not going to happen with the current state of the world though. A recent article on the BBC news website celebrated £40m of UK aid as part of a package to poorer countries. To most people, something like £40m is a wonderfully large amount of money, but it is actually less than 1/100,000th of what the nation earns each year. Another factoid to ponder is that there are 10 calories of hydrocarbon energy in every calorie of real food we consume. We are going to have to adapt very quickly as oil production hits the downside of the mountain, otherwise food production would also collapse. Most people simply attach oil to consumer luxuries such as Sports Utility Vehicles, but when people see the empty shelves in the supermarket, the shortage will really hit home.
No comments:
Post a Comment