Tuesday, May 05, 2015

The Federal Budget - how about something really meaningful?

With the Federal Budget being brought down next week, it's time to reflect on how things could be. When I arrived in Australia, Frank Crean wasTreasurer - and things haven't improved since. Treasurers take the same advice from incumbent bureaucrats and make the same mistakes as their predecessors

Steady State Economics presents a different view of how we could run the world, instead of chasing the illusiuon of perpetual growth. It offers the concept of an economy that is completely sustainable. A community with a size and structure that doesn't grow, but remains stable to match the limits of the natural environment and its resources.

Greed and self-interest led to the last global financial meltdown. It was an inevitable result of Government policies, big business demands and mass gullibility.It will happen again (and again)unless Governments, industrialists, commercial interests and individuals choose a different path from the God 'growth'. The same greed resulted in a pathetic and useless outcome from the climate change talks in Copenhagen.

Traditionally, economics taught in our universities has been based on an assumption that continuous growth is the only way to generate a better life for everyone on the planet. It argues that growth will raise living standards, lift people out of povertywhilst the cycleof supply and demand will solve environmental problems and the depletion of world resources. The classic view is that exponential growth is good and fast growth is even better.

Advocates of steady-state economics dispute this view. One of the first was John Stuart Mill in the 19th century and he has been followed by people like Herman Daly who maintains that the economy is a subset of our ecosystem. The global ecosystem is finite, a closed system which cannot grow. Matter neither enters nor leaves it. The ecosystem also provides the economy’s resources and a sink for its wastes. Continuous growth forces a collapse in the ecosystem which then becomes unable to support the economy and the community.

Some who question the current economic system, note that the ecology of the planet is increasingly under pressure, with natural resources such as forests, fish stocks, minerals and soil being depleted at alarming rates. Land for food production is increasingly scarceand pollution levels are making water and air unusable or unsafe.

The idea of a steady state economy is a way of addressing the problems of an unsustainable human society. Because the resources of the economy are all derived from the natural environment, the ecological dependence and the availability of natural capital means there are strict limits to any growth. Instead of continuous growth and 'development', a steady state economy would have zero growth, at sustainable levels of production and resource use. Renewable resources would only be used at a natural replacement rate and non-renewable resources would be used no faster than renewable alternatives could be found. Limits would be needed for population size, consumption, and the gathering of personal wealth. The steady state would maintain the entire population at a comfortable level which neither threatens the natural eco-systems and resources of our world, nor forces people to live uncomfortable lifestyles.

One definition of sustainability is to have a population and an economy in equilibrium. The birth rate matches the death rate and commercial activity is maintained at a constant level. If we reach this state, the peaks and troughs of a demand-driven society expecting to make more money this year than in the previous year will be a matter of ancient folk lore

There have been many arguments against the steady state theory. Oneis that zero growth would result in a serious economic depression, high unemployment and huge shortages. However, Daly counters this by pointing out that such a depression is part of the design of the current economic system. It's an inevitable consequence of chasing growth. A steady state economy has an entirely different basis that requires a smaller economy which better matches the availability of resources. Under a steady state system there can be no shortage. Our current economy has become far too large relative to the ecosystems and it cannot be sustained at this level. Just as economists and accountants teach that a business has an optimal scale of operations, where the marginal revenue equals the marginal cost, the optimal scale of the economy is where the marginal gain from growth equals the marginal cost of growth – costs such as pollution and resource depletion. It's clear that,over time, growth generates more costs than benefits.

Implementing the theory of steady state economics is inherently difficult. It requires a total change of ideology for economists, consumers and governments of developed and developing countries, and meets strong opposition to what is seen as its extreme requirements. Their whole thinking revolves around growth. It's hard to imagine the mandarins in organisations like the World Bank, the International Monetary Fund or any of the Government leaders in the G20 looking kindly on any suggestion that they should stop worshipping growth.

But Daly, along with many others has identified the most urgent step in fixing the world's economic problems as cutting unfettered growth. This demands limits on family size and allocating fixed stocks of manmade capital.

The world's population has outstripped the carrying capacity of the earth. Steady state economics requires that the population be stabilised at well below the natural carrying capacity, rather than at that level. This means that resources will be better utilised and lifestyles maintained at comfortable levels, rather than at low standards of living. The gathering of personal wealth needs to be limited to avoid over-consumption and waste that reduces the food and other goods and services available to the wider community.

In order to achieve the steady state, the following steps have been suggested to limit growth, stabilise populations and wind production back to a sustainable level:

  • Apply substantial taxes on fossil fuels, especially petrol – fossil fuels are finite and reliance on them can therefore only be temporary. There needs to be deterrents to using fossil fuels and incentives for finding alternative sources of energy.
  • Abolish subsidies encouraging fossil fuel use – fuel prices in many countries are subsidized, so that the price reflects neither the value, nor the finite nature of fossil fuels.
  • Price water to reflect scarcity and encourage conservation – over-consumption and wasteful use has resulted in scarcities of drinkable water in many countries, both developed and undeveloped, and the pollution of waterways.
  • Halt immigration – in developed countries the natural population is below the replacement rate and population growth comes largely from immigration. Halting immigration will mean that local populations will gradually decline naturally. It is also claimed that such a move would have global benefits as immigrants from poor nations living at even low standards of living in developed countries would consume more than they would in their own countries.
  • Eliminate subsidies to industrial agriculture – mass production of food, through crowding or excessive use of fertilisers are already revealing massive repercussions such as ‘mad cow’ disease, declining soil fertility, and pesticide contamination of soil, water and animals.
  • Abandon globalization – this concept completely challenges economic notions of free trade, as Daly argues that ‘by encouraging consumption of cheap imports and pressuring domestic producers to cut costs, makes it harder to set prices so as to reflect ecological costs’ and domestic markets need to be protected from cheaper imports to maintain sustainability.

Steady State economics challenges the view that a traditional ever-growing economy will lead to wide-spread global prosperity, including the preservation of the environment through the mechanisms of supply and demand.

Daly concluded that increasing global wealth will never raise the living standards of the poor, because the benefits of growth go to the owners of surplus, who are not poor. Furthermore the need for surplus will deplete all the natural resources and result in widespread economic destruction. With a steady state economic system the resources of the world can be maintained. The population would be stabilised, growth would be brought to an end and the economy would continue to draw on renewable resources but at completely sustainable levels.

Is superannuation just a con?

Any investment that relies on tax concessions to make it effective should be treated with great caution. And that's the main problem with superannuation. It's a great way of generating a huge financial pool with Governments, fund managers, investment advisers and merchant bankers skimming off the top – but Joe Blow citizen at the bottom of the pile has no guarantee that much will be left when he (or she) needs it. The industry spruiks about it's financial performanceas though it is something wonderful. However if you look at the figures it really only works if there is continual growth which is not going to happen.

In the end its an elaborate sham, a lottery in which there are many winners (such AS the fund mansgers) along the way. Some individuals enjoy the benefits when they finally retire but there will be many who don't receive anything like they expected. For them the gamble won't pay off!

For more on a "Steady State Economy" go to http://learningforsustainability.net/susdev/steadystate.php 

1 comment:

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