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|China’s economy registered a flat growth of 7.7 percent last year, maintaining for the second year its slowest expansion in more than a decade as the government warned of “deep-rooted problems” including a mountain of local authority debt.
Gross domestic product (GDP) expansion for the October-December quarter also came in at 7.7 percent, the National Bureau of Statistics (NBS) said, slowing from 7.8 percent in the previous three months.
The 2013 GDP figure was the same as that for 2012, which was the worst rate of growth since 1999. It was still higher than the government’s growth target for the year, which was 7.5 percent.
“Generally speaking China’s economy showed good momentum of stable and moderate growth in 2013, which is (a) hard-earned achievement,” NBS chief Ma Jiantang told reporters.
“However, we should keep in mind that the deep-rooted problems built up over time are yet to be solved in what is a critical period for China’s economy,” Ma said.
Since the 1980s, China has shaken off the lethargy of the Communist command economy with market reforms that brought it years of blistering growth, making its GDP second only to the US and establishing it as the world’s biggest trading power in goods.
But the country is widely expected to face slower expansion in the years ahead.
Its leaders under President Xi Jinping say they are committed to transforming China’s growth model to one where consumers and other private actors play the leading role, rather than huge and often wasteful state investment.
“Judging from the data, our outlook for 2014 remains that China’s economy will continue slowing down in the first half,” Wendy Chen, Shanghai-based analyst for Nomura International, told AFP.
Within the past decade Chinese growth was regularly in double digits, but it has been on a slowing trend and the 2013 result shows GDP growth in single figures for three consecutive years for the first time since 2002.
Ma of the NBS said China faces problems including dealing with burgeoning local government debt.
“The foundation of economic growth remains to be consolidated, the internal driving forces of economic expansion need to be further fostered, the risk of local government debt should be prevented and greater efforts are to be made to weed out out-dated production capacity,” he said.
Besides shifting the growth emphasis, China’s leaders are also concerned about the country’s financial system including “shadow banking” and government debt, particularly at the regional level.
China late last month announced the results of a long-awaited debt audit, revealing that liabilities carried by local governments had ballooned to $2.95 trillion as of the end of June, up 67 percent from the end of 2010.
Local authorities have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable.
While few see the problem as a systemic threat, the debt issue is considered to be a serious potential drag on China’s economy unless steps are taken to rein it in.
Analysts also say that shadow banking — non-transparent, less regulated credit — can stoke asset bubbles and threaten stability.
Joseph Stiglitz, in an interview with CNBC has said what we are all probably thinking right now. Even President Obama can’t be foolhardy and ostrich-like with his head buried in the sand to imagine that the US economy is picking up. Hope against hope and all the rain dancing you can do won’t get the economy moving because the wrong decisions have been taken by the people that thought that they had the ultimate solution to the world’s woes. Joseph Stiglitz is right when he says that the economy is not in recovery mode and hasn’t been.
Talk as much as we might wish about growth, it just hasn’t materialized. The lackluster growth with the highest growth rate in the third quarter of 2013 (the highest since 2011, which is nothing in itself to write home about) has not even dented the US economy let alone kick-started it into 2014. We have everything to be still worried about as the problems are just stagnating there as the people at the top take the decisions that are going to bring the economy further down into the doldrums. Just how far can we go?
The US stock market has hardly had a good start to the year. Just about the only thing that is doing well is the banking sector. As usual, some might say. The correction that has been promised now for months looks set to be rearing its ugly head at any moment now. Equities have fallen already almost 2% since the start of this year. Those that had somehow foolishly believed that the only way was up or that the sky was the limit look as if they are going to be in for a rough ride.
The market hasn’t corrected itself now for the last 28 months. The longer the wait, the bigger it will be. Statistics show that there is a correction of the market roughly every 18 months that is in the region of 10%. Yesterday was the worst session for the Dow Jones Industrial Average. It fell 1.1% at the close, down 1.9% for the start of 2014. The S&P 500 is down 1.6% and the NASDAQ has fallen by 1.5% so far this year.
The US employment situation is far from good. Jobs haven’t and just aren’t been created these days whatever the government has been telling us. We get people rejoicing over a few thousand jobs that are created, when we need literally hundreds of thousands of jobs every month. Data from last week showed that 74, 000 jobs had been created in December. We we’re expecting 200, 000.
It doesn’t create uncertainty; it just leaves the bitter pessimistic taste of failure in your mouth, Mr. President.
The participation rate in the US hasn’t been this low since 1978. It stands at just 62.8% for December. The number of people that are actively looking for work or in work hasn’t been lower now for more than 35 years. Stiglitz stated: “We have millions who have given up looking for a job. They’ve looked and looked and there are no jobs…more and more Americans have said there’s no future”.
All of that just brings on the same old story about the Federal Reserve’s decision ti cut the Quantitative Easing and shut down the printing presses after injecting $3 trillion into the US economy to keep it floating. All the bailing out that you can do is not going to plug the hole in the bottom of the boat, is it?
Stiglitz believes that it’s fiscal stimulus that will get the economy moving again and certainly not throwing bad money after even worse money. No amount of printing the greenback will have little if any effect on the economy. They might as well just go, get down on their knees and start praying in Washington. Nothing else will happen.
Fourth-quarter growth for 2013 looks as if it will be mediocre at best. Profits growth for S&P 500 is predicted to reach an increase of 7.7% in comparison with December 2012.
Robust growth, let alone any growth at all, is certainly not on the cards this year. According to Stiglitz, we should start worrying (or at least continue).
In his assessment of the global economy’s performance 2013, legendary financier George Soros warned of dangers in the Chinese economy:
The major uncertainty facing the world today is not the euro but the future direction of China. The growth model responsible for its rapid rise has run out of steam.
That model depended on financial repression of the household sector, in order to drive the growth of exports and investments. As a result, the household sector has now shrunk to 35 percent of GDP, and its forced savings are no longer sufficient to finance the current growth model. This has led to an exponential rise in the use of various forms of debt financing.
There are some eerie resemblances with the financial conditions that prevailed in the U.S. in the years preceding the crash of 2008. [Project Syndicate]
That, as William Pesek notes, is a rather ominous conclusion. So is China due a crash?
In a recent speech to the International Monetary Fund economist Larry Summers argued that since near zero interest rates have not stimulated GDP growth sufficiently to reach full employment, we probably need a negative interest rate. By this he means a negative monetary rate set by the Fed to equal the “natural” rate, which he believes is now negative. The natural rate, as Summers uses the term, means the rate that would equalize planned saving with planned investment, and thereby, as Keynes taught us, result in full employment. With near zero monetary rates, current inflation already pushes us to a negative real rate of interest, but that is still insufficiently negative, in Summers’ view, to equalize planned investment with planned saving and thereby stimulate GDP growth sufficient for full employment. A negative interest rate is a stunning proposal, and it takes some effort to work out its implications.
Suppose for a moment that GDP growth, economic growth as we gratuitously call it, entails uneconomic growth by a more comprehensive measure of costs and benefits — that GDP growth has now begun to increase counted plus uncounted costs by more than counted plus uncounted benefits, making us inclusively and collectively poorer, not richer. If that is the case, and there are good reasons to believe that it is, would it not then be reasonable to expect, along with Summers, that the natural rate of interest is negative, and that maybe the monetary rate should be too? This is hard to imagine, but it means that savers would have to pay investors (and banks) to use the funds that they have saved, rather than investors and banks paying savers for the use of their money. To keep the GDP growing sufficiently to avoid unemployment we would need a growing monetary circular flow, which would require more investment, which, in turn, would only be forthcoming if the monetary interest rate were negative (i.e., if you lost less by investing your money than by holding it). A negative interest rate “makes sense” if the goal is to keep on increasing GDP even after it has begun to make us poorer at the margin — that is after growth has already pushed us beyond the optimal scale of the macro-economy relative to the containing ecosphere, and thereby become uneconomic.
A negative monetary interest rate means that citizens will spend rather than save, so savings will not be available to finance the investments that produce the GDP growth needed for full employment. The new money for investment comes from the Fed. Quantitative easing (money printing) is the source of the new money. The faith is that an ever-expanding monetary circulation will pull the real economy along behind it, providing growth in real income and jobs as previously idle resources are employed. But the resulting GDP growth is now uneconomic because in the full world the “idle” resources are not really idle — they are providing vital ecosystem services. Redeploying these resources to GDP growth has environmental and social opportunity costs that are greater than production benefits. Although hyper-Keynesian macroeconomists do not believe this, the micro actors in the real economy experience the constraints of the full world, and consequently find it difficult to follow the unlimited growth recipe.
Summers (along with other mainstream growth economists), does not accept the concept of optimal scale of the macro-economy, nor the possibility of uneconomic growth in the sense that growth in resource throughput could reduce net wealth and wellbeing. Nevertheless, it is at least consistent with his view that the natural rate of interest is negative.
A positive interest rate restricts the total volume of investment but allocates it to the most productive projects. A negative interest rate increases volume, but allows investment in practically anything, increasing the probability that growth will be uneconomic. Shall we become hyper-Keynesians and push GDP growth to maintain full employment, even after growth has become uneconomic? Or shall we back off from growth and seek full employment by job sharing, distributive equity, and reallocation toward leisure and public goods?
Why would we allow growth to carry the macro-economy beyond the optimal scale? Because growth in GDP is considered the summum bonum, and it is heresy not to advocate increasing it. If increasing GDP makes us worse off we will not admit it, but will adapt to the experience of increased scarcity by pushing GDP growth further. Non-growth is viewed as “stagnation,” not as a sensible steady state adaptation to objective limits. Stimulating GDP growth by increasing consumption and investment, while cutting savings, is the only way that hyper-Keynesians can think of to serve the worthy goal of full employment. There really are other ways, and people really do need to save for security and old age, as well as for maintenance and replacement of the existing capital stock. Yet the Fed is being advised to penalize saving with a negative interest rate. The focus is on what the growth model requires, not on what people need.
A negative interest rate seems also to be the latest advice from Paul Krugman, who praises Summers’ insights. It is understandable from their viewpoint because in their vision the economy is not a subsystem, or if it is, it is infinitesimal relative to the total system. The economy can expand forever, either into the void or into a near infinite environment. It does not grow into a finite ecosphere, and therefore has no optimal scale relative to any constraining and sustaining environment. Its aggregate growth incurs no opportunity cost and can never be uneconomic. Unfortunately, this tacit assumption of the growth model is seriously wrong.
Larry Summers and other growth-obsessed economists are calling for negative interest rates.
Welcome to the full-world economy. In the old empty-world economy, assumed in the macro models of Summers and Krugman, growth always remains economic, so they advocate printing more and more dollars to expand the economy to take over ever more of the “unemployed” sources and sinks of the ecosystem. If a temporary liquidity trap or zero lower bound on interest rates keeps the new money from being spent, then low or even negative monetary interest rates will open the spending spigot. The empty world assumption guarantees that the newly expanded production will always be worth more than the natural wealth it displaces. But what may well have been true in yesterday’s empty world is no longer true in today’s full world.
This is an upsetting prospect for growth economists — growth is required for full employment, but growth now makes us collectively poorer. Without growth we would have to cure poverty by redistributing wealth and stabilizing population, two political anathemas, and could only finance investment by reducing present consumption, a third anathema. There remains the microeconomic policy of reallocating the same GDP to a more efficient mix of products by internalizing external costs (getting prices right). While this certainly should be done, it is not macroeconomic growth as pursued by the Fed.
These painful choices could be avoided if only we were richer. So let’s just focus on getting richer. How? By growing the aggregate GDP, of course! What? You repeat that GDP growth is now uneconomic? That cannot possibly be right, they say. OK, that is an empirical question. Let’s separate costs from benefits in the existing GDP accounts, and develop more inclusive measures of each, and then see which grows more as GDP grows. This has been done (ISEW, GPI, Ecological Footprint), and results support the uneconomic growth view. If growth economists think these studies were done badly they should do them better rather than ignore the issue.
The leftover Keynesians are correct in pointing out that there is unemployed labor and capital. But natural resources are fully employed, indeed overexploited, and the limiting factor in the full world is natural resources, not labor or capital as used to be the case in the empty world. Some growth economists think that the world is still empty. Others think there is no limiting factor — that capital is a good substitute for natural resources. This is wrong, as Nicholas Georgescu-Roegen has shown long ago. Capital funds and natural resource flows are complements, not substitutes, and the one in short supply is limiting. Increasing a non-limiting factor doesn’t help. Growth economists should know this.
Although the growthists think quantitative easing will stimulate demand they are disappointed, even in terms of their own model, because the banks, who are supposed to lend the new money, encounter a “lack of bankable projects,” to use World Bank terminology. This of course should be expected in the new era of uneconomic growth. The new money, rather than calling forth new wealth by employing all these hypothetical idle resources from the empty world era, simply bids up existing asset prices in the full world. Most asset prices are not counted in the consumer price index, (not to mention exclusion of food and energy) so economists unconvincingly claim that quantitative easing has not been inflationary, and therefore they can keep doing it. And even if it causes some inflation, that would help make the interest rate negative.
Aside from needed electronic transaction balances, people would not keep money in the bank if the interest rate were negative. To make them do so, the alternative of cash would basically have to be eliminated, and all money would be electronic bank deposits. This intensifies central bank control, and the specter of “bail-ins” (confiscations of deposits) as occurred in Cyprus. Even as distrust of money increases, people will not immediately revert to barter, in spite of negative interest rates. Barter is so inconvenient that money remains more efficient even if it loses value at a rapid rate, as we have seen in several hyperinflations. But transactions balances will be minimized, and speculative and store-of value-balances will be diverted to real estate, gold, works of art, tulip bulbs, Bitcoins, and beanie babies, creating speculative bubbles. But not to worry, say Summers and Krugman, bubbles are a necessary, if regrettable, means to boost spending and growth in the era of newly recognized negative natural interest rates — and still unrecognized uneconomic growth.
A bright silver lining to this cloud of confusion is that the recognition of a negative natural interest rate may be the prelude to recognition of the underlying uneconomic growth as its cause. For sure this has not yet happened because so far the negative natural interest rate is seen as a reason to push growth with a negative monetary interest rate, rather than as a signal that growth has become a losing game. But such a realization is a reasonable hope. Perhaps a step in this direction is Summers’ suggestion that the old Alvin Hansen thesis of secular stagnation might deserve a new look.
The logic that suggests negative interest also suggests negative wages as a further means of increasing investment by lowering costs. To maintain full employment via GDP growth, not only must the interest rate now be negative, but wages should become negative as well. No one yet advocates negative wages because subsistence provides an inconvenient lower positive bound below which workers die. On this “other side of the looking glass” the logic of uneconomic growth pushes us in the direction of a negative “natural” wage, just as with a negative “natural” rate of interest. So we artificially lower the wage costs to “job creators” by subsidizing below-subsistence wages with food stamps, housing subsidies, and unpaid internships. Negative interest rates also subsidize investment in job-replacing capital equipment, further lowering wages. Negative interest rates, and below-subsistence wages, further subsidize the uneconomic growth that gave rise to them in the first place.
The leftover Keynesians tell us, reasonably enough, that paying people to dig holes in the ground and then fill them up, is better than leaving them unemployed with no income. But paying people to deplete and pollute the Creation on which our lives and welfare ultimately depend, in order to expand the macro-economy beyond its optimal or even sustainable scale, is surely worse than just giving them a minimum income, and some leisure time, in exchange for doing no harm.
An artificial monetary rate of interest forced down by quantitative easing to equal a negative natural rate of interest resulting from uneconomic growth is not a solution. It is just baling wire and duct tape. But it is all that even our best and brightest economists can come up with as long as they are imprisoned in the empty world growth model. The way out of this trap is to recognize that the growth era is over, and that instead of forcing growth into uneconomic territory we must seek to maintain a steady-state economy at something approximating the optimal scale. Since we have overshot the optimal scale of the macro-economy, this will require a period of retrenchment to a reduced level, accompanied by much more equal sharing, frugality, and efficiency. Sharing means putting limits on the range of inequality that we permit; it has huge moral and social benefits, even if politically difficult. Frugality means using less resource throughput; it results in less depletion and pollution and more recycling and efficiency. Efficiency means squeezing more life-support and want-satisfaction from a given throughput by technological advance and by improvement in our ethical priorities. Economists need to replace the Keynesian-neoclassical growth synthesis with a new version of the classical stationary state.
Canada Job Grant ad 0:34
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The federal government blanketed the internet with ads and bought pricey TV spots during playoff hockey as part a $2.5-million publicity blitz to promote a skills training program that doesn’t yet exist, CBC News has learned.
TV commercials for the Canada Job Grant often ran twice per game last May during the widely watched Hockey Night in Canada NHL playoff broadcasts on CBC. There were ads on radio, as well.
“The Canada Job Grant will result in one important thing – a new or better job,” said the reassuring voice-over in the TV ads.
The problem: The program was never launched and is still on hold. The job grants were announced in the 2013 federal budget, but it called for an agreement with the provinces, which have so far refused to buy in.
Employment and Social Development Canada spent between $2.5 million and $2.6 million on the ad campaign. That figure excludes radio ads funded by the Finance Department.
“Spending millions of dollars to advertise a program that doesn’t even exist is like flushing tax dollars down the toilet,” Liberal finance critic Scott Brison said.
$11-million publicity push
CBC News has also learned that that advertising cash came from an $11-million fund set aside last year for Employment and Social Development Canada to promote the government as a job creator.
Before the Canada Job Grant TV ad went to air, the government paidEnvironics Research Group almost $70,000 to conduct market research. Focus groups saw a near-final version of the commercial.
Environics concluded: “The main message was consistently seen as positive and one that inspired hope…. In light of seeing the new ad for the Canada Job Grant, most now believe the Government of Canada is on the right track regarding skills training and the job market in Canada.”
- Government ad spending on economy balloons under Tories
- Oil and gas ad campaign cost feds $40M at home and abroad
- Conservatives overspent government ad budgets by 37%
“Their own research suggests that people get a positive impression of the ads,” Queens University political science professor, Jonathan Rose said. “Whether that means they convey accurate information is another story.”
A government commissioned survey done post-campaign showed only two per cent of the 292 people polled who saw or heard the ad also caught the disclaimer that the program didn’t yet exist. It also found only 18 per cent of viewers understood tax dollars paid for the advertising.
Ads ruled misleading
After receiving numerous viewer complaints, Advertising Standards Canada, the advertising industry’s self-regulating body, ruled the TV commercial was misleading because the job grant program hadn’t been approved.
“The commercial omitted relevant information,” ASC concluded in a report. The report didn’t name the government because the ad campaign was already over.
The proposed job grants would give workers $15,000 each for training, with the provinces kicking in one-third of the cost. But provinces have yet to sign on, complaining the proposed program claws back $300 million in federal funds now used to help disadvantaged workers.
“We do not believe, the way the program is designed, that it will work,” Ontario’s Kathleen Wynne said at a premiers meeting last July.
Quebec threatened to opt out. There’s no word yet on when an agreement might be reached.
Asked to comment on the ad campaign, a spokesperson for Employment and Social Development Canada said, “The government of Canada’s top priorities are creating jobs, economic growth and long-term prosperity.”
Harper blasted Liberals over ads
In his first question as opposition leader, in 2002, Stephen Harper took the then Liberal government to task over their advertising spending and the emerging sponsorship scandal.
“Will the prime minister stop the waste and abuse right now and order a freeze of all discretionary government advertising?” he asked in the House of Commons on May 21, 2002.
During its peak, the Liberal government spent $111 million on advertising, in 2002-2003. Harper’s current Conservatives doled out $136.3 million in 2009-2010, their biggest advertising budget yet on record.
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As powerful as it may be, the Fed is not the market. And since the Fed failed to restore trust in the system by forcing all bad debts to light, the financial world has grown increasingly volatile and broken as investors grow increasingly distrustful of the system and begin to pull their money from it: see market volumes continuing to plunge.
Nowhere is the lack of trust more apparent than in the financial sector. Indeed, it was a lack of trust between banks (inter-bank lending) that caused the credit markets to jam up in 2008, which resulted in the Crash.
That lack of trust continues to this day. In the post-Lehman collapse, instead of forcing real derivative and credit risk out into the open, the Federal Reserve and regulators instead suspended accounting standards and allowed financial firms (and other corporate entities) to continue to lie about the true state of their balance sheets.
As a result of this, the financial sector remains rife with fraud and impossible to accurately value (how can you value a business that is lying about its balance sheet?).
Those times in which a company was forced to value its assets at market prices have always seen said values losing 80%+ value in short order: consider Washington Mutual, which sported a book value north of $70 billion right up until it was sold for… $2 billion.
This type of fraud is endemic in the system. Indeed, we got a taste of just how problematic a lack of transparency can be with MF Global’s bankruptcy, in which a firm with $42 billion in assets lost over 80% of its value since August only to reveal in bankruptcy that it had stolen over $700 million worth of clients’ money.
That MF Global engaged in fraud and stole clients’ money is noteworthy. However, the far more important issue is: HOW did this company receive primary dealer status from the NY Fed nine months before imploding?
The Primary Dealers are the banks that actively engage in day to day activities with the New York Fed regarding the Fed’s monetary policies. Primary Dealers also participate in US Treasury auctions.
Put another way, Primary Dealers are the most elite, well-connected financial firms in the world. They have unequal access to both the Fed and the US Treasury Dept. In order for MF Global to have attained this status it must have passed through a review by:
1) The New York Fed
2) The SEC
This is not a quick nor superficial process. According to the NY Fed’s own site:
Upon submission of a formal application, a prospective primary dealer can expect at least six months of formal consideration by the New York Fed. That consideration may include,among other things, on-site reviews of front, middle, and back office operations, review of compliance programs and discussions with compliance and credit risk management staff, discussions with senior management about business plans, financial condition, and the ability to meet FRBNY’s business needs, review of financial information, and consultation with primary supervisors and regulators.
MF Global passed through all of these reviews to became a primary dealer in February 2011. A mere nine months later, the firm is in Chapter 11 and has admitted to stealing clients’ funds to maintain liquidity.
These developments reveal, beyond any doubt, that financial oversight in the US is virtually non-existent. This returns to my primary point: that trust has been lost in the system. And until it is restored, the system will remain broken.
A final note on this: the NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed granted MF Global primary dealer status a mere nine months before the latter went bankrupt?
If the NY Fed cannot accurately audit a financial firm’s risks during a six month review, then there is NO WAY an ordinary investor can do so.
This is one of the biggest risks in the system: that no one has a clue what financial entities are sitting on in terms of garbage derivatives and debts. As MF Global proved, this risk can result in a TOTAL loss of funds.
This type of fraud will continue until the system breaks. At that point hopefully the bad debts will finally clear from the system and we can actually lay a foundation for growth.
For a FREE Special Report outlining how to protect your portfolio from this, swing by: http://phoenixcapitalmarketing.com/special-reports.html
Phoenix Capital Research
Hope in the Face of Disaster – Creating a sustainable, viable, future path for civilisation | Feasta
Taking a long term view, this paper explores the many crises that civilisation and humanity will face over the coming decades some of which are already starting to have an impact. The paper proposes a central cause to these crises and particularly explores the widespread psychological inertia in the face of these vast problems. Some potential constructive choices that individuals, communities and nations could yet make are outlined.
The Illusion of Progress
There was a small village located in the centre of a large rainforest. Over time, the people decided that they would like to voyage out of the forest and to make their way to the sea, which they knew was close by. To do this they consulted the wise people in the village, notably the engineer, the politician and the philosopher. The engineer and the politician quickly took the lead in the project. The engineer made cutting tools like machetes that could cut easily through the dense undergrowth, and the politician organised the villagers in small working teams. Over time an efficient system was evolved, the engineer made the best and sharpest tools and the politician streamlined their application. Soon the village was making steady progress through the forest and everyone in the village was employed and working hard together. The philosopher, who sat in the trees all day long, seemed to make little contribution and people wondered what his value was.
One day the group came upon a particularly high tree. It stood out as the highest tree in the forest. The workers quickly bypassed it as they efficiently made progress, but the philosopher stayed behind and climbed to the top of the tree. From the top he had a fantastic view of the whole jungle. He could see the villagers, cutting like a snake through the jungle and in the far off distance he could even see the sea. Then to his horror, he noticed that the villagers were not heading towards the sea, but in fact were moving in the opposite direction, towards a large hidden chasm. If they continued on the same course, all of the villagers would fall to their death. Alarmed, he climbed down the tree and he rushed over to the politician and engineer leading the group.
‘We are heading the wrong way, we are headed towards disaster’ he shouted.
‘Shut up’ the engineer and scientist replied in unison ‘we are making great progress’.
In many ways the plight of humanity represents that of the tribal village described in the story. We have created an apparently wonderful economic model that seems to provide us with so many benefits. When you consider the incredible feats of technology and the global consumerist lifestyle we enjoy it is easy to marvel at what has been achieved. Of course what may be less obvious is the dark side of the growth economic model which is deeply inequitable, restricting its benefits to the relative elite in the western world and trapping the rest of the world in poverty. Most dangerous of all is the unsustainability of the model and where it is taking us in the future. There is now a perfect storm gathering that includes economic indebtedness, resource shortages, population pressures, and climate change that is guaranteed to derail civilisation. Despite this the political and economic mainstream are largely in denial about what is happening– like the hapless engineer and politician in the story everyone agrees that we must restart the ‘growth economy’ and continue to progress down the business as usual pathway. Very few people are taking the long term view and watching the direction towards doom that this pathway leads us. Too invested in the benefits of our current lifestyle, no one wants to hear the counsel of the philosopher who sees the disaster that looms ahead.
Where is civilisation heading?
Human decision-making is complex. On our own, our tendency to yield to short-term temptations, and even to addictions, may be too strong for our rational, long-term planning.
– Peter Singer
Like the philosopher in the story at the beginning it is useful to take a moment to climb the ‘tallest tree’ and to consider where civilisation is heading. Unfortunately the long term vista is not pleasant. Under the current business as usual economic model we are facing into a series of interrelated crises and global problems that are already beginning to have an impact.
Economic instability/ Financial System Weakness
The world banking crisis in 2008 and the resultant global recession revealed to the general public the inherent weaknesses in our world financial system. The economic growth model on which we depend has created a parallel system of finance that has built up extraordinary amounts of debt between countries and banks that has grown into an unsustainable bubble. In 2008 the world financial system was revealed as co-dependent, embedded and very fragile. Much like a house of cards, the collapse of Lehman’s brothers bank send ripples through the world bands that the nearly brought down the whole system. While some stability has been created due to massive intervention on the part of nation states and central banks, unfortunately this is largely temporary and the central weaknesses remain. Many countries have completely unsustainable levels of debt that simply cannot be paid back and when a future crisis happens central banks and nation states will have less capacity to intervene (having spent most of their reserves to stabilise the system since 2008). Despite these problems there is widespread denial about the scale of the financial problems we face. As the economist and founder of Feasta, Richard Douthwaite notes:
Few of us think that anything radical has to be done. We assure each other that minor tinkering, like holding an inquiry, beefing up the regulatory system and limiting bankers’ bonuses, will be enough to allow us to carry on living pretty much as we do now for the foreseeable future.
We are heading into an era of resource shortage and constraint. The cheap fossil fuel energy that has powered our civilisation will become increasingly scarce and harder to access. Such a peaking of supply will have serious ramifications across our economies and not just in transport and energy. Our world agricultural system on which we all depend is highly fossil fuel dependent – collapses in the supply of oil lead to collapses in food production and thus food shortages. Our world economy is so dependent on the cheap availability of oil, that even a small restriction in supply has the potential to collapse the entire system or plunge the world economy into depression.
Current and future resource constraints are not just limited to oil and indeed almost all the vital resources on which we depend are being depleted at exponential rates. Every human person and community depends on the availability of large supplies of water. With increased consumption and droughts caused by climate change fresh water is becoming harder to access in many regions in the world. Many countries are depleting underground water aquifers at exponential rates that far exceed rainfall’s ability to replenish them. Many highly populated areas of the planet will become increasingly uninhabitable in the near future.
In his book, Peak Everything , Richard Heinberg describes how we are facing decline in just about every resource our complex economies depend on whether this is uranium production, grain yields, fish stocks, arable land in agriculture etc. Having been used to everything on demand and plenty in the past, our societies will have to deal with resource constraint and shortage in the future.
Many natural biologists argue that we are currently precipitating the sixth great extinction on the planet. Some estimates put the current extinction rate at up to 10,000 the norm – we are systematically wiping out the earths species. Perhaps most devastatingly, this can be seen in the on-going collapse of life in the oceans. Overfishing and increased ocean acidity caused by CO2 emissions is leading to the collapse of ecosystems and larger dead zones. In a recent report, Alex Rogers, professor of biology at Oxford University, said:
The health of the ocean is spiralling downwards far more rapidly than we had thought. We are seeing greater change, happening faster, and the effects are more imminent than previously anticipated.
While the mass extinction of species might be seen as an environmental problem, it will also threaten our own survival as the human species as our well-being is determined by the life in the oceans. In the same report Rogers continues
People are just not aware of the massive roles that the oceans play in the Earth’s systems. Phytoplankton produce 40 per cent of the oxygen in the atmosphere, for example, and 90 per cent of all life is in the oceans… The situation should be of the gravest concern to everyone since everyone will be affected by changes in the ability of the ocean to support life on Earth.
As if the problems above weren’t bad enough, by far the most serious issue to come is global warming caused by human CO2 emissions leading to catastrophic climate change – this is biggest elephant in the room.
Already, we are beginning to see the early stages of this in increased rates of flooding, severe heat waves and sea level rises but worse is to come. For many years, 2 degrees was proposed as the safe limit that civilisation could tolerate but this looks likely to be breached on our current economic trajectory. As Prof Kevin Anderson of the Tyndal Centre notes
There is now little to no chance of maintaining the rise in global mean surface temperature at below 2 ̊C, despite repeated high-level statements to the contrary.
In exploring future trajectories, the recent IPCC report concluded that if we continue our ‘business as usual’ rate of CO2 emissions, this could lead to 3- 5 degrees of warming by end century. Such rates of warming could make most of the planet uninhabitable for human life and threaten our very survival as a species. When you consider that the IPCC projections are relatively conservative and avoid taking into account many potential accelerating factors (such as permafrost methane release, dark Arctic Ocean heating etc.), then these predictions are truly alarming. As Kevin Anderson (quoted by David Roberts) states elsewhere
The thing is, if 2 degrees C is extremely dangerous, 4 degrees C is absolutely catastrophic. In fact, according to the latest science, says Anderson, “a 4 degrees C future is incompatible with an organized global community, is likely to be beyond ‘adaptation’, is devastating to the majority of ecosystems, and has a high probability of not being stable”.
What is the basic problem?
Because of his greed the foolish farmer opens the goose’s stomach in order to access more of the golden eggs she produced. In the end he is left with a dead goose and no more gold.
Like all species, humans have exploited the natural environment to provide food, shelter and warmth. Unlike other species however, we are the first to exploit irreplaceable and unrenewable natural resources in such excessive quantities that we are destabilising the planet on which we all depend. The most significant of these unrenewable resources are fossil fuels such as coal, oil and gas which we started using a few hundred years ago to kick start our industrial economy and on which we now depend on an increasingly huge scale to power our modern civilisation and consumerist lifestyle.
In the early days such natural resources were in such abundance that it might have seemed churlish to see them as finite or limited. In addition, we had little evidence that our burning of fossil fuels caused harm to the environment. As a result, our economies started to grow at exponential rates and our modern civilisation became increasingly complex and dependent on exploiting these finite natural resources. Over time our industrial economy has morphed into a complex global machine that requires increasing energy and natural resources at its disposal in order to sustain it. The modern economy and the financial system in particular require on- going economic growth for it to remain stable. Loans that banks make now require future economic growth so that they can be repaid with interest. Any sustained recession puts banks in particular and the financial system in general at risk of collapse.
As a result modern civilisation is collectively caught in the following terrible bind: In order to avoid collapse the modern economy requires continual growth and thus the increased exploitation of natural resources; however, economic growth depletes the earth’s resource base on which the economy depends and so will eventually collapse.
This means that whatever choice we make we are facing into some form of decline and collapse. However, the earlier we choose ecologically sensitive alternatives to our current economic growth model, the more manageable such collapse and decline might be.
In simple terms we are reaching the limits of the natural world and things will not be the same in the future. Already, we are feeling the tremors of the future shocks to come. World agricultural output is declining, the availability of crucial natural resources such as fresh water, fish stocks, arable land are all declining. Fossil fuels are increasingly harder to access or cause increasing environmental damage as they are exploited. The mining of tars sands and the boom in worldwide fracking are examples of this, both of which are barely economically viable.
As children we all learnt the parable of the foolish farmer and golden goose who because of his greed kills the goose on which he and his family depends. We are making exactly the same mistake with the planet. Instead of accepting the natural limits of the resources at our disposal, we are living beyond the planets means and are perilously close to destroying the natural world on which we all depend.
Why is No One Listening?
There have been many warnings of the predicament in which humanity finds itself. In the early seventies the Club of Rome group published the famous book The Limits to Growth which outlined the unsustainability of the world economic model. As early as 1988 James Hansen explicitly warned the United States Congress about the dangers of human induced climate change. Some of these warnings were taken up by politicians of the day and indeed President Carter issued a passionate speech about the over- dependence of the USA on fossil fuels in 1977 and called for a switch to renewable and more environmentally friendly alternatives. With the Rio Earth summit in 1992, attended by 152 world leaders, there was perhaps a peak of world optimism that collectively we might now face reality and turn away from the unsustainable and disastrous path we were on.
Sadly, however none of this hope for change has been realised in the last 20 years and indeed if anything things have got much worse. Instead of reducing our dependence on fossil fuels we have rapidly increased our consumption at an exponential rate. Instead of reducing carbon emissions into the atmosphere these are now at the highest than at any time in human history. Further, what is particularly surprising is that people are now denying more than ever the reality of the problem. For example, research conducted by the University of Cardiff in 2013 found that the proportion of climate sceptics in Britain has risen to 19%, an increase of 15% since 2005.
Despite increasing and overwhelming scientific certainty about climate change, there is a parallel increase in denial of the facts by the public. Indeed, there are now active and well-funded denial lobbies intent on confusing the message. Even among those who accept the problems, there is an increasing avoidance of discussing these problems. As well as a growing number of ‘climate deniers’ we now have ‘climate ignorers’ who are people who despite a sense that all is not right in the world choose not to consider these issues and instead continue day to day on the same path.
So why would this be? Why would people choose to deny the serious problems of the future posed by not just by climate change, but also by resource depletion, and environmental destruction? Why would people deny such serious problems when they are becoming most apparent? Why would we turn away from corrective action at the hour of our direst need? While people have suggested the answer to this lies in the existence of well organised vested interests in the energy and fossil fuels industries and this is indeed true, I think there is also a collective failing in our human psychology that explains this rampant denial.
Denial, Fear and Loss
The only pain that we can avoid in life is the pain caused by trying to avoid pain.
– RD Laing
Denial is a common psychological response to deal with a serious threat or loss. Rather than experience the fear that we should normally feel when confronted by a major threat, we try to deny the reality of the threat in order to preserve our mental comfort. This is particularly when the evidence of the threat is indirect or far off. For example, many people who experience the early symptoms of a major illness will avoid thinking about it or seeking help for a considerable amount of time. They will reassure themselves that it is something minor and nothing to worry about, and avoid seeking help. Denial can be particularly strong when acceptance of the threat would mean we have to change or give up something we hold dear. For example, a person addicted to smoking or drinking will go to great lengths to deny the harm such behaviour might be causing their families and themselves, because they can’t imagine living without their preferred drug. In addition, because the damage of many addictions is far off and in the future, it is easier to deny its impact and to continue the habit unperturbed. For the smoker, the prospect of lung cancer in 20 years can be no deterrent to smoke the cigarette currently in their hand.
In many ways our collective behaviour in response to the prospect of climate change and environmental destruction is similar to the behaviour of a seriously addicted person. We in the West are addicted to availability of cheap oil and the consumerist economy that it provides us. Just like an alcoholic who will go to great lengths to deny the harm that alcohol causes in his life, so collectively our mainstream media and political system will go to great lengths to deny the harm that our economies dependent on fossil fuels are causing. When the denial is strong, people will cling to any belief (however unfounded) that seems to indicate there is nothing to worry about or that there is no threat to their livelihood. Picking perceived ‘holes’ in the evidence about climate, however tenuous, or clinging to ‘vague solutions’, however unrealistic are all powered by denial. When people read ‘denial’ articles, they can feel reassured momentarily and their fear of the future is abated. Of course such strategies only work temporarily as the evidence continues to grow and crises start to impact.
In addition, just as an alcoholic or drug addict will increasingly employ desperate measures to satisfy his addiction (despite the harm and moral depravity of such measures) so we employ increasingly desperate and ecological harmful strategies to secure an interrupted supply of oil to fuel our economy’s voracious appetite (whether this is fracking, exploiting tar sands or dangerous deep sea drilling).
Denial can also be particularly strong, the greater the threat and the more helpless a person might feel in the face of it. For example, many people on receipt of a fatal diagnosis may choose to actively deny or ignore these facts because they feel there is nothing they can do to reverse the diagnosis and the pain of contemplating its impact and their eventual death is too great for them. The recent growth of the number of ‘climate deniers’ and ‘climate ignorers’ can be explained by an increased awareness (on one level) of the problems and a resultant desperation to deny the facts and put them out of collective awareness. Though people have an increasing sense of unease about these problems they will avoid talking about them or engage in some form of wishful thinking that solutions will be found. They refuse to let the scale of the pending catastrophe sink in and do everything to keep it at bay.
As we shall see later, in helping people move from denial to a more constructive stance, they need to discover a purposeful goal of how they can respond to the current challenges which points to constructive action they can take.
Over Optimism and Collective Denial
One of the most striking things about the response to the current predicament is the lack of leadership and/ or collective denial that is endemic across our mainstream institutions. Our political masters, the mainstream media and most of our economists all agree that we must continue the economic growth or our ‘business as usual’ model, despite the patent unsustainability of this pathway and the harm it causes. In the face of the world economic crisis, there is an almost across the board consensus in the mainstream that we must return to economic growth to solve these problems. This consensus extends from the political left to the political right from business leaders to trade unionists and no one in the mainstream is proposing an alternative. There is almost no political will to question this consensus and to really consider the short term nature of such ‘solutions’ which even if possible will have such long term devastating consequences. Focused solely on re-election in a year or two, the last thing a politician wants to do is to talk about the reality of challenges for fear of making people despairing and fearful and vote not to re-elect them.
When denial is punctured
Crisis can be a time of opportunity and change, as well as trauma, and fracture.
The fact that climate change is a relatively slowly emerging phenomenon and that we are out of touch with the environmental destruction we cause means it is easy for most people to continue to deny these problems. This is likely to change once society is beset by an unending set of crises and catastrophes. Even though early change or adaptation is far more preferable to emergency change and forced adaptation, it is likely that until our addicted society experiences catastrophes, will the penny finally drop and our collective denial be punctured. Once this happens this will of course be a very perilous time. People, who have been hitherto in comfortable denial, will become fearful and desperate and may embark on desperate actions leading to social unrest, war and society breakdown. We need to be prepared to manage these social difficulties in the future which is likely to be as significant as managing the economy.
The famous psychologist Kubler Ross proposed a model of the individual’s response to bereavement or pending loss as going through the stages of denial, anger, bargaining, depression and finally acceptance. Once denial is passed a person may experience great anger at their loss, which is often accompanied by seeking to apportion blame and even seek retribution. This can be followed by bargaining or engaging in wishful thinking or unhelpful strategies to mitigate the loss and then by depression and grief as the impact of the loss finally comes to bear. Kubler Ross argues that once this grief work is done, the person can reach some level of acceptance and integration. Interestingly, many writers in the environmental field describe their own personal journey of awareness in similar terms. They describe a period of denial, before having a ‘climate change moment’ when they realise that the world on which they depend is unsustainable. This if often followed by a period of despair and finally by some acceptance and a commitment to constructive action.
Such a grief model may also give us some indication as to the stages we will collectively go through as the denial about the un-sustainability of our current lifestyles is punctured and we are beset by crises and consequences. If the first half of the age of oil has been characterised by exuberance, ever- increasing expansion, and an almost manic consumption of the world’s resources, the second half will be characterised by contraction, scarcity and depression. Once the denial falls away and it becomes clear that the decline of our western industrial economies is chronic and long-term, collective anger in likely to be widespread. People will seek to blame someone for the situation they are in, and there will be many looking for easy answers or scapegoats. It is at these times that people can choose radical and extreme political views. Just as the economic turmoil and the great depression of the 30’s led to the rise of dictatorships and totalitarian states in Europe, when the Nazis seized power by galvanising the public’s anger around easy scapegoats and negative ideals so these times will be fraught by similar dangers. In addition to anger, there is also likely to be widespread depression and despair. This is just as dangerous and has the potential to cause people to feel helpless in the face of negative forces within society, disabled them from taking action and to miss the positive opportunities in their midst.
In collectively, preparing for the many challenges ahead it is important to take into account the associated psychological, community and societal problems that will emerge. Once the crises occur, community and society leaders will have a particular responsibility to manage the public anger and despair that will emerge in order to avoid the destructive paths of social disorder. The twin challenges will be to help people channel their anger into constructive rather than negative courses of action and to present a vision that inspires hope in the face of widespread difficult circumstances. Such plans will be as crucial as economic and technological ones in helping people navigate a new future.
As a mental health professional my work is all about helping people face serious life problems such as addiction, disability or relationship breakdown and then in the face of such problems to live with meaning and purpose. I find it useful to conceptualise four stages to help individuals change which may provide a helpful framework in considering how we might collectively face the serious problems of resource depletion, climate change and economic collapse that are ahead of us. These four stages are
1) Honestly accepting the reality in which we find ourselves
2) Creating a meaningful vision/purposeful goal of how to live in the face of such reality
3) Focusing on constructive action
4) Building a community of support
Honestly Accepting Reality
We must let go of the life we have planned, so as to accept the one that is waiting for us.
– Joseph Campbell
At heart of addiction is fear. The addict fears that he cannot live without the drug or addicted object and will do anything to hold on to it. The antidote to this fear and the first step to overcoming addiction is to honestly accept the reality of your addiction and to take responsibility for your actions. Such honesty requires great bravery as you have taken responsibility for the harm your actions have caused. Using a second metaphor, our response to our collective predicament is similar to person facing a life threatening and potentially fatal illness. It requires great bravery for a person to face this new challenging reality and to allow the difficult feelings of anger and depression that might follow. Adjusting to accept a new much changed reality often requires a period of mourning, whereby a person experiences grief at the ‘loss’ of the future they were expecting and as they learn to live with very different expectations.
For us to face the hard reality of our collective predicament won’t be easy. Most people avoid thinking about it and those that do maintain a theoretical understanding. Scientists will talk about how we are committed to 2-4 degrees of warming, but may be reluctant to describe in detail what these facts will mean (inundation of major cities, killer heat waves, collapse of agriculture, social disorder). Some economists will talk about coming shortages in oil and other resources but few will visualise the food shortages, and the potential economic and social collapse that this will bring. Further, while many people recognise there are serious environmental challenges, such problems are minimised and not seen as a personal threat to their own existence. The melting of the Arctic ice is seen as a problem for polar bears, and climate change as one only affecting the third world, rather than both being seen as heralding serious threats to their own personal and national security. There is a disconnect from the obvious fact that we are utterly dependent on nature and the environment – its demise spells out our own destruction.
For us to wake up to the sheer scale of the problems we face will indeed require great honesty and bravery. It will be particularly hard for us to accept our responsibility – that is it was our actions which caused all these problems in the first place through our refusal to abandon a harmful economic model. Hardest of all will be to accept that the problem is not fixable, that much of what we have done is irreversible. While there is a lot we can do to arrest some of the problems and to mitigate some elements of disaster it is very likely that we are gone beyond the point of no return in many arenas. At best, we are looking into a period of long term decline and managed collapse. There is no way to sugar coat these hard facts, though the psychological acceptance of this reality is the first step to health. After denial, the Kubler-Ross model proposes the hard steps of anger and despair before reaching a stage of acceptance when people can learn to live again in a meaningful way.
Creating a Positive Vision
Grant me courage the change the things I can change, the serenity to accept the things I can’t change and the wisdom to know the difference.
– Serenity Prayer
Hope is definitely not the same thing as optimism. It is not the conviction that something will turn out well, but the certainty that something makes sense regardless of how it turns out.
– Vaclav Havel
Once a realistic and grounded appreciation of reality is achieved the next step is to create a vision for living in the face of this reality. There are two parts to this new vision that are illustrated by the wisdom of the serenity prayer. On the one hand, our new awareness should motivate us to individual and collective action to create change. Anyone realising the facts of climate change and resource scarcity should indeed feel alarm about our current collective path and then throw themselves into action to change course. Like the philosopher in the story at the beginning, we need people to try to ‘shout stop’ and to work to get us to pull back from our course of ecological (and self) destruction. This is the work of the many groups that campaign for reductions of CO2 emissions and those that work to conserve and protect wildlife.
Setting realistic and specific goals is important in this area of work, whether this is achieving a definite limit on carbon emissions when tackling climate change or aiming for food and energy security when building nationals resilience.
While these goals are absolutely necessary to create a future for the next generation, some of these changes are inherently beneficial and can make sense as choices in their own right now. For example, setting goals for more community oriented sustainable living, where people rely on their own resources to live, can be a more healthy and happy choice than the choice to live in our isolated, individual consumer societies.
Such important actions require great courage in the face of powerful vested interests which seek to thwart them. There is indeed a lot at stake. Unless we inspire people to act immediately, even a chance of a sustainable future will be lost. Every day that is passed without changing course makes a survival future less likely. We also have to be realistic about what is achievable. While we cannot avoid two degrees of warming, (which though catastrophic might be survivable) we can do a lot now to avoid four degrees (which will result in wide-spread collapse for human society).
As well as a vision focused on change, once we understand the reality of our predicament there is also another vision for living that is focused on acceptance and serenity. Such a vision recognises that though we are facing into a difficult future of decline and collapse – we can still construct a purposeful and meaningful life in spite of this. This vision is not constructed out of optimism but one that is wrought out of hope. Such a vision might have many components. It can entail a refusal to go down the path of despair nor to give into misdirected outrage that can lead to enemy formation, scapegoating, totalitarianism. Central to this vision might be a commitment to hold onto values such as justice, fairness and compassion in order to preserve a future worth living for. Such a vision might also contain a commitment to appreciate and value the life we have, and a decision to reconnect to the wonder of nature as it is. In his work with people facing death, the great existential psychotherapist Irvin Yalom proposed a ‘golden’ stage of death awareness, whereby people move beyond a simple acceptance of death to a point where such awareness makes their current life all the more precious and vital – each moment that remains is to be savoured and lived well.
Taking Constructive Action
Taking constructive action is crucial to managing and overcoming problems. A person with an addiction may first accept the reality of his addiction and then envision a positive life without being dependent, but unless he takes action to create a new way of living he will never move beyond the addiction the long term. Even a person who has experienced an irreversible loss such as a bereavement can find a new purposeful way of living such as dedicating oneself to a cause that is important to the loved one they have lost.
Taking constructive action in the face of a difficult reality is crucial to psychological health. Positive action in itself is an antidote to fear, channels anger in positive directions and turns the person away from debilitating despair.
Facing the current economic and environmental crises, there never has been such an urgent need for constructive action. Such action is both about arresting our business as usual path to destruction and finding alternative pathways as well as trying to adapt and build resilience in the face coming crises. Despite this urgency, most current global effort is on continuing the business as usual path with CO2 emissions continuing to soar and the environment continuing to be depleted). Even those with some understanding of the issues propose action that is far too little to have any impact on the sheer scale of the problems. Alternatively, other people adopt a ‘wait and see’ attitude – we understand problems are coming but we will change only when we have to. However, if we wait until major crises hit and our economies are shattered then not only will our action be too late, it will also be impossible as we will have little economic infrastructure to put plans into action. You won’t be able to build flood walls or alternative energy sources if your economy is in chaos. Early preventative action, to build resilience or to reduce future problems, is always preferable and the sooner we act the better.
It can be useful to consider constructive action as taking place on four levels 1) personal, 2) community, 3) national and 4) international. Let’s look at what might be possible on each of those levels.
Personal resilience and preparedness
While it is easy to doubt what a single individual can achieve, one must not under estimate the power of individual leadership. Certainly, as they realise the unsustainability of our present world most people in the environmental movement go through a personal journey of alternating despair and fear as they reach a stage of acceptance of the facts. Such acceptance and psychological preparedness for what is to come is a very important stance going forward. Certainly, a lot of time is unnecessarily wasted by people holding on to out-dated worldviews that no longer fit reality and which cause further harm to the planet.
At the end of this journey is the challenge of personal action. What am I to do in the face of these challenges? What is my responsibility now that I know the facts?
There is a responsibility to communicate what you know and to campaign our leaders for the more sustainable use of the resources as well as to start emergency preparation for the coming crises. There is also the choice to build personal resilience and to learn how to help your family survive in a future world that may be devoid of the many comforts on which our survival depends. Simple things like prioritising one’s health, getting fit, learning useful skills and accumulating resources that will be of enduring value in challenging times all create personal resilience.
Building personal resilience is not just about building capacity to deal with future crises, the benefits also extend to how you live your life now. Take for example, the ‘Growing It Yourself’ movement, which has huge current popularity. Learning to grow your own vegetables not only teaches the useful future skill of self-sustainability, but it also provides you with physical exercise, a connection with nature (often lost nowadays) and the personal satisfaction of creating your own food. In addition, done as a family project, gardening can help improve your relationships with your family and has the potential to increase your connectedness with your local community if you share and exchange produce and ideas.
One of the most important benefits of a personal acceptance of the more challenging future we face is how it can alter a person’s appreciation of their current life. Realising the potential losses in the future, many people choose to live more deliberately and with great appreciation of what they have as they sense none of this may be available in the future.
If we wait for the governments, it’ll be too little, too late. If we act as individuals, it will be too little. But if we act as communities, it might just be enough, just in time.
– Rob Hopkins
While the current economy is global, the future one is most likely to be local. As economic problems and future shocks come to bear this is likely to unhinge the global industrial machine and people are more likely to depend on their local communities and towns. This is the basic premise of the Transition movement pioneered by Rob Hopkins, which encourages people to come together in local groups to act now to build community resilience. These communities have initiated small-scale projects around energy, agriculture, transport, waste disposal, housing and education that all promote local supply and sustainability.
Whereas in the past villages and towns depended more on locally produced food and energy, currently now locally grown food makes up less and 2% of produce and local energy production amounts to even less. This means that towns are extremely vulnerable to any global disruption to energy or food supply. Everyone is completely dependent on international supermarkets and oil suppliers for the basic necessities of existence. The Transition projects that encourage project such as community farms, local cooperatives and community energy projects, all reduce the dependency on outside sources and have the potential to build the local economy. Instead of most of people’s money flowing out of the community to pay energy and food bills, the money can stay in the local community and build local jobs. Indeed, as future shocks rock the international economy such local economics will become much more important.
Grassroots movements such as Transition towns are about galvanising local people and communities into positive constructive action. Rather than sitting back, complaining about what is wrong or being fearful about the future, the Transition movement puts people in touch with like-minded people who can act together to make a difference. These projects connect people with their neighbours, provide meaningful community work and build social capital within communities. The personal psychological benefits of such constructive community action are enormous.
In addition, while these community projects are still small-scale and not yet on national agendas, in the future they have the potential to lead the way. Once economic and environmental shocks occur and the current system begins to break down people will increasingly look for guidance from on the ground communities that are better prepared for what is happening. In his most recent book The power of just doing stuff Rob Hopkins describes a myriad of small scale projects that have the potential to provide signposts for future action and sustainability.
While currently national politics is completely in denial about the unsustainability of the current economic system, this could change quickly in the face of serious crises. Such a change would be similar to complete transformation of the UK during World War 2. Politics became unified and focused on a single major goal of survival in the face of the Nazi threat. Out of necessity and within a short period the entire domestic economy was reorganised into a largely local one where communities returned to growing their own food and rationed their consumption of imported products. With the common enemy of the Nazis, political leadership was strong and communities were galvanised into action. The ‘Dig for Victory’ campaign to encourage locally produced food was extremely successful.
In the face of crisis, it is possible to conceive that current national politics could be transformed and reoriented in a similar way. Climate change and carbon emissions could become common enemies and national goals could be set for energy and food independence. Networks of cooperatives could be set up on regional and national levels that could support such projects. Having clear national goals such as growing 100% of our own food by a certain date, or building a renewable energy infrastructure, will be easier to explain to the public and to ensure national buy in.
While currently it may be difficult to persuade such a national reorientation, it will become more necessary as economic, resource and environmental shocks hit. As a result, early preparation is crucial. Even if most people do not fully accept the unsustainability of the current economic model, it still makes sense to create national plans now as to how we will deal with such potential shocks and emergencies. Some effort should be put into thinking how will we deal with a currency crisis? What will we do if oil/ gas supply is interrupted? How could we ensure food security for the population if world trade was interrupted? National ‘think tanks’ could be commissioned to plan a range of adaptive responses and emergency policies that can be enacted during crises. This can include plans for dealing with energy and food scarcity, mass unemployment, population migration, currency and financial collapse etc. Even in the face of large scale denial, there is a strong rationale for starting such preparation. Moving the discourse from an environmental one to one about national security is important in making progress. This is not about saving the environment, it is about saving ourselves.
International Cooperation and Resilience
One of the one most striking things about the global economic model is how interconnected it is. Most nations are bought into this co-dependent system and which our livelihoods depend. Whereas 30 years ago, countries like china and the soviet bloc seemed to possess some independence and to be following separate economic paths, this has all changed in the last few decades and these countries have fully joined the global economy thrown their hand into the consumerist lifestyle and the pursuit of economic growth. As a result, no nation is economically independent of another – shocks in one country quickly transmit across the system. The health of the European economy depends on that of US as well as on the economy of China and Russia and vice a versa. This co-dependence is particularly striking in the financial system – a collapse in one banking system has the potential to bring down every financial system.
As a result the problems associated with unsustainable growth such as climate change, environmental damage and resource destruction are all truly global problems. Any potential solutions or large scale mitigation strategies would only have a chance of working if they are international projects with buy in on a global level. Indeed, much effort has been put into broker international and global solutions such as the IPCC, in the large international meetings in Rio and Copenhagen.
Sadly, however, very little progress on the scale needed has been made. Nevertheless, while our global institutions exist we must continue to work hard to secure international agreements that might reduce CO2 emissions, limit environmental damage and share resources equally. When global crises start to hit hard in the future, it will be interesting to know how our global institutions will respond. While is possible that the stress of reduced resources and climate chaos could lead to fracture and conflict between nations, there is also the possibility that this could lead to more global awareness and force agreed global solutions as people work harder together to survive.
Building a Community of support
Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.
– Margaret Mead
In my work as a mental health professional rarely do people overcome big personal problems on their own. It is usually in the context of support from family, friends or even a professional that people turn their lives around.
While there is a myriad of future challenges facing humanity that are already beginning to impact, the future still is unpredictable and open to choice. While few people yet take the long term view and see the direction towards which we are heading, it is incumbent on those who are aware to prepare and act now. If we do survive and continue to live purposely it will be down to our personal and collective choices. While we don’t know what exact questions will be asked of us in the future, let alone begin to fully answer them, we can build resilience and a state of preparedness for whatever future challenges are to come. If we strive now to honestly face the reality of our predicament, set meaningful goals that bind us together and take constructive action, then we can build a future worth living for.
1. Richard Douthwaite and Gilian Fallon (2010) p2, Fleeing Vesuvius Overcoming the Risk from Economic and Environmental Collapse. Dublin: Feasta.
2. Richard Heinberg 2007. Peak Everything: Waking up to the century in decline in Earth’s resources. Clairview Books
4. Kevin Anderson, Alice Bows 2011, p 42, “Beyond ‘dangerous’ climate change: emission scenarios for a new world” Philosophical Transactions of the Royal Society. 369, 20–44 doi:10.1098/rsta.2010.0290
7. Elizabeth Kubler-Ross, 2005 On Grief and Grieving London: Simon and Schuster
8. 6 Irivin Yalom 1999 Momma and the meaning of life William Morris Agency, Inc
9. Rob Hopkins (2008), The Transition Handbook: From oil dependency to local resilience, Devon: Green Books
10. Rob Hopkins 2013 The power of just doing stuff Devon: Green Books
- Co-creating a Global Climate Commons regime
- Busy doing nothing – seven reasons for humanity’s inertia in the face of critical threats and how we might remove them
- Cultivating hope and managing despair
- Response to the Green Paper: Towards a Sustainable Energy Future for Ireland
- Workshop: ‘Bringing together sustainable agriculture with sustainable economic development.’ – Liam Egerton
Disclaimer: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members.Commentary, Discussion Paper, Slideshow
While the mainstream media continue to push the meme that the economy is in (slow) recovery, some important facts point out that things are not as rosy as you are being told. In fact, most Americans feel the recessionnever ended.
An analysis of retail sales post-Christmas indicates that in-store retail sales decreased more than 3 percent over the same week last year. Retail brick-and-mortar shopper traffic decreased by 21.2 percent over thesame period in 2012. The lack of in-store sales didn’t translate to an increase in Web sales.
In September, homes sales dropped more than at any time in the last 40 months. New mortgage applications dropped 66 percent from an October 2012 peak, reaching a lownot seen in 13 years.
We are now seeing business and personal debt reaching levels not seen since 2007, right before the last crash. Household incomes have not improved at all and, in fact, have dropped. The unemployment numbers are completely cooked. The unemployment rate will drop again due to the ending of benefits to 1.3 million workers who will no longer be counted.
There are 107 million Americans on government assistance. About 50 million Americans get food stamps. The U.S. population has increased by 16 million people since 2006, but there are 1.5 million fewer Americans employed today. Workforce participation rates are the lowest in decades.
According to the consumer price index, the economy is growing at about 2.5 percent. But official inflation is also 2.5 percent. Real inflation is closer to 8 percent.
Yes, the stock market is hitting record highs. But that’s because the Federal Reserve is dumping $85 billion a month into the economy through QE to infinity to prop up the banksters and the market.
The Fed has inflated your dollar away to nothing. One dollar is now equal to 5 cents.
All so-called “growth” in the economy can be directly attributed to inflation. Inflation is not increasing prices, which is a symptom of inflation, but an increase in the money supply.
Inflation is a hidden tax on the wealth of the people.
Helicopter Ben Bernanke has succeeded in creating the illusion of a recovery. The illusion is about to end.
When it comes to setting the prevailing economist groupthink, nobody does it better than the economists at JPMorgan and Goldman Sachs. Which is why the following chart of projected 2014 GDP growth by quarter in the Developed and Emerging World from JPM, explains succinctly just where the groupthink now expects marginal global growth will come from (Mexico, South Africa, Korea, UK, Italy?). We show it just because the economist consensus is always wrong when it comes to the important inflection points (see ECB rate cut decision, Taper off decision, Taper on, the great financial crisis, “subprime is contained”, etc).
So for those curious to know what most likely will not happen in the new year, this chart’s for you.
Finland has little room to deviate from a proposal to fill a 9 billion-euro ($12.3 billion) gap in Europe’s fastest-aging economy if it’s to avoid debt levels doubling in the next decade and a half, according to the central bank.
The northernmost euro member risks joining the bloc’s most indebted nations if the government fails to reform spending, according to calculations by the Helsinki-based Bank of Finland. Without the measures, debt could exceed 110 percent of gross domestic product by 2030, according to the bank. The ratio was 53.6 percent in 2012. Success with the plan would help restrain debt levels to about 70 percent by 2030, the bank said.
The central bank’s assessment shows that the government’s plan would have a “real impact,” Finance Minister Jutta Urpilainen said in an e-mailed response to questions via her aide. Structural reforms are needed if “the Finnish welfare state has a chance to survive,” she said.
The only euro member with a stable AAA grade at the three main rating companies, Finland’s economy is struggling to emerge from the decline of its paper makers and its flagging Nokia Oyj-led technology industry. Export demand has failed to offset weak consumer demand, as companies fire workers and the government responds to deficits with cuts. Lost revenue is hampering government efforts to set aside funds needed to care for the fastest-aging population in the European Union.
In the period August to November, Finland’s six-party coalition put together a package to streamline and reduce public spending to eliminate a gap of more than 9 billion euros in public finances by 2017. The package consists of several different measures, each to be sent to parliament independently. Some of the measures, including changes to pensions and health-care providers, are still being drafted.
Finland’s “costs related to aging will grow faster than elsewhere within the next two decades,” Petri Maeki-Fraenti, an economist at the Bank of Finland, said in an interview. Aging costs will be “decisive” in accelerating debt growth after 2020, he said.
The government reduced its economic forecasts on Dec. 19 for the 10th time since coming to power in June 2011. Even as exports look set to recover and rise 3.6 percent in 2014, GDP will grow only 0.8 percent after declining 1.2 percent in 2013, the Finance Ministry said.
The Bank of Finland’s calculations assume an average economic expansion of about 1.5 percent in the long term, compared with an average of 3.7 percent during 2003 to 2007, according to a February 2013 report by economists Helvi Kinnunen, Maeki-Fraenti and Hannu Viertola.
“We must get used to slower economic growth for an extended period of time,” Maeki-Fraenti said.
The average debt level in the euro area shot up more than 25 percentage points in five years after hovering around 70 percent for the majority of the last decade. Finland has followed suit, with the Finance Ministry estimating its debt-to-GDP ratio rising to 60 percent this year from 33.9 percent in 2008.
Euro-area debt reached 93.4 percent of GDP at the end of the second quarter, according to theEuropean Central Bank. Italy reduced its government debt to 103 percent of GDP in 2007. Since the debt crisis, its debt has begun mounting again, rising to 134 percent of GDP this year, the European Commission forecast Nov. 5.
Debt levels exceeding 90 percent hurt economic growth, Harvard University economists Carmen Reinhart and Kenneth Rogoff argued in a 2010 paper. Three years later, their claims were refuted by University of Massachusetts researchers, citing “serious errors” that overstate the significance of the boundary.
The World Bank set a similar “tipping point” at 77 percent in a 2010 paper, while a 2011 studyby the Bank for International Settlements identified a sovereign debt threshold of 85 percent. An IMF report from 2012 found “no particular threshold” that would consistently precede low growth.
Finding an absolute threshold for debt after which economic growth starts slowing is “quite impossible,” Bank of Finland’s Maeki-Fraenti said. Addressing sluggish growth and public debt is necessary for Finland due to the pressure from aging and the decline of its cornerstone industries, he said.
“As the debt level is still relatively tolerable and our unemployment hasn’t shot up in the same way, it has perhaps led some to believe that the problems shall be fixed on their own as export demand revives,” he said. “Our view is slightly more pessimistic.”
To contact the reporter on this story: Kasper Viita in Helsinki at firstname.lastname@example.org
To contact the editor responsible for this story: Christian Wienberg email@example.com