Why do we need Growth?

There is a beautifully sustainable cycle within nature.
Dead bodies provide food for living creatures, plants photosynthesize and produce oxygen from carbon dioxide and animals use that oxygen in their respiration of which the by-product is carbon dioxide.
At school we learnt all about this and called it the Carbon Cycle, little suspecting that 50 years later this would have such a fundamental significance for the future of the world!
If we can see the Earth as a single living entity involving complex interrelationships and a finely tuned balance of all life, as envisioned for example by James Lovelock, should it not be logical for a sustainable economy to mimic that natural world, indeed be a part of that world, where everything is recycled, everything has a further use elsewhere. We would then be able to build a system that is totally cyclical and sustainable and environmentally sound. Evolution biologist and futurist Elisabet Sahtouris once posed the question: doesn’t it seem crazy and so obviously illogical that our household finances and the study of how we make a living (or economy) should be so totally divorced from the study of how other species make a living (or ecology)? Satish Kumar often says the same thing.

This seems so simple and obvious but we cannot see it!
Neither a borrower nor a lender be; 
For loan oft loses both itself and friend, 
And borrowing dulls the edge of husbandry.
Thus said Lord Polonius in Shakespeare's Hamlet, in 1603.
One of the greatest flaws in our flawed "growth" economy is that loans for interest are made out of fiat money. In other words, money is created out of nothing. Yes, money is created by bank debt against the payment of interest. It is fiat money. This is not widely understood by the general public outside the banking world and usually comes as a surprise. Someone, I believe a Canadian journalist, has estimated that only one person in a thousand really understands how money is made! It is certainly not something that is widely publicized. What is more each bank also has what it calls its Reserve Ratio. This means the proportion of cash invested into its bank deposit accounts that the bank estimates it needs to retain in case the customer wishes to withdraw again against their deposit. If for example £1000 is put on deposit with the bank and they calculate their Reserve Ratio to be 10%, then they reserve £100 and the remaining 90% of the deposit or £900 is available for the bank to lend on. And it does. The bank sets up a loan of £900 to another customer for interest, neatly increasing the supply of money available in the economy by a simple accounting entry in its books. The bank has not only made money out of nothing but it is also making an interest profit on that money that it has created out of nothing. And the bank almost certainly charged a fee for arranging the loan as well. The more times the same money can be recycled and recreated in this way the greater the arrangement fees and the interest profit that the bank can make, all from the creation of illusory money out of nothing. What is more, the amount borrowed by the customer is likely to be placed on deposit again elsewhere and the creation of further debt out of nothing can continue in another bank. The multiplier effect of this exponential increase in debt is astounding and very dangerous. Money has to continue to grow to maintain this system and to avoid financial collapse, even though actual standards of living may remain stagnant. With consumer spending the lifeblood of the economy and a personal consumption now nearing 75% of GDP, which truthful and brave politician will urge us to spend less? It is not hard to see that the system is unjust and unsustainable.

A government can and does make money out of nothing also, but this is only to the extent of new notes and coins it issues. As long ago as 1939 American President Abraham Lincoln was clear in his warnings: “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest,” he said. (1) But fiat money is still issued by banks.

I was shocked when I read that something like 98% of the trillions of dollars changing hands in the foreign exchange markets each day is purely speculative and has nothing to do with wealth creation. Only the remaining 2% relates to real goods and services. As Edward Cahn observes: “Money has taken on a life of its own: its function is to produce for the sake of reproducing – regardless of the impact on the health of the human community … increasingly what we are witnessing in the world’s money markets looks more and more like cancer.” (2)
Now cancer is dangerous and often fatal, requiring unpleasant treatments along the way.
In such loan systems there is an impersonal relationship between the borrower and the lender with a minimal flow of information needed between them. Such loans are therefore cheaper to administer. In addition the tax system favors such business fund raising by allowing tax relief on the related interest. Because such loans are not linked to the success or otherwise of the business, there is no reward to the lender if the business is successful and conversely the lender can foreclose on an ailing business that can no longer afford to repay. This makes the problems of the business worse and it may need to curtail its production and make efficiencies of staff by laying-off, with all the inherent human and social consequences that then arise. This is of course harmful to the economic cycle, and means that interest based economies have exaggerated cycles of “boom and bust.” One of the most harmful aspects of this interest on loans is that it is almost invariably charged by compounding year on year. Typically a home “owner” with a mortgage will pay way over the amount of the original loan before the mortgage is fully paid off. Our debts on credit cards have also reached massive amounts and many regularly pay double figure interest rates on their cards each year. A significant number of college students and undergraduates have credit cards and amass debt on these as well as on their other student loans. This encourages an extravagant attitude of spending among students who no longer need to budget expenditure within their means. When I first wrote of these imperfections in our debt system a few years ago I was saying that alarm bells should ring. I was far from alone. In 2001 Bernard Lietaer predicted a 50:50 chance of a global money meltdown within 5-10 years unless steps were taken to heal what he called the global foreign exchange casino (3). He was pretty much right, wasn't he? 

Unfortunately those in charge of our finances do not appear to consider alternative economic models. They want us to spend and consume our way out of recession. They're stuck in the idea that a growth economy is the only way out of our problems. But the problems and dangers of debt, at personal, corporate, national and international levels, are the cause of huge social disease. Such debt involves the transfer of wealth from the poor to those who are already wealthy. The system does not reflect the skill or the labor of the participant and encourages short termism. Indeed it has been shown that interest based economies cause unemployment, social violence and pollution. Indeed it seems clear to me that compound interest is for the monetary system what excessive carbon dioxide is for the earth’s atmosphere: it is man-made and unsustainable. For an up to the minute campaign on promoting an alternative and workable economy see for example positive money and http://projects.exeter.ac.uk/RDavies/arian/local.html for many resources on alternative monetary systems.

1. Senate Document 23, 1939
2. Edgar S Cahn, 2004 No More Throw-Away People: The Co-Production Imperative Washington D.C.: Essential Books, 2000, p. 68.
3. Bernard Lietaer, The Future of Money – Creating New Wealth, Work and a Wiser World (2001)

From an original idea in Healing This Wounded Earth: with Compassion, Spirit and the Power of Hope, where a chapter puts all this and much more into the context of compassion and healing and relationship.

World Economy in a mess - Spend Spend Spend our way out of trouble?

When the last tree is cut, the last river poisoned, and the last fish dead, we will discover that we can't eat money...
Greenpeace message on one of their longest banners.

This notion of spiritless existence can be described as materialism. All is matter; land, forests, food, water, labour, literature and art are commodities to be bought and sold in the marketplace - the world market, the stockmarket, the so-called free market… Business without spirit, trade without compassion, industry without ecology, finance without fairness, economics without equity can only bring the breakdown of society and destruction of the natural world. Only when spirit and business work together can humanity find coherent purpose.
Satish Kumar, “Spiritual Imperative,” Resurgence

We seem to be in such a mess in the world with our economy. Growth, growth and more growth seem to be the Holy Grail. Growth will solve all our problems. If only we can get everyone to spend, spend, spend, then the economy will grow and all will be well. Until the next time, that is. When are the powers that rule going to understand but more importantly do something about the fact that seems so obvious to me and to many others around me? Growth is unsustainable. Isn’t it common sense that the world and its resources are finite? As are its land-fill sites? Our economy is sick. We need a new, ethical style of economy, that is totally sustainable.

98% of the $2 trillion changing hands in the foreign exchange markets each day is purely speculative and has nothing to do with “wealth” creation, whatever that is! (see below). Only the remaining 2% relates to real goods and services. As Edward Cahn observes: ‘Money has taken on a life of its own: its function is to produce for the sake of reproducing – regardless of the impact on the health of the human community… increasingly what we are witnessing in the world’s money markets looks more and more like cancer.’ (Cahn, Edgar S., No More Throw-Away People: The Co-Production Imperative Washington D.C.: Essential Books, 2000, p. 68.)
There is a beautifully sustainable cycle within nature. Dead bodies provide food for living creatures, plants photosynthesize and produce oxygen from carbon dioxide and animals use that oxygen in their respiration of which the by-product is carbon dioxide. At school we learnt all about this and called it the Carbon Cycle, little suspecting that 50 years later this would have such a fundamental significance for the future of the world!
If we can see the Earth as a single living entity involving complex interrelationships and a finely tuned balance of all life, as envisioned for example by James Lovelock, should it not be logical for a sustainable economy to mimic that natural world, indeed be a part of that world, where everything is recycled, everything has a further use elsewhere. We would then be able to build a system that is totally cyclical and sustainable and environmentally sound.
Evolution biologist and futurist Elisabet Sahtouris once posed the question: doesn’t it seem crazy and so obviously illogical that our household finances and the study of how we make a living (or economy) should be so totally divorced from the study of how other species make a living (or ecology)?
This seems so simple and obvious but we cannot see it!

Anyway, what is the purpose of all this growth? To preserve and sustain wealth. But what is wealth?
Real wealth is not about money: it is about spiritual wellbeing. It seems that we have largely lost sight of the spirit that is in all matter, as Satish Kumar so eloquently writes. As the human ecologist Alastair McIntosh observes in his inspirational book Soil and Soul, ‘We are materially richer than ever before and yet suffer a spiritual poverty…we live, but suffer spiritual death. Our very accomplishments cut us off further from the soul.’ Real security and happiness that we all seek, consciously or unconsciously, will be found in spiritual wealth, for which we have a great hunger.
And how powerful this human soul can become against the seeming odds of the twenty first century when it is sufficiently aroused. We should not underestimate that power, even in the context of our economy! McIntosh tells the tale of how in the last decade of the twentieth century the might of a great corporation was broken by spirituality and theology. Scientific and economic values clashed head on with spirituality. Against what seemed like overwhelming opposition the soul in the end prevailed.
The Community of the Isle of Harris, in the Western Isles of Scotland, was threatened by the development in their midst of a devastating super quarry, a wound and scar of massive proportions. With the assistance of a Native American Warrior Chief Sulian Stone Eagle Herney and what was said to be the first ever theological submission put before a public enquiry the islanders were able to prevent a large corporation (Redland Aggregates Plc) from going ahead with their plans. Overnight the share price of the company on the London Stock exchange fell a massive 8% or £160million pounds! If the project had gone ahead who would have gained from the cruel ravages inflicted on a finely balanced community such as Harris?

The divide between the materially wealthy and the hungry poor is massive and the gap is apparently widening. Statistics from the World Bank tell us that in 2005 26% of the developing world was living below US$1.25 a day, representing 1.4 billion people. If we look at the number living on less than $2 a day, that represented 48% of the world population, or around 2.5 billion men, women and children, a massive testament to human suffering.
Is it not disgusting, for example, that 43% of children under 5 in India are severely malnourished whilst the country’s leaders are having gastric band surgery for obesity?

I have written about this before in my blogs and make no apology for continually revisiting the theme. It is covered in more detail in my book, with ideas for change, change that we can all be a part of. I am going to a conference soon to find out more about how we can build a sustainable world with a sustainable economy. What we need is action, and influence in the highest echelons of power. You will be hearing more about this soon!