Economics as though human civilisation matters
By Dave Sanderson
If it’s about production or consumption, making money or saving it, it’s economics.
There’s no-end of different organisations, groups of people and individuals involved in this, they all interact and rely on one another, so it’s a sort of ecosystem. Investors, workers, businesses, governments, banks, traders, reporters, merchants and consumers are each vital in their own way. So too is the earth as it provides the room, the air and the minerals without which none of these types of people could survive and carry out their activities.
In this note, I’ll try to show why this is a useful way to view the vital and often misunderstood topic of economics and highlight why some radical changes are needed if the ecosystem is to remain healthy. And it is vital that it does; ‘It’s the economy, stupid’, as Bill Clinton said when asked what would determine the outcome of the US Presidential election in 1992. And economics will determine whether you and your family have a prosperous future or a poor and chaotic one. Pay attention!
Ecosystems are never static; there’s always stuff going on. When you learn about ecosystems at school, you get to understand the carbon and nitrogen cycles and the flows of nutrients and energy. A healthy ecosystem is rich in species yet stable over time. You hear about the destabilising effects of pollution, changes in food availability and over exploitation by man.
There’s stuff going on in the economics system too; businesses starting while others fail, stock markets rising or falling, innovations disrupting old ways of doing things, growing populations, political shifts, different ideas….and much more besides. There are flows of money, materials and labour, the ebb and flow of demand, the disruption caused by war or famine and the more subtle effects of interest rates and regulations.
People study both economics and natural ecosystems. Whereas the functioning of a lake or forest can be studied scientifically, with experiments to test out ideas, that is not really practical with economics. There’s no equivalent of a placebo or a double blind trial! Instead, there are a number of ‘schools’ of economists, each with their own ideas on how to make the economy work best. The dominant school of economics in the West at the moment, especially popular with right wing politicians and global businesses, is free-market or neo-classical economics. This assumes consumers are individual, logical consumers… which of course we are not. We often buy on emotion and are heavily influenced by marketing, by our peers and by whatever is most popular. While there are certainly circumstances when it is right to say ‘ the market will decide’, there are many occasions when a totally free market is not acceptable; most countries outlawed buying and selling people long ago, for example, whilst regulations ensure pollution is limited and packaged food is safe to eat.
So both the theory and the practice of economics need to evolve, as circumstances change, just as ecosystems do. So what are the major factors that are bearing down on our economy now and which will cause change for us all, whether we like it or not? Here are half a dozen really big (and scary) ones to think about:
- Global population growth. More workers, more consumers, so a bigger global economy. But this cannot go on forever. There must be a limit on how many people our planet can carry, sustainably. At current levels of consumption, the 2015 population of 7.3bn is using 1.5 earth’s worth of resources, so a population of 9.7bn (as predicted by the UN for 2050) will need approx 2 earths. We only have one…..
- Resource depletion. We will not run out of iron or aluminium but some scarce materials, such as those used to make touch screens in smart phones could well run out, and soon. Substitutes may be found but we cannot easily replace soils exhausted by intensive agriculture or fresh water pumped dry by irrigation and huge cities.
- Climate change. Global warming is not a belief; it is a scientifically proven fact. It will lead to crop failures and thus food shortages, the flooding of low lying land and thus mass migration. We must leave most known stocks of coal, oil and gas in the ground if we are to avoid runaway climate change and dire implications for human civilisation.
- Increasing inequality. Research shows that more equitable societies are generally more stable and happy, yet inequality is rapidly increasing, here and globally. This appears to be a side effect of free market economics.
- Globalisation / global interconnectivity. Another idea that big business and powerful individuals are keen on, as it enriches them. Yet it means that a problem in one country (such as the collapse of the American sub-prime mortgage market) can rapidly cause problems elsewhere (the 2008 global financial crisis).
- Ever faster innovation. There are more scientists, technologists and innovators than ever (as the population is bigger). So change is happening ever faster and becoming more difficult to stay on top of. Even for big businesses. IT and artificial intelligence in particular have the potential to seriously disrupt current ways of doing things, with significant but as yet unknown economic implications.
Now these are hard to think about. They always seem just over the horizon; too difficult to deal with today so let’s leave them for another day, shall we? But that just won’t do. The sooner they are tackled, the better. They may represent huge threats but there are also giant opportunities with realistic ways of each of us helping bring them about. Let’s think about a few ways our economics ecosystem could adapt to handle these and what part each of us can play. We don’t want anything going extinct, do we, especially us?
- Stop human population growth and then let it gently decline. Coercion is unethical and no one wants to tell people how many kids they can have. This is about female empowerment and a culture shift. Aid programmes can help with female education and provision of contraception in those places where it is not available. And families come to realise they can have a better life if they just decide not to have more than one or two kids.
- Consume less. Do we really want to work harder and harder so we can buy more and more stuff in order to show off? A change of mindset, from ‘keeping up with the Jones’ to being content with ‘sufficient’ while having more time to relax with family and friends. Make the car last another couple of years and don’t buy that extra pair of shoes you don’t really need…. To help this along, Government and media should stop focusing on GDP growth and instead use measures of well-being. As they say ‘Tell me how you will measure me and I’ll tell you how I will behave’.
- Recycle more. Increasingly products are being designed for reuse or recycling and we should all support this ‘circular’ economy.
- Renewable energy. We need to keep fossil fuels in the ground so we should all swop to electricity tariffs that are 100% renewable. If we can, fit PV panels on the roof. Don’t object to local renewable projects; invest in them instead! Insulate the house and drive economically. Make sure your savings, pension pot or investments are not being used to support fossil fuel extraction. Government should put a price on carbon and integrate this into the tax system.
- Think carefully about who you vote for. It is in everybody’s interest (even the rich) to live in a content, stable society so support a party strong on social justice. If the poor become less poor, they buy more and so support business and pay tax.
- Play a part in your local community. Shop locally and buy local produce. Seek ways to make your locality more self reliant and sustainable. Big isn’t always best and many decisions are best made at a local level rather than nationally.
- Stay informed and abreast of new technologies. Don’t blindly accept them; they all have pros and cons. Understand what they mean for you and us and use them accordingly.
So there ARE ways of keeping our economics ecosystem healthy and keeping the three horsemen of the apocalypse at bay. If our existing politicians won’t or can’t put these ideas effectively into place, quickly enough, it is down to us. If we each do a little bit and tell others about it, we can do it. The power of social media is proven. There are a billion of us on Facebook already. Far more have phones. Some of the 7bn are little children, others are old or poor. So maybe 2 bn need to make changes. Get changing what YOU do, so you can lead by example. Convince 2 or 3 others, get it trending and soon most of the economic actors worldwide will be doing things differently… and the ecosystem will be evolving nicely.