Saturday, June 19, 2010

Growth, Resilience, Efficiency and Sustainability

In recent months I’ve been trying to understand money as ‘objectively’ or dispassionately as I can. The framework which strikes me as most likely to yield helpful results in this endeavour is systems theory. My earlier posts show how important it is for me to understand components not in isolation but in context. I believe more and more that properties of ‘things’ are emergent, not intrinsic, even at the subatomic level (see Durac’s negative energy sea for one man’s take on how this might be). My struggles to get a grip on money’s relationship with society and culture have been an attempt to understand economics from a systems point of view, and not in isolation. Nothing exists in isolation. Nothing makes sense in isolation.

On to the diagrams:





Existing readers will remember the earlier money-flow diagrams I sketched, showing how money-as-debt must never be paid back in total, for such would mean No More Money for the economy. However, this is only a quickly intractable and self-destructing process if all people competing for as large as possible a share of the too-small money pool do equally well. In this case (which I think of as symmetrical repayment of debt) none could pay back fully the amount owed – there is not enough money in the pool to cover the interest – so none would benefit, and all loans would be written off. Whereas some benefit and some loans are paid off in the asymmetrical scenario sketched above. An infinitely preferable outcome for lenders, which goes some way to explaining how the debt-money system has survived so long. Another reason for its relative longevity is that the process does not begin with zero ‘good’ money or real wealth in the system. It always starts with much to be turned into debt.

Ultimately though, regardless of the successful firms acting as a source of profit for the lucky banks, there can never be enough money in this system to pay back the debt. With money creation as a profit-motivated enterprise performed by private companies, economic growth can only be debt-growth. Conversely, debt-reduction can only mean a shrinkage of the money supply, which means negative economic growth, which means recession or depression. Here not-growth is bad. Frugality is bad. The more credit extended (up to a point), the better the chance a bank has of making a profit.

With money-as-debt, new wealth is only ever created as a consequence of an uneven distribution of money over time among the system’s participants. Should money-as-debt be evenly distributed throughout the economy, there would be zero growth, and zero wealth creation, financially speaking. The system can only grow as a consequence of ‘disequilibrium’ (in terms of distribution); the more unbalanced, the greater the success of the few who do well, relative to the failures.

Furthermore, since money-accrual is the sign of success, and since money-scarcity is by design the systemic property which engenders competition – with winners securing their positions then hampering open competition – the debt-money system is inherently prone to stubbornly lopsided growth. Indeed, it can only be said to be ‘functioning’ when lopsided growth is occurring. Trickle-down is the assumed balancing mechanism touted as a redistributor of the system’s lubricant (money), but because being rich is logically better than being poor, and because debt growth is inextricably tied to continuing wealth growth, trickle-down cannot balance the system and make it sustainable; the pressure to game the system is just too strong. Debt-money systems are therefore not sustainable, nor can they ever be, nor are they fair. And, believe it or not, fairness is very important to humans.

Our beloved debt-money system grows therefore in a cancerous fashion by design, cancer being uneven and perpetual growth. Were the human body so designed it would barely last a month, all nutrients being hogged by the brain, for example, as the rest of the body withered away. Were an ecosystem so designed it likewise would have a very short life span. The reason for this is a systemic decay of versatility and resilience as, in cuckoo-like fashion, the strong-nodes of the system become stronger and stronger, the weak weaker and weaker, until its growing fragility and lopsidedness cause breakdown. Sadly, we think this process of favouring and encouraging the strong ‘efficient’:



“Critically what this says is that the very absence of order (even if its potential is never activated, and therefore unnoticed and unmeasured) plays the key role for a system to persist over the long run, to adapt to changing environment, or survive unexpected challenges. [ snip ] Systems that endure – that is, are sustainable – lie in dynamic balance somewhere between these two poles of order and disorder, efficient performance and adaptive resilience.” Lietaer et al.


The folks responsible for the research that produced this sustainability scale are mighty confident it proves efficiency can be overdone. This is, to my mind, a very exciting idea. However, what does not show up in the graph, is how well a system recycles its waste, nor how balanced it keeps its consumption of its environment’s resources relative to how quickly its environment can keep producing those resources. The idea that multiple money-types (see Bernard Lietaer) would make the economy more stable is most likely correct, but how ‘robust’ an economy ought a society to have, in order to have a sustainable relationship with the environment? There is, after all, far more to society than money-fuelled consumption!

The question I am currently unable to answer definitively is whether all money systems or monetary arrangements are necessarily cancerous (over time) and therefore unsustainable, not for reasons of over-efficiency, but for reasons of perpetual growth. Expressed as a question: Is money the only mechanism for metabolising society? Also unclear is whether society without money (a resource-based economy) would be too resilient and therefore become stagnant and die.

My crude reasoning goes as follows: since money is a tool for distributing scarce goods and services, incentive to accrue more than you need is built in and can’t be removed. Money promotes ever increasing consumption; a society’s economy is considered healthy the more consumption there is taking place. Likewise, with money as the only tool for rationing out life’s bounty, there is an ever-present motivational pressure to hoard, no matter how bountifully available those items that exist for sale might otherwise be. The distribution mechanism – the price system – makes things scarce whether they are or not. Slowly but inexorably, hoarding results in an increasingly lopsided system, over consumption produces real scarcity, which both inspire yet more hoarding as the have-nots slip towards poverty and deprivation, and being poor becomes That Which Must Be Avoided, at all costs. However, is this inherent and ever-present tendency to increasing imbalance a guarantee of systemic collapse? Or can forces such as government and art and others ‘deal with’ greed and hoarding, via, for example, taxation and morality, such that sustainability is ‘assured?’ In all honesty I just don’t know.

What strikes me though as a no-brainer is that sustainability should be the real test of a system’s mettle, the true hallmark of success. In that 99% of all life forms that ever graced this planet are now extinct, working out how to live sustainably is a tall order. Being a member of the exclusive club that makes it past a few hundred thousand years is an honour indeed. Driving shiny cars may well be ‘cool’ and impressive from our point of view, and it is certainly an incredible and unique achievement to have put members of our species on the moon, but our greatness will be quickly forgotten if we saw off the branch we are sitting on.

Keep it simple, stupid! If we want lasting success for our species (I certainly do), our priorities should be sustainability and living healthily, both individually and societally. Focusing on these things above all others would not preclude incredible achievements and fun – we are an intelligent and curious animal with opposable thumbs no matter what – but would give us a chance of a much longer stay on this spectacular planet, and elsewhere in Universe should we figure this challenge out.

My systems take on what money is, might be summarised as follows:

Surplus + scarcity as emergent property of ‘taming’ nature per domestication
Trade as emergent property of surplus + scarcity
Money as emergent property of trade
Greed and lopsided growth as emergent property of price-system-distribution of planetary resources

But there’s more to money than rampant growth. Functionally, money is probably most useful as a unit of account, a way of keeping tabs on what goes on. So, should we fully automate clean and renewable energy generation, food growth and distribution, water too, throw in housing, basic white goods and so on, and so be able to provide a good life to all without a price tag attached, and thereby make poverty, most crime and war history, and deal with the looming pension problem too, we may well still need money for ‘everything else,’ not money as we have it now, but as some sort of unit of account, not for driving consumption, but perhaps as measurement of energy used, or societal contributions, or something else.

Thinking forward, we ought to bear in mind that money is a bit ‘weird,’ and here’s why: Debt is bad for the body, but surplus is too. Holding our breath causes a growing pressure to breathe, but when we start breathing again we gasp and pant only until oxygen debt is redressed. We can’t carry on panting to store a surplus of air in our lungs in case a shortage ever happens again. If you drink too much water you drown. If you eat too much food for long enough you build up energy reserves as fat and become unhealthy. Debt and surplus in the human body, and elsewhere in the natural world, seem to be a whirring tilting and balancing, a ‘dynamic equilibrium’ (living systems are said to operate “far from equilibrium” in systems theory), and not a constant drift towards debt in one place and surplus in another. Even squirrels hoard for a specific period, to deal with a specific challenge. As far as I know they don’t ‘overdo it.’

For now sustainability must be our top priority. I don’t think our well paid experts are up to the job though, and we’re running out of time (please see Sylvia Earle’s presentation on the state of the Ocean’s for TED). Systemic greed, unchecked, combined with our ‘improving’ technology, have the power to wipe us humans out. We have to get wise.

"Everything is dying," a woman said as the town hall meeting was finally coming to a close. "How can you honestly tell us that our Gulf is resilient and will bounce back? Because not one of you up here has a hint as to what is going to happen to our Gulf. You sit up here with a straight face and act like you know when you don't know." Naomi Klein, writing for The Guardian

5 comments:

Debra said...

Interesting, Toby.
I think that the ideas behind our debacle are somewhat simple... the idea that "more is better", for example.
The growth paradigm is based on the glorification of "more".
Since somebody on naked capitalism was talking about the 500 year old accountancy practice, and opening it up for questioning, do you think that we can open up our prejudices about scarcity ?
Is it possible that we don't HAVE to think the way we're thinking, that there is no genetic or universal foundation to it, but that this thinking is particular to Western society ?
One of our greatest difficulties lies in not identifying our ideological prejudice as such.
I will comment more later.

Toby said...

Obviously there is scarcity. It does not lie in our imaginations alone. But there is not scarcity of all things either, air being the most obvious example (air having therefore an economic value of zero!). What we force ourselves to do when we rely exclusively on money to distribute resources is to fight abundance where it arises (or already is), because abundance is bad for profit. Because the western world was born in a situation of harsh winters etc., scarcity was more of an issue than for, say, folk on the Philippines where the growth cycle is perennial. And yet even on St. Kilda (I mention this example often), an island north west of Scotland, the people who inhabited it up until around 1920 did so without money. They shared, they coped together. My reading is that they trusted in nature's bounty and went through the hard times together knowing good times would return. Their coping mechanism was mutual suffering/mutual support, rather than 'kill or be killed.' So there's choice in there too as far as I can tell. We always have choice, but breaking out of a system becomes increasingly difficult as the system becomes increasingly pervasive. As McMurtry says, we are at the cancer stage of capitalism, so I guess we now have to die to start something new.

I imagine a way out of the money trap we are in to be to technologically produce abundance (in harmony with nature -- yes I'll even say that) of the basics, including delivery, and have money for non-essentials. If we're still 'greedy' for beautiful art or other unique items for example, let there be some kind of money for that. Or maybe there will be ways of sharing even unique things. Maybe the acquisitive urge will be dulled by a general atmosphere of sharing. Whatever happens, addiction to growth is of course absurd, and combined with the inflexibly stratified social situation dangerously so.

Debra said...

Your examples are really interesting.
I didn't know that island existed.
I wrote a comment on the naked capitalism thread about the dead sea life, with an American flag floating at the bottom of the Gulf.
I think that the problem lies with our allowing our symbolic systems to get to the point where we perceive that there is NO OUTSIDE them.
If you live in the city, and never see trees, or animals, or perceive how nature can be generous, then you are totally surrounded by our symbolic systems.
The Protestant Reformation started when Luther asked the naive question about whether it was possible to BUY the remission of sins...
Much has been written about the Catholic Church's corruption, but little about Luther's questioning of WHAT MONEY COULD BUY (which means... what it can't buy...)
Money and the American flag mean nothing to the dead sea life in the Gulf. THEY are living, feeling creatures who are OUTSIDE the symbolic system.
But.. it is not because they are outside our system that... THEY DON'T COUNT (!!!!), and that THEY have no value.
See what I mean ?
I think that we are on the verge of, or in the middle of a NEW REVOLUTION, like the Protestant Reformation.
We have collectively taken steps to question our symbolic systems. THAT is why it looks like we are taking ourselves out, Toby.
And... maybe we are.
We are definitely behaving as though... there were no longer ANY LIMITS to us, and our symbolic systems...
That is MAJOR ILLUSION, Toby.
And.. folly.
Like the Good Book says...
But.... at the same time we are moving closer and closer to the realization of what we share in feeling and interdependancy with the crabs in the Gulf of Mexico. That.. is a GOOD thing, I think.
This weekend I was at a zoo in Lyon.
And... I was looking at all those tags (labels) that we stick on the animals' cages.
The zoos are scientific places. We spend lots of time giving names to the animals, measuring them, classifying them, EXPLAINING them.
Much less time... really observing them to see how they live, and even less time really trying to... communicate or interact with them.
And then we stick "science" between us and the animals, saying that we shouldn't identify with them, or influence their way of life, for example.
I think... that's a bunch of bunk.
If we are going to treat EACH OTHER with respect, why can't we treat the animals with respect WHILE looking for ways to interact and communicate with them ?
Why can't we... share with the animals too ??

Toby said...

Amazingly the process which gave birth to the nucleic cell was cooperation, billions of years ago. There were all these single cell dude floating around having a heavenly time until one day some virus came along and almost killed them off. The virus would die each time an infected cell died, but hey, you know what those dan viruses are like! Anyways, some of the cells hit upon a way in incorporating the virus and became nucleic cells, setting the stage for us, ultimately speaking. They embraced the enemy, let it into their very being, and saved life. Amazing.

Sharing is survival. Altruism is selfishness.

Toby said...

I didn't proof that. Drat. Sooo many mistakes!

'dude' is dudes
'dan' is darn
'a way in' is a way of

Sorry.