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