Wednesday, October 29, 2008

The ecological credit crunch

We are living beyond our means, running up a debt of up to US$4,500,000,000,000 every year. The parallels between the credit crisis and the ecological crises are not accidental. Both are symptoms of the myth of infinite growth.

The differences, however, are crucial. The financial crisis is primarily (as far as I understand it) a crisis of trust: financial institutions who are no longer sure from whom it is safe to borrow. The responses by governments have been to act as a kind of credit backstop, stopping (or slowing) the corrosive effects of cycles of mistrust.

The ecological crises are a crisis of life: of too many human lives living lifestyles that undermine the stability of all living things. This helps give some idea why governments have not responded with a similar urgency and zeal as they have done in relation to the credit crisis. Not because the problem is smaller or less pressing, but because it is far larger and more difficult. How do millions and millions of people radically change their assumptions and consumptions?
H/T Box the Jack. Make sure you also read this post on his blog boxologies: GDP is a speedometer, the question is "where are we headed?".
Photo by ALS.


Annette said...

A resource for understanding what the "economic meltdown" means for you as a post-grad:

Anonymous said...

Is the problem capitalism?
I don't understand economics at all, but my understanding is that capitalism works on greed. The more people buy, the more money is pumped into the economy. When people stop spending, we have economic crisis.

Is that right or am I way off?

byron smith said...

Geoff - yes, I think this is certainly part of the problem (or at least a particular conception of capitalism). In both cases (economic and ecological crises) there is a common denominator of assuming it is possible to pursue endless growth (the myth of infinite growth). Thus, when I speak of the credit crisis being 'solved', I meant the short-term crisis of trust in lending capacity. This solution masks the larger (ecological) problem, since it simply enables to the financial wheels to go on turning as we trundle over an ecological cliff.

Annette - priceless.

Mike W said...

Of course, governments could stop the corrosive cycle of life by acting as a kind of backstop, informing us who it was ok to live off....

Mister Tim said...

Endless growth, as capitalism understands it, is not a myth. The world economy (and probably the economy of every country) has grown since the industrial revolution - and probably since economies first existed. This doesn't mean they are growing all the time - a recession is the opposite of growth, for example, but the overall trend is for growth.

However, infinite future growth based on finite natural resources is not realistic, so capitalist economies just need to look to alternative sources for growth (and probably tone down their expectations of expected growth).

byron smith said...

Tim - yes, that's more or less what I meant by the myth of infinite growth. I was not referring to the fact that (on the whole) human economies have consistently tended towards growth in the long term, but to the problematic extension of this experience into the indefinite future. This extension is a problem because many of the places (in space and history) where there have been significant economic contraction have been where human society has run up against the limits of growth in the form of not enough food, or some other key resource. While this in the past has been true of an island, or a colony, or a region, or a city, or a country, the present claim is that such a limit is/has been/will soon be reached for the entire planet.

One question then becomes whether economic growth is possible while decreasing ecological degradation. I am sure there are myriad ways we can reduce the effects of our present consumption, but won't there be a limit even to these reductions and efficiencies?

A further question is whether economic growth is itself a healthy measure of human flourishing. My hunch is that while human flourishing often produces economic activity, not all economic activity produces human flourishing.

byron smith said...

Guardian: Our environment is the natural foundation on which our economy is built.

byron smith said...

Bloomberg: Environmental Cost of Business Estimated at US$4.7T Annually.

"Some business sectors with significant environmental impact, such as mining, create an economic loss when accounting for such things as natural resource use and pollution costs, according to the report, which considered impacts in various regions."