24 October 2011
Creating one debt balloon after another in order to drive forward economic growth and consumerism will not make us any happier
It is easy to be a politician, just promise more to all and everyone is happy. In the 1970s, it was done using the printing presses. More and more money was printed. Unfortunately, inflation came along and then a big bubble suddenly burst. An audible boom could be heard, like an exploding balloon. But fear not, in the 1980s, we came up with the bright idea of unregulated capital. Now the private banks could create money using fractional reserve banking. New money, new growth and no inflation. Magically, the balloon grew again. Painfully that balloon exploded in the Swedish population's face between 1991 and 1993. Actually, to a large extent, the problem was opting to become a member of the European Union. The party was over. Extremely painful cuts and a transformation of Swedish society was the effect. But, it had one positive result – virtually, all Swedish political parties were more careful when it came to balancing the budget.
But this lesson was not universially learned. And, after some minor dotcom crashes, the easy capital road was on track once again. When the natural growth of capital was not enough to feed markets - more and more of our savings went on the stock market and other financial services' instruments. "Everyone could be a millionaire," we were told. All the easy capital reduced interest rates. And our borrowing and annual incomes exploded - as did housing prices. Like children, we were again blowing up the balloon. Then it happend again –boom. This time, the banks had a problem. Lending money you do not actually have and, instead, creating it using fractional reserve banking means you are in trouble when people cannot pay that money back.
But - fear not - good old Uncle Sam, Moder Svea or whatever the particular state was called could help the banks out. New billions flooded the market and we were back on track. We were like happy children - the new balloon was growing again. But then, boom. Some states were not solid and wealthy enough to cover it. They had to pay high interest rates because of "risk". But then the European Union covered the risk, by offering help. Now, not even the rich states are rich enough so people have started talking about eurobonds. But this is just the newest balloon – which will no doubt inflate to bursting point before going boom. For, banks must be small enough to be able to fail otherwise no investor will be avoiding risk - knowing the state will cover the losses. This cycle just leads to unsustainable debt.
Let us not fool ourselves, politics is full of painful priorities and the economic growth solution is dead. Creating more for everyone is in good times is destroying the climate and its eco-systems. The decoupling scenario just does not wash, if you include the export-import balance of a countries consumption. In bad times, pushing policies for growth means an unstable economy. The crashes will come again and again, each time delivering a blow to the weakest. Over the last 40 years, we have become between two and four times richer, but not at all happier. Spending all benefits from innovation and increased efficiency on keeping working-time up, with an army of unemployed, is just wasting resources. Poorer countries, where growth actually would mean life quality improvements, need those resources more than us. We should increasingly use productivity gains for reduced working time and pursuing life-quality improvements, rather than just constantly driving up consumption. There is a clear link with reduced working time and reduced resource use. We could actually spend more time developing as humans, rather than consumers, saving ourselves and our planet in doing so.
Let us rethink the economic model and organise it around improved life, not increased growth. Let us balance budgets and allow financial risks to actually be categgorised as such. Avoiding risk makes sense. Otherwise, greed is the best option and greed is not good. Let us redistribute rather than making promises built on hot air in a balloon, which will eventually pop. In the 1848 book Principles of Political Economy, John Stuart Mill, concluded that constant growth and continued expansion in the use of natural resources would not make us happy. The author claimed that an earth where the last resource was used would not be a fun place to be. He suggested a stationary condition, as an antidote: "It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture and moral, and social progress; as much room for improving the art of living, and much more likelihood of its being improved, when minds ceased to be engrossed by the art of getting on." Let us not hunt growth to the last drop of blood of our poor planet - let us pursue development.
Carl Schlyter is a Swedish MEP and member of the Greens/European Free Alliance group in the European Parliament