Economic heresy

Many of us know that over-consumption is one of the most significant factors driving current North American economic behaviour, and that we must learn to consume less, in order to begin restoring some balance in relations between humans and the non-human world we inhabit and dominate, destroy and nurture. Below is an adaptation of one of the chapters in my book If Only Things Were Different: A Model for a Sustainable Society. I expect that, for different reasons, it will be rejected by those on both the left and the right.

Economic Heresy: An Alternative to a Constantly-Growing Economy

To deal effectively with global warming and other planetary ills, we must evolve more sustainable ways of doing business, which in turn, requires a fundamental shift in our concept of what constitutes a healthy economy. Despite all the concern expressed about the many and varied perils besieging our environment, nothing has fundamentally changed where business is concerned. The ideal economy (and the goal of businesses and governments everywhere), remains that of a constantly growing Gross National Product (GNP) driven by the need of corporate managements to increase shareholder wealth every year. Like cancer (the symbolic disease of our time), this model is one which will eventually devour the body politic, and economic, altogether.

However, it is possible to envision a healthy economy that is not based on constant growth, but on adapting to the natural ebb and flow of the business cycle (instead of perpetually trying to straighten it out, as is now the case).

Extrapolating from conventional business wisdom, the ideal economy is one in which the GNP keeps rising in a straight line to infinity. Governments and central banks are enjoined to achieve and maintain this state of constant expansion by means of fiscal and monetary measures. However, since the standing pattern of the universe is not a straight line, but a sine wave (the cyclical rise and fall of energy and form arising from the complementary interplay of opposites), attempts to control the business cycle, whatever good they may do the GNP, inflict a great deal of damage on those who must contend with the personal economic crises which so often accompany such actions, unemployment being the most grievous.

The proponents of laissez-faire are partly right--let the economy look after itself. But it is only when we, through our governments, have enabled ourselves to take advantage of each and every phase of the business cycle, that we will, in fact, be in a position to choose as freely as free market theory assumes, and only then, that we will all benefit from laissez-faire.

Therefore, it is not the economy per se which should be governments' concern, but those who suffer because of events beyond their control, and who need assistance in maintaining, or regaining, their economic equilibrium. With government programs such as a form of guaranteed annual income, investments in co-op and other affordable housing, daycare, and homecare; better access to education and training; cheap and accessible public transit, and investments in the arts and sciences--we would be able to generate far more, and far more useful, economic activity than by monkeying about with the business cycle using interest rates and taxes.

Following the classic scenario, this is how we might adapt during one complete turn of a business cycle, beginning arbitrarily in the early phase of an inflation. Most people would be working hard, making money and buying everything from housing to pre-cooked and restaurant meals and cleaning services, to cabs, cars, and transit, to computers, and cell phones, to recreational pursuits and works of art. We take pleasure in spending money on high-quality goods, understanding that we are doing our part in keeping the money-making going. The more we all spend, the more we all make, and the heady sensation of fresh cash affects us like oxygen in the economic bloodstream, spurring us to even greater effort.

As long as there is unused capacity from the preceding deflation, prices will remain relatively low and stable, despite this increase in spending, but once the slack has been taken up, prices rise to cover the costs of new production to meet renewed demand. At first, rising prices stimulate even more buying, but as the inflation matures, we begin to change our mix of products from immediate needs and desires to long-term necessities, laying up stocks of food, clothing, electronics, raw materials, seeds, tools, and other supplies with which to enjoy the expected deflation. We may not yet know exactly when it will occur, but we now assume it will be sooner rather than later.

As preparations for the deflation are completed, and as interest rates steepen, we gradually cut back on all but the most essential spending. The mortgage is reduced, other debts are paid off, and cash reserves are invested to take advantage of high interest rates. These actions are taken by a populace that understands two interacting factors: 1) the most direct and effective cure for inflation is to stop buying; and 2) taking such action is part of a self-fulfilling prophecy; that is, by behaving as if a deflation is imminent, we will help to bring it on.

The timing of the decision to spend less is made individually, and by only a few people at first, but it spreads wider and faster the higher prices rise. At the same time, high interest rates discourage borrowing by businesses and consumers alike, which causes retail sales to drop, orders to warehouses, factories, and suppliers of raw materials to be curtailed, and staff and overhead to be reduced; a deflation has begun.

However, instead of being a period of privation and suffering, deflations are welcomed as times of recreation and renewal, the form of which can be as varied as travelling, going back to school, having or adopting a baby, writing a book, changing careers, or just plain loafing, assured of security of income from a variety of sources, including (but not limited to) a guaranteed annual income or other supports of purchasing power, to scholarships, awards, grants, and loans, to part-time and freelance work, to co-op dividends, and savings.

For a while we enjoy less work and more leisure, spending time rather than money; even those who are still fully employed, work at a slower pace. Eventually, as prices bottom out and our reserves diminish, we take advantage of bargains and easing credit to start spending again, recognizing that in doing so, we are helping to start the economy expanding again. Once more, the timing of this increase is an individual/family one, depending on people's particular circumstances.

Business life quickens, sales pick up, and factories and offices re-open or expand; more and more people return to working full time, rested, refreshed, and looking forward to the coming boom; another inflation has begun.

Of course, nothing in real life operates quite as smoothly as depicted here, and fortunately, it doesn't have to. Instead of requiring uniform behaviour, adapting to the business cycle works best when many options are available. At any one time, most people would still be employed (even in the depths of the Depression, 75% had jobs), while certain sectors--the arts, education, recreation, tourism, etc.--would tend to be counter-cyclical, increasing during a contraction and decreasing during an expansion.

The advantage of adapting to the business cycle rather than trying to flatten it into submission is that it meets two human, and environmental, needs: The need to grow, and the need to rest from growing, without succumbing to either, while also providing a way to evolve a new economy, one which is not dependent on the over-consumption of material goods to survive.

Adapting to the business cycle is only one part of establishing a sustainable society; other parts include consuming fewer, but higher-quality, goods that have been made to last, by workers paid fair wages using environment-friendly processes; and in developing technologies which enable us to recycle the materials we use in ways which mimic or adopt nature's own cycles of growth, death, and restoration, along with legislation which requires producers to take responsibility for finally disposing of their product in environmentally-appropriate ways.

But the most significant aspect of adapting to the business cycle, or any other proffered solution to global warming and other environmental ills, lies in recognizing that humans, especially those of us in North America, can no longer continue to try to consume ourselves into happiness, but must make a basic change in attitude, from that of the spendthrift to that of the steward, from measuring success in monetary and material terms, to measuring it in terms of satisfying human relationships, leisure, participation in the arts, sciences, and sports, and the well-being of the natural world, and the preservation of wilderness.

At the moment, our planet and its life forms are suffering from a cancerous economic ideaology; adapting to the business cycle can be part of the cure.