Why we have compulsory devotion to economic growth
Why we have compulsory devotion to economic growth
Last week the ritual worship of ‘economic growth’ continued unabated, and few ever stop to ask if we are really better off, or whether in a finite world we can actually have perpetual growth.
In a single day after the Reserve Bank had moved to raise the Official Cash Rate, economic growth had been advocated by Don Brash, Michael Cullen, Helen Clark as well as interviewers Geoff Robinson, Kim Hill, Linda Clark and of course various economists.
Every three months we must go through the bizarre ritual of the release of the GDP figures. Like docile disciples of the GDP God, journalists earnestly repeat the magic figures and dutifully fall into the reportage of economic growth as if it were synonymous with progress and wellbeing. Everyone gets into the act, praising or criticising the government for the way it is growing or not growing the economy.
Although back in 1972 the Values party first questioned this concept, twenty eight years later we are still entrenched in the same mind-set, possibly more so than ever. I have only recently discovered why.
But surely, you say, don’t we need economic growth? Doesn’t it bring in more taxes? Yes it does. And if we are to rely on income tax and company taxes for the bulk of our Government revenue, then growth is needed to create jobs and provide for health and education. But the world financial system is based on a structure which makes us choose between growth and dire consequences like bankruptcy and unemployment. It is either growth or collapse, not much of a choice considering global warming and a host of other very serious environmental ills are coming to us courtesy of economic growth.
Well the penny dropped for me after when, after reading Hazel Henderson, David Korten, Jonathan Rowe and Richard Douthwaite, I fell upon Michael Rowbotham’s book The Grip of Debt. Eureka!
What I now understand is that the growth imperative is caused by the way money is supplied to a modern economy. In New Zealand 98% of the money supply is issued by private banks as interest-bearing debt. The creation of money as debt sets in place a most extraordinarily destructive chain of events.
1. Since borrowers must pay back the debt with interest, but this interest has not been created, there is always less money in circulation than there are goods and services available, giving a chronic lack of purchasing power.
2. In turn, this leads to intense competition between industries, causing mergers and acquisitions and making it extremely difficult for small firms and ethical companies to keep trading. Those who don’t cut corners are either forced out of business or become the subject of a takeover. Only the fastest growing businesses survive in this dog-eat-dog economic environment. This results in further concentration of power in a smaller and smaller number of megacorporates. Because footloose corporations with no allegiance to place prowl the globe in search of cheap labour and weak environmental laws, the environmental and social damage just escalates.
3. If a firm can’t pay the interest on their loan out of current profits, a common choice is to invest to grow their business. Usually they borrow again from banks. Businesses which don’t expand go under, as the alternative to growth is bankruptcy and debt. This builds forced economic growth into the system.
4. Individuals have to compete with each other to earn enough to service their loans and pay off their debts. Where once banks used to lend 80% of the house value, they are now offering 100% mortgages and pushing second credit cards. Because of the lack of purchasing power and heavy debt, young couples both have to go to work to pay the mortgage, especially if there is a student loan to pay off as well. Job insecurity and time poverty leads to further stress, because the alternative is unemployment, and/or debt to financial institutions.
5. Time poverty leads to the cannabilising of the non money economy by the formal economy – substituting of home meals by fastfoods, family recreation by entertainment, parent care by nanny care and home care for institution care for the elderly.
6. The growing environmental and social damage leads to economic growth in areas which are essentially defensive, thus bringing no actual improvement in the quality of life, but just preventing it from deteriorating - bottled water, security services, insurance against job loss, prison services. Economic growth also occurs in areas which are non-productive like financial speculation or gambling to relieve poverty.
7. Governments also have to struggle to pay off their debt, caused by borrowing money from pension funds or banks who issue the money and charge governments interest! There is growing overseas debt in almost every country - debt largely to the commercial banks of the world and the international banking agencies. Countries respond by trying to export more than they import. Overseas trade is now reduced to a competition between countries to relieve their indebtedness. Instead of trade being for mutual benefit, it become export warfare. Megacorporates transport goods at great environmental cost round the world, and the competition leads to the lowering of commodity prices.The push for exports means wasteful and accelerating growth of trade with identical goods crisscrossing the globe which adds to global warming, damages the lifestyle and cultural integrity of indigenous people, and reduces the self-reliance of local communities.
8. Since interest rates always have to be built into prices and firms are often obliged to raise prices to stay afloat, the debt-based money system builds in inflation, though this is usually masked by changes in the basket of goods which measure inflation.
9. A boom-bust cycle is associated with debt based money, and since central banks are greatly influenced by private banks, a small coterie of international bankers has the power to expand or contract the money supply and alternate inflation with deflation.
10. Democracy is continously eroded as centrally planned megacorporates colonise the world, usurping the power of democratically elected governments.
11. The deregulation resulting from the growing power of the megacorporates and billionaire currency speculators has led to free flow of capital, bringing economic instability, as money whizzes round the world at webspeed in search of profit, collapsing economies like Mexico, Asia and Russia. The deflation which follows further empoverishes debt-ridden nations.
So it is no wonder we have to champion economic growth. Without it we have economic collapse. But with it we have environmental damage, the kind that is now threatening our very survival. We are doomed if we do, and doomed if we don’t.
Who ever would have dreamt up such an absurd system? Isn’t it time we looked at the fundamentals, the way we allow money to be created? If the consequences of issuing currency for profit, whether it be by banks, governments or counterfeiters, are anything like the list above, isn’t it time we moved towards a debt-free currency?