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Ekodo: Development Without Growth

Submitted by on October 2, 2010 – 9:29 pm

By Sean Weaver

The planet is not growing. And yet the common view is to measure the health of every economy on the rate that they are growing. If we applied the same logic to people we would conclude that the only healthy people are those under 23. I stopped growing well over 20 years ago (apart from sideways at my waistline). I have continued to develop in that time though, and this convinces me that development is possible without growth.

A bacterial colony will grow on a dish until the dish is full. Thereafter it will become more diverse. A forest will grow for a period (e.g. 150 years), and then stop growing  – the volume of new growth is balanced by death and decay. The forest (like the bacterial colony) will continue to develop though, in terms of biological diversity.

Development without growth is a widespread natural phenomenon, and is necessary for systems to sustain themselves. Given that the planet is not growing, why don’t we use this model for our economic system? Here is a key reason:

About ninety percent of the money in the economy is borrowed. This is because of how the banking system works. It goes something like this – A $100 deposit becomes a $10 cash reserve and a $90 loan. Someone borrows the $90 to buy something. The person they pay deposits it in the bank. This $90 deposit becomes a $9 cash reserve and an $81 loan, and on the story goes. This allows the $100 deposit to generate about $900 in loans.

As a result the vast majority of the economy is subject to interest payments. The economy then needs to grow by the interest rate every year in order to keep the banks happy and the money supply stable (or inflation compensates for the difference). This is one reason why we live in a growth economy.

If lots of borrowers cannot pay the interest on their loans the banking system gets wobbly. In 2008 lots of US homeowners could not pay the interest on their mortgages, which caused some banks to collapse and triggered a global recession. Recessions can be avoided as long as there are no limits to economic growth.

Here are a couple of limits to economic growth: Oil price and drought.

The majority of independent geological studies that I have seen predict the global peak in oil production to be about now. Thereafter oil supply moves into terminal decline whilst demand continues to rise, making prices increase. Escalating oil prices will cause the price of everything to escalate because the world economy is hard-wired to energy and oil prices. Substituting oil for other energy sources is not easy because there are not enough alternatives to meet demand, and the alternatives are expensive compared with oil. As the price of everything increases, more people and business will fail to meet their interest payments – leading to conditions ripe for recession.

Another physical limit on the economy is drought. A warming global climate will lead to more frequent and severe droughts, particularly for water-stressed regions like eastern New Zealand and much of Australia. With the world population growing by about 80 million every year, increasing drought means food supply will drop while demand continues to rise – leading to escalating food prices and declining food security. An increase in the frequency and severity of droughts will also stifle agricultural economic growth, and make it difficult for agriculture to keep up with interest payments – another problem for banks.

With escalating oil prices combined with the economic impacts of climate change we have two significant limits to growth overlapping and reinforcing each other. On top of this we have declining fish stocks, declining soils, declining water supplies, declining biological diversity, and declines in other natural resources.

These limits to growth pose a serious challenge to the modern financial experiment that forgot that we live on a finite planet.

Recessions cause hardship and even famine. Hardship and famine usually cause conflict, and conflict commonly triggers violence. Furthermore, people suffering new hardship often want someone to blame. This creates ideal conditions for populist political movements that promote simplistic explanations of the cause of hardship, and often use conspiracy theories to find someone convenient to blame (e.g. immigrants, certain races, creeds, political views). The blamed then become scapegoats and are persecuted by a rising angry bigotry. All these things have happened time and again in the past, and in various parts of the world. And in the words of George Santayana: If we do not learn from history, we will be condemned to repeat it.

It is vitally important that we openly discuss the underlying causes of our predicament and the common challenge we face as a global society. We need to build a process to adapt our economy to the actual (physical) world we live in. Here’s the rub: if we do this by blaming, shaming and igniting our anger, we will fail. If we want to keep ears and eyes open we need to use a communication strategy capable of keeping ears and eyes open.

History has shown us that divisiveness will not deliver enduring outcomes. In an interconnected world inclusiveness is far more capable of doing so – because it taps into a greater force of nature by embodying interconnectedness. Compassionate, non-violent communication that bears witness to this problem and then focuses on an inclusive path to solve it is our task. After all, this is an effort to protect the diversity of all people and our non-human companions from an unwholesome common fate. We can change the course of history and alleviate future suffering but only if we are mature enough to recognise that we are all in it together.

Sean Weaver is the founder and host of Ekodo – a professional development life-skills programme for compassionate ecowarriors. He lives in Wellington. See the Ekodo Facebook group here: http://www.facebook.com/group.php?gid=47683391767

Sean is also a climate change solutions consultant through his business Carbon Partnership.

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