Growth: the false god

If a team of interplanetary anthropologists (the phrase is an oxymoron, but we have none better) were to descend to earth in their spacecraft they would notice that, like some distant tribe who worships a panther’s claw, a voodoo mask or the gnarled roots of an ancient tree, the human race has a strange fetish for growth.

Whereas past civilisations built their pyramids to gods who brought rain, or made the rivers flow, in ours we shop. The temple is the air-conditioned mall, where we occasionally have lunch on small rolls of tuna and rice – a tasty mix of the endangered and the engineered – before maxing out the credit card for clothes we don’t need to impress people we hate. Those extra-terrestrial anthropologists would think, wouldn’t they, that ours was a society headed for self-imposed destruction, like the stone head builders of Easter Island or the Vikings in medieval Greenland.

From the self-development books of Oprah and Tony Robbins to the world records in the Olympic Games, the act of standing still, or of tomorrow not being better than yesterday, is the ultimate sin. From computer processing speeds, to pixels on phone cameras to waistlines queuing for the food buffet, everything must be faster, better or bigger. Achievement and victory, inculcated since school – themselves ranked against each other for parental selection – are the ultimate virtues.

Nowhere is this obsession more apparent than in finance and economics. Governments are obsessed with GDP growth, even if that means unsustainable debt, imbalances or environmental destruction. Businesses are obsessed with profit growth. Regardless of growth’s long-term merits, the CEO of any publicly-listed company will be sacked quicker than you can say ‘board meeting’ if he says otherwise. Investors, more to the point, are obsessed with beating inflation and each other. And of course they are, they’re investors.

Despite living in probably the most comfortable country on earth in what is probably the most advanced period in history, Australians are not immune from this fetish either, notwithstanding the country’s sometimes forced routine of studied indifference. No mainstream politician would dare say growth is not the priority and no mainstream economist would dare to say growth isn’t good (most, after all, are employed by banks). Tell your bank manager that you plan to earn less and you’re unlikely to get a mortgage. Tell your financial planner that you want your assets to decline in value and you’ll be referred to a psychologist.

Yet economics beyond growth is exactly what we need if some kind of equilibrium is to be restored in the domestic and global economy. Forgetting for the moment Malthusian arguments about resource scarcity, or indeed the science of climate change, for the insidious political economy of a highly unequal world to subside and for the backbone of democracy – a middle class where most are in the middle – to reassert, we essentially need a no-growth environment.

But how can such an agenda be pursued? If capitalism is inherently not the answer then is socialism? Probably not. Marx fetishised growth as much as the market, just with different methods. China’s Great Leap Forward and Stalin’s Five Year Plans, after all, were blatant growth-pursuing exercises that would make Wall Street blush. Is deep ecology the answer? Not if you don’t wish to wear a hairshirt. Reducing our standard of living to the level of people Bono sings about is never going to be popular. Ditto for primitivism, survivalism and fundamentalist religion as well.

Perhaps what we need then is not institutional or philosophical revolution, but a broadening of our economic objectives. Growth is fine of course – just like panther claws, voodoo masks or gnarled roots – but growth for its own sake, fetishised growth, is an unhealthy obsession.

To broaden our economic objectives we could start by broadening our economic measurements. As my colleague blogger Sell on News wrote on Saturday, GDP – the lodestar of the growth religion – measures economic transactions, not economic wellbeing or advancement, and thus, since it came into mainstream use leading up to the Second World War, it has not only been an imperfect measure of economic success or otherwise, but a policy signal of dubious value. Whether examined from the inequities of the ‘99%’ in the United States, the glaring imbalances in China, the productivity challenges of Australia or the debt crisis in southern Europe, an elite focussed on the GDP speedometer has failed to avoid hitting the proverbial tree.

Alternative measurements, such as Bhutan’s ‘gross national happiness’ measure, or the United Nations’ human development index, have been promoted, but even simple mainstream indicators like gross national income per capita, the Gini coefficient or just plain old CPI could be used to a greater extent.

Right now, however, with austerity policies attracting controversy in Europe and the US recovery remaining tepid, the majority instinct is to go the other way, with some economists even proposing to have central banks use GDP targeting in setting interest rates, not just unemployment or inflation. Yet by elevating the false god of GDP to the omnipotent centre of economic cosmology, the inherent unsustainability of the debt-fuelled system that GDP-chasing has created would only get worse.

There is much hope for the world economy, whether in the form of nanotechnology, greener energy or 3D printing, and human ingenuity will probably find a way to accommodate the world’s billions at a higher standard of living. Yet to achieve economic nirvana our cabalistic idols must first be destroyed. To create an economics that’s not reliant on debt, inflation, over-consumption or money creation, we need to requestion its ultimate purpose.

Modern society has largely moved on from burning witches, exorcising demons and sacrificing virgins. It’s time to re-examine the primeval practices of our economic cult as well. It’s time to create an economy that’s built for more than growth.

Michael Feller is an investment strategist at Macro Investor. Macro Investor is offering a free, 21-day free trial for new subscribers.

Comments

  1. It seems I posted this too soon… More appropriate here (mods: can you delete the one in links)

    http://www.econtalk.org/archives/2012/10/robert_skidelsk.html

    Robert Skidelsky, noted biographer of John Maynard Keynes and author (with his son Edward) of the recently published How Much is Enough, talks with EconTalk host Russ Roberts about materialism, growth, insatiability, and the good life. Skidelsky argues that we work too hard and too long. He argues that the good life has more leisure than we currently consume and that public policy should be structured to discourage work in wealthy countries where work can still be uninspiring. Skidelsky criticizes the discipline of economics and economists for contributing to an obsession with growth to the detriment of what he says are more meaningful and life-enhancing policy goals.

    • Capitalism without growth is dead. Capital strive for growing, this is its nature, this its purpose. If we don’t accept that, we are on the road to another economic system. There is no way for capitalism to sustain itself without growth. That is why Marx emphasizes (or fetishised) growth as much as the market. Everyone in business want to grow.

      Everyone investing wants his investment to grow. Everyone expect his salary to grow. How on Earth everyone would accept voluntarily his own business not to grow, because we have to save the planet? At the same time the same people are calling for less regulations. How would anyone accept to invest without profit if the market is totally freed? Because growth means GROWING CAPITAL and capital can’t grow without profit. The idea of capitalism without growth sounds like much greater Utopia than even the Marx’ communist society.

    • …human ingenuity will probably find a way to accommodate the world’s billions at a higher standard of living.

      Ah, MB has its own technocornucopian, I see!

  2. GunnamattaMEMBER

    ‘Despite living in probably the most comfortable country on earth in what is probably the most advanced period in history, Australians are not immune from this fetish either, notwithstanding the country’s sometimes forced routine of studied indifference. No mainstream politician would dare say growth is not the priority and no mainstream economist would dare to say growth isn’t good (most, after all, are employed by banks). Tell your bank manager that you plan to earn less and you’re unlikely to get a mortgage. Tell your financial planner that you want your assets to decline in value and you’ll be referred to a psychologist.’

    I hope you are not going to tell me the high point of civilzation is a wade through a Murdoch newspaper and commercial breakfast TV to be followed up with a constant stream of ‘futures’ on sporting events, beer adverts, mobile phone adverts and adverts suggesting ‘there has never been a better time to buy real estate, average house prices will reach 1 million in just a few years’ and parading an endless stream of perceived societal shortcoming (fat, bald, uninsured, etc etc etc) at 12 minute intervals is the high point of human civilization.

    Living in a tree and clubbing wildlife for a feed starts to look good otherwise

    • Mining BoganMEMBER

      “I hope you are not going to tell me the high point of civilzation is a wade through a Murdoch newspaper and commercial breakfast TV to be followed up with a constant stream of ‘futures’ on sporting events, beer adverts, mobile phone adverts and adverts suggesting ‘there has never been a better time to buy real estate, average house prices will reach 1 million in just a few years’ and parading an endless stream of perceived societal shortcoming (fat, bald, uninsured, etc etc etc) at 12 minute intervals is the high point of human civilization.”

      Too many of my fellow bogans think yhis IS the high point.

      The wildlife should be clubbing us.

    • Gunna, you forgot reality TV. I’ve had the misfortune to stumble across The X Factor recently, and if that’s not a sign post for the decline of civilisation I don’t know what is!

  3. While chanting to be happy i merely note that the evil twin of a growth fetish is the belief that debt and leverage have magical powers.

    A far more sceptical and restrained approach to all forms of debt – household, public and corporate – would be a huge step forward for mankind.

    Unwinding the debt that already exists requires bold action and not the fools errand of a solution in faster growth ( fuelled by more debt) or worse inflation.

    The quickest way to resolve a debt whose burden becomes too heavy is liquidation.

    • Jumping jack flash

      “The quickest way to resolve a debt whose burden becomes too heavy is liquidation”

      indeed.

      but who will buy to facilitate liquidation? The debt is forever until it is repaid in full plus interest, even if you sell the asset for a loss.

      Someone is going to take a haircut, a massive, massive haircut, and we all know it isn’t going to be the banks: they’re all too big to fail you know.

      • Yes – there will be haircuts but it is worth keeping in mind that most people will seek to avoid liquidation and thus we are not necessarily talking about a massive sudden default.

        Rather thinning out the dead wood and putting their liquidated assets in the hands of the debt free.

        Yes the banks will do anything to avoid bearing a haircut but the solution is straightforward.

        If the banks cannot bear the consequences of poor lending decisions they should be nationalised with all equity and debt holders above a certain limit wiped out (preserve the small retail accounts less than $500k).

        That will avoid a banking collapse and the govt can then sell them off again once their finances have been stabilised and bad management removed.

  4. “Modern society has largely moved on from burning witches, exorcising demons and sacrificing virgins.” Ah, yes, largely. But we still have gold as “the primeval practices of our economic cult.” Until gold becomes the base metal that it really is, growth for growth’s sake will continue to be perused. When it no longer is, then perhaps we will have established a new form of economic society.

  5. When fund managers rationalise underperformance by suggesting that they should differentiate their product with other superfluous measures they are usually on a path to failure.
    Suggesting that growth which is usually gained through productivity is not a goal of the economy is like suggesting that profitability shouldn’t be the goal of a company. Unfortunately we must focus on productivity and efficiency which leads to growth otherwise we will fail.
    In the natural world species that don’t evolve go extinct.

    • Yes, but in the past 10 years the zeitgeist amongst evolutionary psycholosits and evolutionary biologists has been turned on its head as the Age of Naive Individualism comes to an end.

      As the evolutionary biologist David Sloan Wilson has noted, demonstrations of group selection now appear regularly in the top scientific journals, something that would never have been seen when Naive Individualism rode roughshod over evolutionary biology and evolutionary psychology:

      As one example reported in the July 6, 2006 issue of Nature, a group of microbiologists headed by Benjamin Kerr cultured bacteria (E. coli) and their viral predator (phage) in 96-well plates, which are commonly used for automated chemical analysis. Each well was an isolated group of predators and their prey. Within each well, natural selection favored the most rapacious viral strains, but these strains tended to drive their prey, and therefore themselves extinct. More prudent viral strains were vulnerable to replacement by the rapacious strains within each well, but as groups they persisted longer and were more likely to colonize other wells. Migration between wells was accomplished by robotically controlled pipettes. Biologically plausible migration rates enabled the prudent viral strains to persist in the total population, despite their selective disadvantage within groups.

      DAVID SLOAN WILSON, “Beyond Demonic Memes: Why Richard Dawkins is Wrong About Religion”
      http://www.skeptic.com/eskeptic/07-07-04/

      Here’s another example cited by Wilson:

      William Muir of Purdue University
      compared two kinds of selection for egg
      productivity in hens. The hens were kept
      in cages, with several hens per cage. In
      the first experiment, the most productive
      hen within each cage was selected to
      breed the next generation (within-group
      selection). In the second experiment, all
      hens within the most productive cages
      were used to breed the next generation
      (between-group selection). In the first
      experiment, the most productive hen
      in each cage achieved her productivity
      largely by bullying the other hens. After six generations, a hyper-aggressive strain had been produced, with hens plucking each other’s feathers in incessant attacks that were sometimes fatal. Egg productivity plummeted over the course of the experiment, even though the most productive hens had been chosen in every generation. In the second experiment, group-level selection resulted in a docile strain of hens, and egg productivity increased 160 percent in six generations.

      DAVID SLOAN WILSON and EDWARD O. WILSON, “Evoluton ‘for the Good of the Group’ “

  6. Very good thought provoking post.

    My view is that the western world is locked into close to zero growth for quite sometime.

    Negative real rates of interest on deposits and mortgages is part of rebalancing the excess money that’s been created in the system.

    No economist or CB governor will change this eventuality

    • Time is gunna beat the system! In 2008, those late 50’s potential retirees are now early 60’s; they don’t have too much longer available to them to look to ‘cash up’ That’s not just here, but everywhere that has stored savings in assets – property and the stock market, and the like. 0% interest rates aren’t going to save retired workers, and that’s where the next push is going to come from – those who don’t have the time, and increasingly, the money to wait any longer.

      • GunnamattaMEMBER

        Well all those guys need to do is offload whatever margin paid for ‘assets’ they have and recline back into the tender mercies of our societal administrative arrangements for the impecunious entering the golden years…..

        …..such as they exist after the same types of people have been foisting debt, user pays, blame the victim social welfare, labour flexibility, and a bureaucracy funded by poker machines, real estate speculation, and mining boom rake offs for the better part of a generation.

        …..as my dentist used to say, they ‘won’t feel a thing’

  7. We have caught the growth tiger by its tail, but unable to let go, because we fear that it will eat us.

    I think the challenge is to get off the growth treadmill without it leading to mass unemployment and the ensuing social chaos. Nobody can provide an easy solution to this quandary that we find ourselves in.

    Most “economists” pretend they have the solution – More growth and increased population!! AKA kicking the can down the road.

    • When one clearly understands that real wealth and power are steadily consolidated in a comparatively few hands, by reason of a usury-based Ponzi monetary system, now global, that both depends upon and indeed thrives upon ever increasing “growth” – and ever increasing heads of population to serve as new consumers / borrowers-at-interest – then it is hardly surprising that “growth”, whether it be in the form of consumer purchases, personal wealth (“assets”), corporate market cap, or the Volume x Value of total transactions in the economy – has become the obsession of all.

      From the “elites” on down.

      • In your system, how are you going to gainfully employ the people formerly employed in the central banks and the FIRE sector?

      • It’s not my job, or anyone elses, to find employment for them. In my proposed system, every individual is empowered to create their own employment, if none is available / offered to them by others.

      • Unfortunately, It IS the “job” of our political leaders.

        Or rather, it is a job description that we have given to our political leadership, without so much as a pointer on how to go about doing it. It is no wonder that they recite the growth mantra as soon as they gain office (except, maybe the Greens).

      • Well, you may not agree with me, but we most certainly do no elect leaders who say they won’t bother with the unemployment rate or sleep well at night when the economy is in a recession.

        Paul Keating said it is the “recession we had to have” and soon.. out he went.. bringing in the merchants of private debt/growth, m/s John Howard and Peter Costello.

      • Agree with all that Mav 🙂

        Again though, returning to my core point, our political leaders are, as I have stated before, merely the turds that rose to the top of their respective party political systems. Typically by reason of graft, habitual dishonesty, promises made to others in exchange for internal and external (ie, financial) support. They, more than the rest of us, are dependent on the system – particularly the financial/monetary system – to advance their Self-centred purposes (ie, to quote Yes Minister, “climbing the greasy pole”). IMO, in observing that all politicians eagerly mouth the right words, assuming credit where it is manifest that little-to-none is due for the “official” UE stats when they are “good”, whilst engaging in rabid obscurantism when they are not, it is the pinnacle of naivety to imagine that our political leaders actually have either the real intent, or indeed the power, to provide employment for every sub-group within the populace. Unless, that is, doing so helps to create/increase their own support mechanisms – witness Howard’s reemployment of PS previously made redundant, when it suited his agenda.

        Politicians are no more than self-serving puppets for the real drivers of the system. Their actual impotence with regard to “fixing” unemployment on a wide scale, is abundantly apparent in many countries across the Western world right now.

      • I don’t agree. I believe in the adage that we get the politicians we deserve – they are merely a reflection of the values held by the broader society.

      • Disagree Mav. Once we adopt the view that “it IS the job of our political leaders” to find employment for all of us …. need I say more?

        There’s a distinct difference between “find employment for all of us” and “find employment for those of us who cannot find it from others”.

        The latter used to be considered a key goal of Government.

      • There’s a distinct difference between “find employment for all of us” and “find employment for those of us who cannot find it from others”.

        Indeed. However, returning to the original context of my point and the counterpoint raised by Mav specifically pertaining to the hypothetical scenario of FIRE sector workers being made redundant by my monetary system proposal, in that context, I do not see it as the job of politicians to find work for financial sector workers. Given your comments yesterday, drsmithy, specifically pointing out that financial sector workers can easily deal with lower wages, I would respectfully presume that there is some chance you may agree with that.

      • Given your comments yesterday, drsmithy, specifically pointing out that financial sector workers can easily deal with lower wages, I would respectfully presume that there is some chance you may agree with that.

        Maybe they can find some work for them doing something useful like street sweeping. 🙂

    • +1 when incapable of creating a self-sustaining economy then default to population growth and make it the next generation’s problem. Keep the charade going until imbalances are so great that it leads to war. Then start all over again.

  8. The solutions are simple, but politically impossible. We all know what should be done, but so much is invested in the current arrangements only an economic and/or environmental catastrophe will bring change.

    Even a small step in the right direction — such as Ken Henry’s recommendations — proved impossible to implement, and even a small watered-down part of that — the carbon tax — has inflicted considerable political damage.

    Take debt and speculation. Why is honest labour (and interest on hard-earned savings) taxed at twice the rate of capital gains? Why are gamblers (sorry, “investors”) given a tax break to borrow money to speculate, and a further tax break on their winnings? Its insane, we all know that, but no politician since Keating has dared even mention negative gearing.

    Sadly much of the policy emphasis seems to be on punishing “bad” behaviour and we have failed to encourage “good” behaviour. This could be achieved in a revenue neutral way by subsidising good behaviour and raising taxes on bad behaviour. Why for example, can we buy two-star appliances for a fraction of the price of six-star appliances? The tax system could be used to even up the pricing, or at the very least we should mandate that annual running costs (in dollars not kWh) be prominently displayed on the label.

    Anyway, over to loony right to lecture us all on how there is no good behaviour and bad behaviour and everything will be solved by the government getting out of the way and letting the market rip.

    • GunnamattaMEMBER

      Great post….

      Basically you are right on the money. The status quo has sort of congealed around a given set of biases and ‘flaws’ (for many, though not the beneficiaries), who are acutely aware that even questioning the status quo is undermining it, so have to be on the front foot to shoot anything that looks like doing so.

      The issue with the Henry recommendations was basically that it undermined a little too much of the status quo to be politically massageable.

      The reason speculation is taxed at twice the rate of labour is that the beneficiaries of the status quo create wealth through speculation (and tell their offspring that only idiots labour for a living).

      Australian society is basically about the beneficiaries of the status quo holding the rest of society to ransom to fund their benefits, while having enough of the rest of that society believe that they are within cooee of a chance of having access to that benefit, and that it is in their interest to keep working towards that than questioning the status quo.

      Policy emphasis is of course on punishing bad behaviours because the policy is not about creating anything (ie a better economy or better society etc) but about justifying depriving parts of existing society from access to any benefit.

      The political process almost certainly will not set up a system to reward ‘good’ behaviours at variance to behaviours already being rewarded (real estate speculation come on down) because that wouldmean that people currently getting a benefit from the status quo may not do so tomorrow (or suspect that they may not) and then start questionning the rights of others to gain a benefit – and that is ‘UnAustralian’

      The only answer one digs up in History is one coughed up circa 150 years ago by Marx and which formed in part the basis of attempts by Messrs Lenin and Trotsky to bring change

      OK, that should get some nuts into the mix.

      • Any honest assesment of Marx must undoubtedly conclude that his intentions were good. However, he is hardly “the only answer one digs up in History.”

        “Moreover, Pace the hard-liners,” is how Robert Huges put it in The Culture of Complaint, “you do not have to be an ideologue to spot human oppression and injustice, and to want to do something about it; long before The Communist Manifesto, men and women burned with indignation when they saw the strong depriving the weak of hope, and they will keep wanting to redress the injustices the rich inflict on the poor long after the last Marxist regime collapses.”

        You’ve also got to question the means that Marx advocated. “Violence is the midwife of History” is a highly questionable doctrine. Personally, I much prefer the non-violent methods of Gandhi and Martin Luther King, and believe they bring about superior results. Martin Luther King noted that “with all the weakness and tragedies of communism, we find its greatest tragedy right here, that it goes under the philosophy that the end justifies the means that are used in the process.”

        Martin Luther King wrote an entire section in “My Pilgrimage to Nonviolence” on Marxism. He rejected communisim’s materialistic interpretation of history, its ethical relativism and its political totalitarianism. But then he concluded that communism

        should challenge every Christian—-as it challenged me—-to a growing concern about social justice. With all of its false assumptions and evil methods, communism grew as a protest against the hardships of the underprivileged. Communism in theory emphasized
        a classless society, and a concern for social justice, though the world knows from sad experience that in practice it created new classes and a new lexicon of injustice.
        The Christian ought always to be challenged by any protest against unfair treatment of the poor, for Christianity is itself such a protest…

        MARTIN LUTHER KING, JR., “My Pilgrimage to Nonviolence”
        http://mlk-kpp01.stanford.edu/primarydocuments/Vol4/1-Sept-1958_MyPilgrimageToNonviolence.pdf

      • True, but it’s also important to note that Gandhi eventually broke with Tolstoy’s Christian pacifism and non-resistance. As the Christian theologian Reinhold Niebuhr observed:

        Beginning with the idea that social injustice could be resisted by purely ethical, rational and emotional forces (truth-force and soul-force in the narrower sense of the term), he came finally to realise the necessity of some type of physical coercion upon the foes of his people’s freedom, as every political leader must. “In my humble opinion,” he declared, “the ordinary methods of agitation by way of petitions, deputations, and the like is no longer a remedy for moving to repentance a government so hopelessly indifferent to the welfare of its charge.”
        REINHOLD NIEBUHR, Moral Man & Immoral Society

        Here’s how Jonathan Schell put it:

        In 1986 he had read Tolstoy’s Christian pacifist manifesto “The Kingdom of God Is Within You” and was “overwhelmed” by it. A few years later, he entered into correspondence with Tolstoy, who celebrated Gandhi’s work in “Letter to a Hindu.”….

        The example that inspired him most, however, was the Russian revolution of 1905, whose first stages were largely nonviolent. For some years, he observed in “Indian Opinion,” the Russian revolutionaries had resorted to terrorist attacks. He admired the courage of the attackers, including “fearless girls, actuated by patriotism and a spirit of self-sacrifice, [who] take the lives of those whom they believe to be the enemies of the country, and themselves meet an agonizing death at the hands of officials.” Nevertheless, their method was “a mistake.” Now they had discovered a new method:

        “This time they have found another remedy which, though very simple, is more powerful than rebellion and murder. The Russian workers and all the other servants declared a general strike and stopped all work. They left their jobs and informed the Czar that unless justice was done, they would not resume work. What was there even the Czar could do against this? It was quite impossible to exact work from people by force.”
        JONATHAN SCHELL, The Unconquerable World

    • The Lorax said:

      Why is honest labour (and interest on hard-earned savings) taxed at twice the rate of capital gains?

      Adam Smith explained it pretty well:

      What was the source of rents and profits? As we already know, Smith saw it as a fundamental inequality of bargaining strengths that prevent labor’s wages from absorbing the full value of the product. “A landlord, a farmer, a master manufacturer, or a merchant,” he wrote, “though they did not employ a single workman, could generally live a year or two upon the stock [capital] which they had already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment.” Thus the “necessity” of employment, despite the contractual freedom that set it so deceisively apart from the status of serf or slave, provided the disparity in social power from which arose the rights to payment called rent, or to claims to a residual called profit, without which the access to resources called employment would not be offered.

      ROBERT l. HEILBRONER, Behind the Veil of Economics

      The “fundamental inequality in bargaining strengths” exists in the political arena as well, so laws are promulgated which tax labor at a higher rate than capital.

      • There is no doubt that capital gains tax will be addressed after the next election in the US (unless Romney gets in which is very unlikely). The problem is that a whole industry has been set up to make income look like capital gains which is unfairly mainly available to the rich. It is also one of the reason why US companies pay very low dividends preferring capital gains.(not the same here because we have a different tax treatment of dividends).
        The choice to tax capital gains at a lower rate has been made by governments so as to encourage hard earned savings to take some risk, hopefully leading to more honest employment.

      • One of the scams being perpetrated in the US is to reduce corporate taxes to almost nothing, a feat which has almost been accomplished.

        Corporations are thus able to retain almost all their earnings, corporate income taxes having been reduced to almost nothing, with those retained earnings enhancing the value of the corporation.

        When the corporation is finally sold (or shares or portions of the corporation), the income is taxed as capital gains instead of regular income.

        The benefits of this arragnement are two-fold:

        1) Capital gains are taxed at a much lower rate than regular income

        2) Taxes are not due until the corporation is sold, so the tax bill is postponed and reduced by the time value of money effect.

      • It is quite true that companies are sharing less of the tax burden in the US but the risk is that those companies pull up stumps and move to a country with less company tax. Individuals have less ability to move. The important thing is that the tax base is fairly distributed amongst the population according to what your elected representative’s think is fair. Currently in the US it is probably not fair and gets quite regressive over 150K.
        Australia has a problem with Singapore. They set their tax rate lower than ours purposely to attract business that would otherwise be in our jurisdiction. However this does put competitive pressure on our tax office to not overtax profitable parts of the economy.

  9. Another great read. Now this is the stuff I like to see at MB rather than regurgitation of dubious spruik based auction stats. Deep analysis of those stats vs reality, yes, but not just “hey, look, improving dubious stats.” Again, great piece.

  10. bolstroodMEMBER

    As US Senator Gaylord Nelson reminds us ” The economy is a wholly owned Subsidiary of the Environment not the other way round”.
    The Global Footprint Network take “5400 data points for each country ,each year, derived from internationally recognised sources to determine the area required to produce the biological resources a country uses and to absorb it’s wastes ,and to compare this to the area available.”
    The answer on a global scale in 2009, we needed 140% of the available land, or 1.4 planets.
    In 1986 we broke even, ever since we have been living on our “environmental Capital”
    Given population projections of 9 billion people by 2050 we will need more planets than we have
    The info above is from Paul Gildings 2011 book “The Great Disruption” a very good read.

  11. I’m sorry but this article makes very little sense. In a society that has increasing productivity driven by ever better technology, either the currency value must gain in buying power or the asset values must increase.
    You didn’t explore increasing currency buying power, and that situation did exist in the USA over a century ago.

    The issue is who should gain and who should lose, because every system has winners and losers. In a system where currency buying power increased, all wealth would be concentrated in the hands of older residents with little hope of the young gaining a foothold. Debt values would increase in worth, not decrease, which would be disastrous for business startups or anyone borrowing for asset purchases.

    No system is perfect, but our present system is a lot better than you suggest.

    • Peter, our system could be so much better with small changes at the margin. Ken Henry showed us the way. It was hardly a radical document, but it was a small step in the right direction. Sadly, even a tiny subset of this small step proved politically impossible.

      • Of course we can continue to make incremental changes. Lower growth however is still the same thing, but just less of it.

        As Australians we have seen a growth in the purchasing power of our dollar over more than a decade, but that won’t continue, whilst US citizens have seen a decline in the purchasing power of their dollar at the same time as their real incomes have declined.

        If people are complaining about their growing relative affluence and the materialistic attitudes it has brought, just watch as they complain even more loudly about their declining relative affluence over the next decade.

        We can but take the good with the bad, because complaining about the good and then complaining about the bad seems to have little purpose.

  12. Yeah its a bloody conudrum, i detest the materialistic society, but enjoy the comforts of western civilisation.
    Do I want to be a noble savage and live in harmony with nature or open my fridge door and grab a cold beer.
    I agree with Pete, no system is perfect but I would rather be living now than in 50 years time or 100 years ago and I am so bloody lucky to be living in the land of Oz.

    • I would rather be living now than in 50 years time or 100 years ago

      Actually, I think Australia was at its best in the mid to late 90s. i.e. before the worst excesses of the property boom, the credit boom and the mining boom. We still had a reasonably diverse economy, commodity prices were in the toilet, we had five million less people clogging our cities and roads, and as far as I can recall we weren’t in a deep recession.

      Cue MineBots to tell us we can never go back to the 1990s, and need higher commodity prices to sustain our current standards of living.

      • Yeah you are right, i managed to skirt the recession that we had to have by having a good job, real estate was still affordable and my wife was able to stay at home whilst I way able to pay off the mortgage.

      • The recession-we-had-to-have was well and truly over by 1994. Unemployment peaked in 1993 and was falling sharply by the mid 1990s and continued to fall to about 6% by the end of the decade.

        All this happened while commodity prices were severely depressed.

      • +1 The last 20 yrs of unfettered growth is not just a warning shot across the bow, it took out jib.

        Australia perhaps still has a chance to be more than just another teaming polluted morass of concrete and competitive poverty, but that time is passing.

      • Maybe you are right, but that does sound like it comes from someone who lived it through the 90s, just like someone who lived it through the 50s would say that was the best time to be living in OZ, just as those who went through the roaring 20s would say. Perspective – we are shaped by our greatest experiences at the peak of our willingness to enjoy them.

      • I agree to some degree — the 90s was a good time for me — but by several objective measures, such as housing affordability, traffic congestion, economic diversity etc things are definitely worse now than they were in the 90s.

        I’m sure some Gen Y’s can give me plenty of reasons why the 2010’s are better — iPhones, Facebook, Twitter — but I’m not convinced these things have improved our quality of life.

    • Jack and PeterFraser, with you on this one.

      Sure there are flaws, inequities and stuff we may not like about the present system. This enormous global experiment continues to evolve, transition, rebirth and find fluidity. ‘Growth’ is will continue, it is the way of the world.

      A diamond with a flaw is worth more than a pebble without imperfections ~ Chinese Proverb

      • “This enormous global experiment continues to evolve, transition, rebirth and find fluidity”

        I am just worried about who is setting the experiment paramenters and what is the aim of the experiment. I also think that with TBTF it takes some of the glorius failure out of the equation.

      • Experiment parameters themselves in state of change, the finance organism mutates again, absence of ‘glorious failure’ not guaranteed!

  13. If there was ever a picture that captured the god of endless growth…

    The gap between the answer and mechanism to achieve it seems as wide and cavernous as ever. Mav’s description of humanity holding the growth tiger by the tail is a about bang on – how on earth do we ever let go.

  14. In terms of perception of Australia’s living standard, my favorite closing lines come from “a day in the life of Ivan Denisovitch” where the guy who has just finished a back-breaking day moving concrete has managed to smuggle some extra bread and isn’t freezing to death in the cells” he says – “all in all, it’s been a really good day”…
    It’s all comparative.
    You will never manage to control growth until you control population, but we’re driven by evolution’s selfish agenda – comfort for us and our immediate family but b@@@@r the rest of ’em. That’s why the one party state doesn’t work, and why those big new SUV’s that have never seen the bush keep rolling past. We will grow until we choke on it.

    • rob barratt says:

      …we’re driven by evolution’s selfish agenda – comfort for us and our immediate family but b@@@@r the rest of ‘em.

      I think you’re trapped in an ideology that dominated evolutionary biology and psychology from the 1970s to the 1990s. But it’s now rapidly becoming obsolete, despite the protestations of the selfish gene true believers.

      For a more up-to-date take on the conditions in which humans are believed to have evolved, you might try this:

      “The Natural History of Human Food Sharing and Cooperation: A Review and a New Multi-Individual Approach to the Negotiation of Norms”
      http://www.anth.ucsb.edu/faculty/gurven/papers/kaplangurven.pdf

      • A review of small foraging societies and adapting strategies that worked for isolated communities leads to:
        “why we consider it necessary to re-think existing approaches to food sharing”

        Tell that to the multi-nationals currently buying large areas of agricultural land in Africa. You’re several wars away from your dream.

      • The reasons for studying the natural history of human food sharing, as the authors point out, are two-fold, and about as far from the “evolution’s selfish agenda” dogma that you are proselytizing as one could possibly get:

        First, inter-familial food sharing is pervasive among hunter-gatherers and many forager-horticulturalists; they are often referred to as egalitarian societies. Second, hominids lived as hunter-gatherers for the vast majority of their evolutionary history (over 2 million years). Agriculture originated only about 10,000 years ago and has been practiced by the majority of the world’s population for only two or three millennia. Since most hunter-gatherers share food on a daily basis, studies of food transfers among foragers may provide important insights into the evolutionary basis of human food sharing and more generally, about the origins of human hyper-sociality.

      • As a said before, the world cannot go backward, except as the result of a global catastrophe. To give you two examples of what can cause it:
        You won’t be able to stop agribusiness moving to plunder Africa’s food-growing potential.

        You won’t be able to stop India diverting more and more water for it’s own use from rivers that thirsty Pakistan is downstream of.

        And that’s just two out of many food & water competitions. Once you start looking at the competition for energy resources, you’ll really get a feel for the unstoppable momentum of population-induced instability

        Wonderful glowing pink ideas coming from an ivory tower in deepest academia will have no effect whatsoever on where we’re currently headed. No opinion on how good or bad that is, just facts.

      • @ rob barratt

        There is certainly no shortage of prominent thinkers and historical figures, from both the right and left extremes of the political spectrum, who share your and 3d1k’s celebration of violence. Perhaps the most notorious and concise summation of your ideology was delivered by Stalin when, responding to the Pope’s condemnation of his mass murders, he quipped: “The pope? How many troops does the pope have?”

        But nevertheless, yours is an ideology based upon a half-truth, a distortion. Perhaps no one has ever put it more beautifully than Jonathan Schell, writing in The Unconquerable World:

        The power that flows upward from the consent, support, and nonviolent activity of the people is not the same as the power that flows downward from the state by virtue of its command of the instruments of force, and yet the two kinds of power contend in the same world for the upper hand, and the seemingly weaker one can, it turns out, defeat the semmingly stronger, as the dissolution of the British Raj and the Soviet Union showed. Therefore, although it may lead to paradox and linguistic tangles to speak of martyrs as being more “powerful” than the authorities who put them to death, the exercise is inescapable. For it is indeed a frequent mistake of the powers that be to imagine that they can accomplish or prevent by force what a Luther, a Gandhi, a Martin Luther King, or a Havel can inspire by example. The propsperous and mighty of our day still live at a dizzying height above the wretched of the earth, yet the latter have made their will felt in ways that have already changed hisory, and can change it more.

  15. I Don’t Know why we enrich Self-help gurus.

    I do know, a world centred on Self needs tearing down, not building up.

    I Don’t Know how self-help “experts” get it so wrong.

    I do know, what a selfish world needs most is Self Un-development.

  16. In our system, the best consumers are the best citizens.- citizenship is consumption and consumption is citizenship.

    I am afraid we are heading for the brave new world

    “Huxley’s vision of a shallow populace easily distracted by consumerism, pleasure seeking, cultural trivialities, and a never ending ability to be distracted by meaningless minutia”

  17. In a petri dish inoculated with yeast you will find that some strains grow faster than others.

    Eventually, the fast growing strains of yeast tend to overwhelm and destroy the slower growers. Of course, the yeast then consumes all the resources in the petri dish and dies out.

    The current residents of Australia are fast growing strains of humans that displaced the previous slow growing indigenous strains. The sad reality is that if we attempted to create a sustainable system here it would only be a matter of time until we were eventually conquered and displaced. History is pretty clear on this matter.

    • Yes Cyrusp, the word you are looking for is evolution. It takes no prisoners. If we get a cut it will heal because that is a property of a successfully evolved organism. How long that organism remains successful for is another matter, it’s demise explainable through exactly the same principals, the major one being – compete successfully or else. The Japanese say “Business is war”. They’re right unfortunately. Growth is the only option if we have been unable to rise above our evolutionary limitations. If we want to do that, we have to make some hard decisions about immigration and other issues that we currently perceive as our rights as opposed to our obligations. Not only that but we would have to be able to defend the resulting ‘stable’ state against the expansion of others.
      Too hard.

      • rob barratt said:

        How long that organism remains successful for is another matter, it’s demise explainable through exactly the same principals, the major one being – compete successfully or else.

        Channelling just a tad of Herbert Spencer and William Graham Sumner, are we?

      • Careful with the sarcasm ladies. I have pointed out the facts, not what I feel about racial, age, or intellectual prejudice, let alone Social Darwinism. If I’m prejudiced in one direction, it would be culturally, with politcal correctness and pseudoscience being near the top of the list.

      • rob barratt says:

        I have pointed out the facts…

        Undoubtedly, in your own mind, you are absolutely sure of that. But we have to question just what it is you consider to be “facts.” Or as Eric Hoffer put it:

        The facts on which the true believer bases his conclusions must not be derived from his experience or observation but from holy writ….

        We can be absolutely certain only about things we do not understand….

        All questions have already been answered, all decisions made, all eventualities foreseen. The true believer is without wonder and hesitation.

        ERIC HOFFER, The True Believer

      • The sound of one hand clapping…. The known, the unknown and the unknowable…

        Just read the headlines. Hoffer had no difficulty supporting the Vietnam war. I wonder what you would have said if he came out wiht that on this BB.

        “Some, for renown, on scraps of learning dote, and think they grow immortal as they quote”

      • rob barratt said:

        Hoffer had no difficulty supporting the Vietnam war.

        Again, this is the sort of “fact” that is the stock in trade of true believer, in that it is a distorition or half-truth. Hoffer’s positon on Vietnam was much more nuanced, much more ambiguous:

        During the Vietnam War, despite his disgust for the anti-war movement and acceptance of the notion that the war was somehow necessary to prevent a third world war, Hoffer remained skeptical concerning American interventionism, specifically the intelligence with which the war was being conducted in Southeast Asia. After the United States became involved in the war, Hoffer wished to avoid defeat in Vietnam because of his fear that such a defeat would transform American society for ill, opening the door to those who would preach a “stab in the back legend” and allow for the rise of an American version of Hitler.[21]

        In The Temper of Our Time (1967), Hoffer implies that the United States as a rule should avoid interventions in the first place, writing that “the better part of statesmanship might be to know clearly and precisely what not to do, and leave action to the improvisation of chance.” In fact, Hoffer indicates that “it might be wise to wait for enemies to defeat themselves,” as they might fall upon each other with the United States out of the picture.[22]
        http://en.wikipedia.org/wiki/Eric_Hoffer

      • And I presume it is on those grounds that you would have rushed to his defence on this BB. Put the book down and start reading the daily news. That’s a far surer guide to what will happen.

  18. This argument is completely flawed because it criticises growth due to its reliance on debt and consumption without mentioning fractional reserve lending and fiat currency.

    Economic growth often means better efficiency, using resources and energy more wisely and preserving environmental resources for their most valuable and sustainable purposes.

    With governments spending nearly half of every dollar earned, and with central banks accommodating the explosion in credit and unbacked ponzi money, we know where the finger should be pointed.

      • GunnamattaMEMBER

        globally agreed and exchangeable social environmental and justice credits, which in the interests of procedural fairness will be allocated according to a framework incorporating genealogically identified ‘good’ retrospective for 9 generations…….

      • Let me preclude some of our “right” minded commentators from obscurantism by saying:

        Oh dear, did you include “social”, “environmental” and “fairness” in one sentence? You must be a communist!

      • GunnamattaMEMBER

        Well identified Sir!

        and they may well be 100% right. For while I have seen and know well first hand the shortcomings of communism as an actual modus operandi for any society (and I have lived in 2 where it was ostensibly the ruling system) and would not actually recommend it, I tend to the view that as method to identify the shortcoming of any given society it actually has a fair bit to recommend it.

        But my issue is essentially this.

        If we assume that we dont want social, environmental and justice in our address in society then why dont we just tell everyone that life is a free for all in a sty without rules ….

        …….and get on with open extortion, theft, violence and traditional forms of primitive society rent seeking, coupled with a laissez faire approach to addressing the ill infirm etc (which our right minded mates would presumably tell us is more efficient anyway)

      • @ Gunnamatta,

        If you’re interested in a Marxist* take on the causes of consumerism, you might enjoy the Canadian film maker Scott Noble’s interview on V-Radio. He breaks ranks with the British film maker Adam Curtis as to the causes of consumerism:

        V-RADIO: Are you familiar with the BBC documentary “The Century of Self”? Did it influence your making of Psywar?

        Mr. Noble: It did, but not in the manner you might expect. Curtis is an extremely talented filmmaker with an immense repository of archival footage at his disposal (some of which I utilized in Psywar), and he puts out a great product. But I also find that he tends to exaggerate the importance of particular individuals, groups and fanciful ideas in lieu of basic class analysis; he also appears to self-censor, often at critical junctures. I don’t recall seeing the slightest hint of skepticism about the official story of 911 in “The Power of Nightmares”.

        There was a great review of The Century of the Self” published by Media Lens. In it, the author quotes a passage from the film:

        “Politicians and planners came to believe that Freud was right to suggest that hidden deep within all human beings were dangerous and irrational desires and fears. They were convinced that it was the unleashing of these instincts that had lead to the barbarism of Nazi Germany. To stop it ever happening again, they set out to find ways to control the hidden enemy within the human mind.” (The Century of the Self – The Engineering of Consent, BBC2, March 24, 2002)

        The critic goes on to state:

        “As you’ll know, if you’ve read Elizabeth Fones-Wolf’s study of the period, Alex Carey’s work, and countless books by Edward Herman, Noam Chomsky, and many others, this could not be further from the truth. Post-1945, as now, the real fear of politicians and planners was the existence of dangerous +rational+ desires and fears – popular desires for equity, justice and functioning democracy; popular fears that unbridled capitalism and militarism would once again lead to horrors on the scale of the two world wars. Freud’s theories were incidental – useful in refining traditional methods of popular control perhaps, but a sideshow.”

        In Curtis’ film, Bernays is presented more as a cause than effect. In reality he was joined by all sorts of other like-minded mind managers from the time period: scientists like John B. Watson, the founder of behaviorism, for example, and Ivy Lee, the unsung hero of embedded journalism, crisis management and the press release. Public relations evolved as a means of rescuing corporations from the wrath of public opinion, most notably in response to events like the Ludlow massacre.

        The revolution in American advertising was brought about not by a single visionary but by a crisis in capitalism, namely overproduction, which mandated new and innovative ways of marketing products. There were alternatives. Raising wages and reducing working hours, for example, but corporations were and are mandated by law to maximize profits on behalf of their shareholders.

        The consumer society is a natural outgrowth of capitalism, not Freud. Endless growth means endless mountains of junk. To sell it, you have convince people that buying objects leads to happiness.

        http://v-radioblog.blogspot.mx/2010/09/v-radio-interview-with-scott-noble.html

        * I’m not sure if he’s a Marxist or an Anarchist, but either way I very much respect his analysis.

      • I am curious. Do you speak from personal experience? 🙂

        Before you became a MineBot, were you a hippie in your previous life? I ask because you have said you are well travelled, but seem to visit the oddest of places.. Chile, Mexico, Liberia et al

      • He’ll have to learn Welsh first:
        http://www.andesceltig.com/eng/welsh.patagonia.today.html

        The real opportunity was missed before Robert FitzRoy arrived in Patagonia in 1826 to map the islands around Cape Horn. Things started to go seriously wrong for the local Aboriginal indian population from that point on, what with all that technology, “civilization” and missionaries arriving….

      • GunnamattaMEMBER

        Hey! That would be just down the road from the social justice and equity awareness re-education camp for reforming minebots (on the global minebot register).

        That is in Southern Peru actually, just over the border from Escondida though, and home to some mighty fine mineral deposits in its own right – you would love it there!

        I cant say I have ever seen it up close, but I have flown over it on my way to vineyards in Chile – and it certainly looked good.

      • What should money be backed with?

        A publicly visible “Honour” rating. Automatically derived directly from the greater of every Personal Central Bank owner’s respective debit/credit balances.

  19. bolstroodMEMBER

    “What should money be backed with?”

    One hour of a workers time. (pay rate adjusted for occupation)

    time is a world wide constant