Amongst the majority of Americans, there is little doubt that we live in troubled times and the state of the economy is a large part of our trouble. Rising housing and consumer prices, stagnant wages, significant underemployment and ballooning wage and wealth inequality are all symptoms of an economy in disequilibrium.
The solutions peddled by the political right are the same tax cuts and deregulation which landed us in this situation (see Part 4); the left, lacking a coherent economic narrative, offers laundry lists of disjointed economic reforms (see here and here). This at a time when the economy is so ill that alleviating the symptoms is no more than a temporary palliative, it is time to go deeper and treat the underlying causes of the disease.
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[This the final part of a series describing an alternative way to look at the economy. It follows directly from Part 4:
Econology Part 1a: It's not the economy, Stupid; it's economics
Econology Part 1b: The depth and breadth of economies
Econology Part 2: The ecology of economies
Econology Part 3: Eleven economics lessons from ecosystems
Econology Part 4: Emergent flaws of Capitalism (1, 2)]
This is the last in a series of essays offering an alternative narrative of economics. In the introduction to this series (Part 1), I discuss how the failure of economics to advance a theory of economics that corresponds to reality has been a major disservice to modern civilization. Part 2 delineated how the ecological water cycle substantially parallels capital circulation in economies. Part 3 listed several lessons of economics that can be extrapolated from the water cycle. Part 4 equated the transition from a functional post-war economy (Figure 1) to today’s distressed economy where many American workers are essentially subsisting (Figure 2) to land desertification where poor agricultural practices reduce once productive land to unproductive desert. Should this economic trend continue, workers will not have the capital resources to raise the next generations of healthy, capable, educated ‘workers’. Losing generations of workers would change the economy on a scale comparable to the Industrial Revolution, in reverse. Here, to conclude this series, I will present how the economic lessons of the ecological water cycle might be applied to diagnose and resolve some of the persistent short and long term problems in the economy.
The Great Recession and its recovery are atypical in many ways. Despite ‘strong economic numbers’, many workers are still un- or under- employed and the wealth gains of the recovery have been concentrated in the top income bracket. Being as this is the product of a decades long closed door effort to systematically destroy or marginalize the institutions and procedures that protect workers from capital predation, reform efforts should be open to scrutiny so workers can evaluate their goals and efficacy. The first step is to break down the problem into smaller digestible segments: Problems with the economy can be broken down into three levels: first is the immediate needs of workers and opportunities for them to earn a living wage (on the time scale of months). Second is the roughly century long cycle of net growth followed by a global economic downturn; witness the Great Depression and Great Recession. And the third is an economy that is sustainable into the unforeseeable future (centuries and beyond).
[Note: Although the issue of standard recessions is not specifically addressed (primarily because the genesis of these essays stemmed from the unusual trends of the economy), the ideas presented here would be applicable to smaller economic downturns.]
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I. Immediate needs of workers
In any economy, when working people must choose between the necessities of life, ‘food or medication?’ or ‘rent or transportation?’, it is not meeting the needs of its workers. The only possible cause is the capital in the system is insufficient to cover the needs of workers (compare the blue arrows in Figures 1 and 2).
The desertification equivalent would be a parcel of abandoned unproductive agricultural land whose productivity was destroyed by poor land management (Figure 3). Both ecosystem and economic decline were set in motion by the decisions of people in positions of power (predators). The first step to restore the highly productive pre-agricultural ecosystem (Figure 4) would be to promote the growth of native vegetation by mimicking the pre-agricultural climate conditions… so sow the seeds of native plants and water appropriately.
With an ample supply of workers, economies only need increase the amount of circulating productive capital. This would increase worker access to capital and increase both size and productivity of the overall economy (see Part 3 #3). Any single or combination of policies that transfers capital to primary producers would work. These include increasing the wages of low income workers, increasing competition for labor (thus increases wages) by increasing government funded job opportunities (civil service, public sector, infrastructure jobs), and increasing social welfare benefits. The economy would also benefit from the loss of subpar capitalists whose profiteering hinges on an abundance of low wage workers (better known as prey).
II. Centural cycles of global economic downturns
Once the livelihoods of workers is stabilized, economic reform efforts should focus on preventing a future recurrence of a global recession (if two make a pattern -Great Depression & Great Recession-, a third will surely follow). In standard recessions, the decline in productivity is associated with a drop in overall income which reduces the flow of capital in the economy (Part 3 #4). This is followed by a recovery where wages increase in sync with productivity. But the recovery from the Great Recession is unusual in that productivity has improved but wages have not gone up. Improved production without wage growth strongly suggests capital is being deliberately removed from the economy; the capital produced by American workers for their use and consumption is being syphoned away.
Capitalists were only able to execute this economic agenda (detailed in Part 4) by ‘capitalizing’ the three legs of the economy, the production pyramid (Figures 1L and 2L), public reservoir (government) (Figures 1I and 2I) and the financial system (Figures 1G and 2G). The manifold advantages of this are easier to see in a natural terrestrial ecosystem/water cycle (Figures 3 & 4), where these ‘legs’ are clearly the sites where capital aggregates and concentrates. Agriculture desertifies ecosystems by harvesting biomass (remove capital stored in biomass) (Figures 3L, 4L) and depleting natural reservoirs (Figures 3I, 4I) by draining them to increase productive acreage or tapping them to irrigate crops. With low reserves of ground level water, transpired/evaporated atmospheric water vapor never reaches the concentrations needed to form rain clouds (Figure 3G). The little water capital the ecosystem manages to retain (Figure 3E) is eventually lost through export by wind (Figure 3K) to rain on other biomes.
Capitalists use similar strategies to desertification economies. Early in the process, they invest generously in political campaigns to subsume politicians into the production pyramid as subordinates (Figures 5 and 2I). In return, essentially all enacted policy benefits the bottom line of capitalists (see here and here). Capitalism itself confers possession of worker produced capital to capitalist owners and policy reforms which relax safety and wage regulations empowers them to extract ever more worker produced capital (Figure 2L and Part 4). As a result, most of the increased production of the recent recovery has been absorbed by capitalist owners. And the tradition of private (capital) ownership of financial institutions (Figure 2G) provides an easy path for capitalists to siphon the profits of economic predation out of the economy (Figure 2K). To forestall another global recession, capitalist control of the three legs of the economy must be redressed:
(A) Reduce the dominance of capitalist enterprises in the production pyramid (Figures 1L, 2L). [Because much of this melds with economic sustainability, this discussed will continue below. Suffice it to say the inherent predatory nature of capitalists can be checked by allowing workers to compete with capitalist owners (i) over the distribution of worker produced capital through labor unions; (ii) for labor through alternate business models - workers can choose to work for a capitalist enterprise or join a worker cooperative; (iii) for consumers through workers starting their own enterprises and (iv) for the (executive level) jobs held by capitalists.].
(B) De-capitalizing government operations by limiting private election funding. [The larger purpose of government is essentially the same as economies (as defined in Part 1b), to safeguard the present and future existence of a nation for the benefit of its people. On the economic front, governments are stewards of national capital; they allocate national resources to best support the wellbeing of all residents - inject capital into circulation in times of economic downturn and cache undeveloped resources to support the economic expansion of future generations. When private campaign funding is allowed to ‘capitalize’ elections and politics, the priority of public policy is diverted from the wellbeing of all people to the desires of capitalists. This is a betrayal of government and citizenry as well as future generations.]
(C) Reform and reorganize the financial sector to serve the interests of the economy and not the persons who control capital. [Although essentially all financial institutions are owned and operated by private capital, there is good cause to reconsider this long held tradition. It comes down to the fact that currency has no inherent value but rather, symbolizes value. Because banks define the (symbolic) value of money, their actions affect the entire economy. When a bank issues a loan, they define the value of a worker’s labor - a car might be worth one thousand assembly line hours or three hundred doctor hours. Banks decide what businesses/business models might come to fruition and where/what real estate gets developed. Through selective lending practices, banks can increase or decrease the value of the labor of certain groups of workers. By controlling credit, banks are literally economic landscapers; they hold sway over who, what, where and how people live, travel and work.
In addition to the undue influence of banks over the economy, the symbolic nature of currency makes it easy to encrypt. New (risky) financial instruments can be thought of as a series of (hidden) money transfers (like those described here), each linked to a hefty (and profitable) transaction fee. (Think of how language is symbolic - computer language - and how information can be hidden by translating the same information in series to other languages or converting it into code and hiding it further through layers of code keys.) This is how ‘too big to fail’ came about. Economic cryptographers secrete and shield their capital manipulation through complex coded transactions. Regulators do not have decoders to safely deconstruct these financial instruments. (Bankers are propping up the economy with enormous poorly designed financial houses of cards. Regulators are denied the resources to assemble blueprints of these structures so they can’t deconstruct these structures without crashing the entire economy.)
American workers, indeed workers everywhere, need to question the propriety, ethics and wisdom of permitting profit driven capitalists such dominion over currency and the overall economy.]
Reducing the overall influence of capitalists over the three legs of the economy would severely hamper their ability to concentrate sufficient power to trigger another global recession.
[It should to be clear that, although these essays have primarily scapegoated capitalism (as the dominant economic system in the U.S., its excesses account for most of the economic woes in this economy), economic disequilibrium is not exclusive to capitalism. A number of economic systems including state socialism (purportedly, socialist North Korea), oligarchism and facism all engender the concentration of power associated with extreme predatory economics. The common flaw of these -isms is the concentration power. As the aphorism predicts, ‘Power tends to corrupt, and absolute power corrupts absolutely.’ The powerful and greedy will always take and make every opportunity to sequester capital as personal wealth.]
[The next part is based on the extrapolation of the ecohydrological cycle onto the economic cycle. It is presented as a thought experiment of how a future economy might come about.]
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III. Towards a sustainable economy
The issue of a sustainable economy takes up an ongoing meme in these essays, the precedence of economics. Desertification is an effective metaphor of capitalism (see Part 4 and above). But capitalism is also literally desertifying the global ecosystem to ‘grow’ economies and further enrich the wealthy. The fossil fuel industry is a prime example:
Extraction and transport of fossil fuels damages environments:
-mountaintop removal coal mining devastates entire mountain ecosystems
-deep water oil drilling is unsafe and places aquatic ecosystems at risk
-hydraulic fracturing contaminates water supplies and promotes earthquakes
-pipelines leak, trains derail, shipping tankers collide, trucks have accidents
Production and consumption of petroleum products damages environments:
-burning fossil fuels increases atmospheric carbon dioxide setting off the greenhouse effect
-chemical industry fabricates novel synthetic chemicals from petrochemicals that damage environments through multiple pathways - toxic to life forms (human and wildlife); pollutes air, water and soil; plastics do not breakdown which increases need for more dump sites
And this is an abbreviated list of the environmental impact of the fossil fuel industry.
The problem is that consumers who purchase and use fossil fuel products often don’t realize their true costs. The economic decision to exploit fossil fuels (and other natural resources) is made by capitalists who realize the immediate profits of exploitation. Consumers don’t see the links between the infinite aisles of subsidized cheap processed food to chemical dependent conventional monoculture GMO agriculture to global warming to the loss of insect pollinators to water depletion/pollution and loss of rainforest ecosystems. Consumers don’t understand the enormous selection of inexpensive fashion comes at the expense of clean air and rainforests.
Capitalists are actively diminishing the human and non-human carrying capacity of the planet with the naively implicit consent of workers and consumers. They do this by quietly and generously ‘externalizing’ the environmental costs of profitable economic activity. When economies inevitably exceed the biocapacity of the planet, the survival of the humanity and perhaps even the human species will be at risk (Figure 6C). There are already numerous red flags highlighting this trend including California’s multi-year drought. And on a national level, China is systematically orchestrating the economic destruction of its environment. In their single minded pursuit of economic growth, the Chinese Communist Party is sacrificing the air, soil, water, forests, wildlife, farmland… in short, every natural resource necessary to sustain life and economy (this is a must read article about the environmental impact of China’s explosive economic growth). Private owners of capital assume their right to profit from their privately held capital supersedes the future lives of everyone else (see here, here and here).
In the absence of proven solutions, the best we can do is to apply the principles of the quintessential of sustainable economies, ecosystems. Though not a unifying theory of economics (its predictions and assumptions have not been substantiated by rigorous testing), the ecosystem based economic cycle can be a useful model of a sustainable economy to help guide future economic reforms.
On the basis of the expanded eco-environment cycle in Figure 6, a sustainable economy has three essential features:
(A) Sustainable economies are conservative in their consumption of environmental resources. This would require shifting away from a materials economy dependent on the production and market exchange of disposable consumer goods to a service economy driven by the exchange of services (repair/refurbish/trade/exchange instead of replace) and experiences. Materials economies are unsustainable simply because the natural resources that feed the supply chain are finite (see green and tan portions of pyramids in Figure 6).
This would also reduce the influence of big money because capital dependent mass production (through ownership of means of production) is how capitalists concentrate the capital produced by their workers. A service economy runs on the skills and imagination of providers more than capital and those can’t be owned by capitalists.
(B) Sustainable economies conserve ecological/environmental services meaning the environmental impact of economic activity cannot be externalized. Extraction/agricultural practices must be environmentally neutral, else the environment must be restored to its original condition post extraction. Manufacturing must utilize closed loop production-consumption streams where discarded consumer waste becomes the primary raw material to produce new marketable consumer goods (Figure 7). Not only would this preserve natural resources (Figure 6, blue arrows) and their recycling services (Figure 6, black arrows), the improvement and expansion of green space would do much to nurture the mental, cognitive and physical health of all people.
(C) Because environments are dynamic, sustainable economies have feedback mechanisms to adapt to and maximize returns within the constantly changing conditions of the environment. In ecosystems, evolution by natural selection fills this role. Biological diversity generated through genetic mechanisms (results in speciation over time) is tested for adaptive value by natural selection. The competition to pass traits onto the next generation, or natural selection, is how ecosystems maximize biological productivity within the constraints of the carrying capacity of the environment. The natural selection underlying ecological succession both constrains ecosystems to operate within environmental resource limits and grants the biological flexibility to generate the complexity that makes food web pyramids highly productivity, resilient and sustainable.
And it just so happens that market economies also have the tools to self-regulate their activity. Business adaptation (adding services for example) and research & development (new technologies, new products) generate variety; market competition can be very effective at facilitating business succession. The problem is capitalist economies often resist competition as competition reduces profits. This is why capitalists take every opportunity to invest in politics; politicians return policies which minimize competition.
One of the most powerful legislative/policy/public relations weapons in the capitalist arsenal is information control. They obtain political power by skewing the prevailing narrative (safety regulations restrict the ‘freedom’ of corporations; taxing the wealthy dis-incentivizes ‘job creation’). Political investment is returned in the form of lax regulatory policy that favors corporate interests. For example, after the West Fertilizer Company explosion in Texas, rule changes allowed corporations to not disclose chemical storage lists; despite reports of negative health effects of fracking (see here and here), government regulators cannot collate complete formulations of fracking fluid.
Furthermore, dis-/mis-information negatively impacts market competition. Without knowing the labor practices of manufacturers, consumers can’t choose to support ethical employers. Without knowing the extraction methods and material sources of manufacturers, consumers can’t choose to support responsible resource management. Without knowing the chemical and GMO content of their food choices, consumers can’t make informed decisions about personal chemical exposure/ingestion. Without knowing how and what subsidies are awarded which business concerns, consumers can’t make informed purchases. In short, an economic policy which tolerates a secretive business culture makes for bad economics. Information control allows unethical businesses to skew market competition and potentially damage the wellbeing of workers and the environment.
The best counterweight to information manipulation is transparency… which means one of the most important economic reforms is to protect transparency of information; at minimum, establish universal whistleblower protection. Perfect information (or as close as reasonable) democratizes markets (including government) so that consumption signals which businesses, ideas and technologies best meets the needs and desires of consumers. This effectively gives every patron of every institution some regulatory authority over that institution; a self-regulating feedback mechanism where the market competition drives succession in the business environment (this is an example of the power of consumer as regulator - mediated through government). When capitalism guarantees the right to profit from private property, economic evolution by free market competition can counter with ‘not at our expense’. In the end, the right to determine the future should be consciously exercised by everyone affected, not by the rich and powerful.
The versatility of this approach allows societies to evolve economies that meets the needs of its people within the constraints of their environment according to their values and cultural norms. Some of the inevitable policy adaptions include new metrics of productivity, essential needs, and environmental sustainability to allow consumers to evaluate corporate practices; reconsideration of the social benefits of infinite corporations (legal protections skews market competition between capitalist corporations and other business models); rethinking of private ownership of banks/financial institutions to democratize credit; redefinition of wealth to differentiate between leisure time and accumulation of capital; possibly new ways to support research to socialize benefits of socially funded information gathering; and liberalize ownership of intellectual property to make it more open to market selection. (Current intellectual property rules limit competition by allowing capitalist owners to (i) squash competing technologies and (ii) restrict innovation by patent trolling.)
If markets and production were democratized (through market selection and liberal financing of business models) the evolution of the economy would entail a significant social revolution. In fact, the drop in demand for independent regulators would immediately decrease the size of government resulting in greater personal autonomy… perhaps to the degree of a libertarian society (much as that pains me to admit).
As an aside, one of the most destructive and environmentally damaging human pursuits is the production of military armaments and armed conflict. Most wars are armed competitions initiated to control economic or natural resources. Capitalists would prefer to form business relationships which allow them to profit by production (the predation model described in Part 2); think global trade pacts. However, they reserve the option of profit by nationalized armed robbery, better known as war; when an invading force essentially parasitizes the invaded nation. What capitalists forget in their pursuit of capital is that economies do not exist in isolation. Economic and environmental (pollution) exchange brings all economies of the world into a unified single unit (Figure 8). This means the danger of economic excesses, regardless of economic system, (see Parts 1-4) and their solutions (see above) apply on a global scale. Cultivating the wellbeing of workers worldwide for limited and selective predation makes for far better economics (more productive) than the parasitic economics of war. Sustainable economies have no incentives for warmongering.
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This ends my series of essays of a ‘big picture’ economic narrative. Thank you for reading.
Safeguard your foundations and they will nurture you in return.
I’d like to say a word of thanks to Richard Wolff for his program, Economic Update. Prior to spotting the similarity between ecological and economic cycles, I had only a cursory interest in economics. Professor Wolff’s explanations confirmed much of the understanding I garnered about economics from the water cycle and gave me the confidence to formulate this series. Any errors are mine alone.
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