The economic system is at war with the environment

Facebooktwitterredditpinterestlinkedinmail

I am concerned that so few environmentalists understand the connection between the environment, resource depletion and the economy. 

The economy has a built-in growth imperative. The economy must either grow, or it collapses. Why does this happen? Because we allow the bulk of our money to be created by commercial banks as interest-bearing debt. (Even our own Reserve Bank has belatedly acknowledged this. In their article on money creation, they state, “The vast majority of money in circulation is created by commercial banks, through the process of bank lending”). 

Banks create the money to pay back the debt but they don’t create the interest. So when the debt is paid back with interest there is not enough money in the system to allow everyone to do this. Therefore someone must go into more debt. This has two effects: it widens the gap between rich and poor (net lenders and net borrowers) and it expands the total money supply. 

If you didn’t fully understand this first time, Bernard Lietaer spells out the story of the Eleventh Round here. An easy clear read.

And of course it means that banks have dangerous power over what is mined, grown or manufactured.

Nowadays with resource depletion of fossil fuels, it takes more energy to get energy. So we have progressively less net energy year on year available for the economy. Remember that economic growth and energy growth go hand in hand. There is a close correlation. So because we have less net energy, for the last few years there have been progressively lower rates of economic growth.

This in turn leads to desperation from right-wing politicians who want the economy to expand faster, no matter what the consequences. (And that is leading to far-right dictatorships becoming increasingly common.)

But can the global economic system known as capitalism be reformed?

Recently Ted Trainer published a 22p critique of the degrowth movement in which he argues that the answer is no. Capitalism can’t be reformed. It’s too hard.

This article changed my thinking. 

I know very few people like to explore the money supply part of the economic system, and that the very word “economics” tends to turn a great many people off. But academics here who are also environmentalists surely can understand this explanation. No equations are necessary, just the simple story of the Eleventh Round.

All this of course makes me very depressed. The actions of our change of government demonstrate this trend.

Leave a Reply

Your email address will not be published. Required fields are marked *