"Budgetary Wishful Thinking" by Jeffrey Frankel Exit from comment view mode. Click to hide this space CAMBRIDGE – Why do many countries find it hard to control their budgets? Concern about budget deficits has become a burning political issue in the United States; helped to persuade the United Kingdom to enact stringent cuts, despite a weak economy; and is the proximate cause of the Greek sovereign-debt crisis, which has grown to engulf the entire eurozone. Indeed, among industrialized countries, hardly anyone is immune from fiscal woes. Clearly, part of the blame lies with voters who don’t want to hear that budget discipline means cutting programs that matter to them, and with politicians who tell voters only what they want to hear. Such forecasts underlie governments’ failure to take advantage of boom periods to strengthen their finances, including running budget surpluses. European countries behaved similarly, running up ever-higher debts. Other countries have also adopted fiscal rules, most of which fail.
Recovered Sustainable Means Bunkty to Me 1977 views this month; 1977 overall What? Don’t know what bunkty means? Now you know how I feel about the word “sustainable.” My paper towels separate into smaller segments than they once did. I think most would agree that the rapid depletion we currently witness in natural resources and services, climate stability, water availability, soil quality, and fisheries—to name a few—suggests that we do not live sustainably at present. Sustainability, in Numbers I have made the case in the past that growth—either in physical measures like population, energy use, etc., or in economic terms—cannot continue indefinitely in our finite world. If we think about the fact that growth must one day end, we realize that an ultimate steady state would tend to reduce income inequalities. Our dream is that the poor of the world can improve their standard of living toward first-world norms. You may object that Americans don’t eat five times more food than the average Earthling today. Why Now is Special
Misplaced faith It’s time to let austerity go out of style A poster promoting the virtues of austerity. But who really benefits? Photo: Flickr Creative Commons Austerity isn’t working. From the Bundesbank to 11 Downing Street, in Ireland, Spain, Italy, and Greece, expensively educated men in suits are telling the rest of us that we have been living large for too long. It is counter-intuitive but essential to remember that our current economic travails are caused by lack of demand, nothing else. Instead, austerity-inspired spending cuts ripple through the economy, further lowering demand, reducing any incentive for private firms to invest, trapping the economy indefinitely below its productive potential. Austerity has always been the ideology of creditors. No longer. The Achilles heel of capitalism, the opposite of every other economic system, is overproduction. But the ship still gets unloaded, the steel still gets made. The second world war proved him right. Here is the mechanism. Sound complicated?
Galactic-Scale Energy Since the beginning of the Industrial Revolution, we have seen an impressive and sustained growth in the scale of energy consumption by human civilization. Plotting data from the Energy Information Agency on U.S. energy use since 1650 ( 1635-1945 , 1949-2009 , including wood, biomass, fossil fuels, hydro, nuclear, etc.) shows a remarkably steady growth trajectory, characterized by an annual growth rate of 2.9% (see figure). It is important to understand the future trajectory of energy growth because governments and organizations everywhere make assumptions based on the expectation that the growth trend will continue as it has for centuries—and a look at the figure suggests that this is a perfectly reasonable assumption. (See this update for nuances.) Total U.S. Growth has become such a mainstay of our existence that we take its continuation as a given. This post provides a striking example of the impossibility of continued growth at current rates—even within familiar timescales.
The Economy of Gross National Happiness by Sabina Alkire Exit from comment view mode. Click to hide this space OXFORD – On April 2, the United Nations hosted a High-Level Meeting on Happiness and Well-Being in New York. The meeting was called to catalyze mounting efforts to create a new economic paradigm grounded in sustainability and dedicated to human well-being, building on Bhutan’s innovative approach, which aims not for GDP growth, but for gains in gross national happiness (GNH). Indeed, Bhutan’s example gives the international community a unique opportunity to reconsider the path of economics in order to facilitate human flourishing on a shared planet. First, the focus must be on the big picture. This in no way undercuts the priority that must always be given to eradicating poverty and destitution. The economist and philosopher Amartya Sen has long argued that markets, trade, and economic growth should be designed explicitly to advance human well-being. Above all, ordinary people must call for systemic change.
Growth thumbnail from NYT As a rejoinder to my piece a couple weeks ago (not really), the New York Times published an article on population growth, and why we need not worry. The problem—and solution—is all in our head. Clearly there is a misunderstanding, but I’ll side with the natural scientists, naturally. Continue reading Sometimes considered a taboo subject, the issue of population runs as an undercurrent in virtually all discussions of modern challenges. The subject is taboo for a few reasons. Recently, participating in a panel discussion in front of a room full of physics educators, I made the simple statement that “surplus energy grows babies.” So in the spirit of looking at the numbers, let’s explore in particular various connections between population and energy. Continue reading I’ll cheat on my bi-weekly posting plan and slip in this podcast conversation between Chris Martenson and myself, covering many of the topics I have written about in the last year. Continue reading What?
"A World of Convergence" by Kemal Derviş Exit from comment view mode. Click to hide this space WASHINGTON, DC – For almost two centuries, starting around 1800, the history of the global economy was broadly one of divergence in average incomes. In relative terms, rich countries got even richer. This “divergence” was very pronounced in colonial times. This has been a revolutionary change, but will this 20-year-old trend continue? Long-term projections based on short-term trends have often been mistaken. Later, in the 1980’s, Japan’s spectacular growth led some to predict that it would overtake the US, not only in per capita terms, but even in terms of some measures of “economic power.” These kinds of projections have often been based on simple extrapolations of exponential trends. Will the recent predictions of rapid ongoing global convergence similarly turn out to be wrong, or will most of the emerging countries sustain a large positive growth differential and get much closer to the advanced economies’ income levels?
Can Economic Growth Last? [slimstat f='count' w='ip' lf='resource contains can-economic'] views this month; [slimstat f='count' w='ip' lf='strtotime equals 2011-07-01 | interval equals -1'] overall As we saw in the previous post, the U.S. has expanded its use of energy at a typical rate of 2.9% per year since 1650. We learned that continuation of this energy growth rate in any form of technology leads to a thermal reckoning in just a few hundred years (not the tepid global warming, but boiling skin!). What does this say about the long-term prospects for economic growth, if anything? World economic growth for the previous century, expressed in constant 1990 dollars. The figure at left shows the rate of global economic growth over the last century, as reconstructed by J. The difference between economic and energy growth can be split into efficiency gains—we extract more activity per unit of energy—and “everything else.” Exponential vs. First, let’s address what I mean when I say growth. Potential Gains and Limits
Wendell E. Berry Lecture “Because a thing is going strong now, it need not go strong for ever,” [Margaret] said. “This craze for motion has only set in during the last hundred years. It may be followed by a civilization that won’t be a movement, because it will rest upon the earth. E. M. Forster, Howards End (1910)1 One night in the winter of 1907, at what we have always called “the home place” in Henry County, Kentucky, my father, then six years old, sat with his older brother and listened as their parents spoke of the uses they would have for the money from their 1906 tobacco crop. He came home that evening, as my father later would put it, “without a dime.” The economic hardship of my family and of many others, a century ago, was caused by a monopoly, the American Tobacco Company, which had eliminated all competitors and thus was able to reduce as it pleased the prices it paid to farmers. The boomer is motivated by greed, the desire for money, property, and therefore power. James B. James B.
Arithmetic, Population and Energy - 1 - a talk by Al Bartlett "Ideas over Interests" by Dani Rodrik Exit from comment view mode. Click to hide this space CAMBRIDGE – The most widely held theory of politics is also the simplest: the powerful get what they want. Financial regulation is driven by the interests of banks, health policy by the interests of insurance companies, and tax policy by the interests of the rich. Those who can influence government the most – through their control of resources, information, access, or sheer threat of violence – eventually get their way. It’s the same globally. It is a compelling narrative, one with which we can readily explain how politics so often generates perverse outcomes. Yet this explanation is far from complete, and often misleading. Consider a struggling firm that is trying to improve its competitive position. The mere fact that the firm’s owners are self-interested tells us little about which of these strategies will be followed. Similarly, imagine that you are a despotic ruler in a poor country. We could multiply such examples endlessly.