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GDP growth obsession-1

by on 04/08/2018

The economists obsession about GDP growth is not a misconception or ideological prejudice. The whole capitalistic system, to satisfy the demand for positive yield on capital, needs continuous economic growth. In a stagnant economy, will be no new additional add value, that is necessary to pay return on the loans in form of interest, or on invested equities in form of dividends, (or CEO wages). The whole capitalistic system cannot continue to exist on the long run, if no positive return is on the capital. This is why the existing capitalistic system must continue with economic growth, even if doing so, it will destroy the world’s ecological balance, and at the end cause the annihilation of human specie on planet Earth.

The world economy long time ago stopped to add new value to the standard of living in the developed countries. It rather productises more and more of the human activities, and releases the individuals from knowhow and capacity to create its own products and enjoyment. If few generations ago, kitchens at homes were facilities to produce food and social gathering spot, today they became design show off, while the food is processed and bought from the restaurants. By doing so the family dinner became part of the GDP. This social-economic change happened, without decision of any authority. An another example i would bring, is the more and more sophisticated private cars, that add very little comfort to the driver, while he has to drive for hours in traffic jams. The same can be said about most of the consumption items that gradually overtake our life. Sometime the takeover of the new technology comes like a storm with a new paradigm products, that appear from while to while on the market, like plastic materials, personal computers or smartphones. Are those deep changes in human acts and behaviour, unconsciously adapted by the people living in modern developed economies for the wellness and happiness of the people, or for achieving higher profits to the suppliers of these products, so they can satisfy the unrestrained urge of the capital co generate ever increasing yield?

The price to be paid in terms of global environment, to achieve this continuous economic growth, ignated an unsustainable processes of global ecological dis-balance, endangering the very existence of bio-systems. It seems, already we are in the stage, that these processes cannot be stopped, unless a system change will happen.

Observation brought me to categorize human beings to social cultural groups, that differ from each other according to their conscious awareness to the realities, they encounter in their daily life, or come to their awareness through the information media. I can in rough terms divide the people to three different groups with different personal methodologies they use to comprehend their worldview:

A. Those with concept of consciousness based on belief in fairy tales, originated in ancient texts like, the Bible, the Quran, etc.
B. Those whose consciousness is built on modern fairy tales, created by sophisticated tools of modern marketing, distributing rather disinformation than information, useful for a potential customer of a product. Those tools include not only the official marketing tools of advertisements, but every random information and communication object a normal human being encounters in every step in his life in modern society. It includes cultural products, like movies, tv serials, newspapers, books, shops, street signs, showcases, etc. Then falsified consumers evaluations, that always tend to be too much positive to be valid. But also our language penetrated with false icons, brands and other kind of junk information.
C. At the end are those, who make consciously special effort to avoid random information enforced on them, and rather are exposed to intentionally chosen information with definite purpose. Then they rationally, with self aware critical approach, judge, categorize and filter such an information, based on evidence and previous experiences.

There is no need to make intense surveys to know what kind of information, out of those three mentioned above, are most of the people exposed too. It is enough to compare the number of followers on the web and especially on YouTube kind of media, of the disinformation kind of information, compared to the followers of the third kind of information. While millions of people are following the first two kinds of disinformation, only very few follow the third kind of informative publications. This is the reason, why no data, evidence or any kind of rational argumentation is accepted by the masses, within the existing economic and political system.

Then it becomes relatively easy for people, who run the existing economic system, based as explained above, on the need for ever growing return on capital, to sustain this deception of most of the people, whom they draw to over consumption and illusive satisfaction of immediate desires and lust. On the other hand, the economic leaders, who market such a deceptive economic system, have to be well aware to the fact, that this system cannot continue forever, exactly as they knew before 2008, that this system of theft, that created systematic debts creation, without real economic foundation, cannot go on forever. Still they continued to play their game, personally very profitable for them, believing, that somehow-someone, will clean for them and after them the economic mess they create.

The contemporary capital driven economy, in its foundation, with the need of continuous blind economic growth, because of its cumulative tendency to accumulate waist, has to bring to collapse of global environment, and eventually of the human civilization as we know it.

It appears, the most important macroeconomic question on the global scale should be, to develop an economic model, that will be based on sustainable processes, securing balancing feedbacks to the whole global system. Even if the awareness to these problems and to their solutions exist, and sometimes even implemented, these solutions are always very partial, sporadic and particular, while the problems are at global scale, and its accumulation continuous. The tools used to solve these problems are always political, and within the existing capitalistic economic system. The latest example is European decision to abandon the usage of plastic bags. It is again a sporadic and particular solution to global system problem. (An exception of world wide cooperation on solving a global problem was the acceptance of restrictions on usage of ozone layer damaging gases as chlorofluorocarbons. Even here it seems there are leakages in the restrictions).

Why such an inaction of economic-political leadership on the global scale, when every reasonable minded person can easily understand, that any continuous process, if not disturbed by contra-act, has to create an unbalance, that at the end will create a bubble that has to blow up.

The answers lies in the existing political-economic system, that has no management tools to cope with those long term global problems. It seems a Global Environment Economic Management System (GEEMS), has to be created, to cope with the issue. To create such a system, first we have to ask the question, what are the core problems in the existing political-economic system, that seem to be in the root of the impotence of the existing authorities to act. There are several systemwise problems, that can’t be overcome in the existing global political system:

A. Fragmented sovereignty problem.

While the GEEM problems are global, its management is local, by sovereign nation or state focused. Political system based on competing nations, has no capacity to solve global problems that need global cooperation of all.

B. Term problem.

The GEEM problems are long term, while the existing democratic political decision making processes are short term, limited to time schedule of the next election.

C. Social change problem.

GEEM problems solution demands changes in socio-economic behaviour of every individual, be it in economically developed or developing nations. While in the economically developing nations, consumers based economy and society has to be abandoned, in developing societies birth control policies has to be adopted.

D. The hungry capital problem.

The economic system based on interest or other form of yield income, forces a need of continuous economic growth of the economy.

E. The monetary system problem.

The monetary system imposed by sovereign governments of the states, that is based on mixture of two. Money as byproduct of government deficit, and government securities, issued to cover government deficit, with byproduct of being a major tool to influence interest rates, with intention to secure economic stability, but also economic growth, that is the basis of economic stability. (Economic stability means full employment without inflation.)

F. Equality in income distribution problem.

Can’t be expected a policy of self- restrained economic growth, while in parts of the world, still big parts of the population struggle to satisfy their basic needs, as food, shelter, education and healthcare.

The existing economic model is based on faith, that market, an imaginary place, where competitive demanders and suppliers meet and negotiate the price, that will become the equilibrium price, that equalizes the production and consumption motivations and utilities. Yet this economic model does not takes in consideration, the global scale price to be paid, to let these individuals involved in exchange of products at agreed price. The individual utility from the usage of the product, expressed in form of product price, doesn’t take in account the price the global community pays, as byproduct of the act of production and exchange. This phenomenon is an obvious failure of the market price system. The solution has to come with communal intervention into the free market processes. But who have the power to enforce such an intervention in global scale? Obviously not the national governments, that suffers from all the defects mentioned above.

The economist suggested policy is eventually government intervention into market prices of energy through taxation. Yet even this policy is not globally implemented. In contrary, many countries subsidize the energy usage, that not only increases global ecological imbalances and resource depletion, but also creates unfair competition advantages of these countries, while the ecological price is paid evenly by those countries, that subsidize energy and those that don’t.

4 Comments
  1. Here are my reflections on GDP growth obsession-1 article:
    The positive yield on capital you can achieve in at least 2 ways – by increasing production or by lowering the cost of the product. Also – as we saw in 2008 it is possible in the capitalist economy to lose the capital – so the obsession about GDP growth it maybe only obsession.

    Economy and the ecological balance.
    Looking from the above – our ecological system is a closed system with finite number of atoms. Our economical system creates from these atoms different substances – some poising, some healing and some neutral, but having enough energy and know to how – we can convert the poising one – to least the neutral one. This process happens – here just some examples:
    https://www.nps.gov/cuva/learn/nature/waterquality.htm
    Number of trees in the US are growing:
    https://www.mnn.com/earth-matters/wilderness-resources/stories/more-trees-than-there-were-100-years-ago-its-true
    Today we can produce a drinkable water from the sea or oceans.

    Population grows in many Western countries is shrinking, so the pressure on the resources is weakening.

    So I am not very pessimistic about destroying our ecology by the capitalistic system.

    Global warming – there are men made plans how to reduce global warming – from creating clouds over the oceans (clouds will reflect solar radiation) or injecting sulfur dioxide into the atmosphere. Sulfur dioxide is very effective at cooling the climate.

    Liked by 1 person

    • I didn’t claim, that there are no solutions to save the biosystem in planet earth. All I’m saying is, that the existing political-economic system doesn’t have tools, or will to act, unless some catastrophic event will force it to do it. As you said, the earth is final, while in the existing political economic system its exploitation is unlimited. Noone can predict what intensity and shape the catastrophic scenario will take, if it will take. In the next article i will try to check, alternative economic system, that could change the existing trend.

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      • True, because to act – at least how the Warmists claim we must – is itself some catastrophic event, more based in the desire to eat the “rich” than to “save the planet.”

        And please do understand that we humans can neither save nor destroy the biosystem in planet earth. We can only render it less favorable to ourselves.

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        • Welcome Jonolan. You are right, to act means to change. Change in such a scale definitely will cause suffering to many. Change is needed to balance the global environment and to stop cumulative processes causing environmental imbalances. To achieve it, sacrifices are needed. Every year of no action will increase the sacrifices needed in the future.

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