This article is the part 1 from Chapter 6 of Richard Heinberg's new book 'The End of Growth', published by New Society Publishers. This chapter looks at ideas for post growth economics.
Only a crisis—actual or perceived—produces real change. When the crisis occurs, the actions that are taken depend upon the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
—Milton Friedman (economist)
Many analysts who focus on the problems of population growth, resource depletion, and climate change foresee gradually tightening constraints on world economic activity. In most cases the prognosis they offer is for worsening environmental problems, more expensive energy and materials, and slowing economic growth.
However, their analyses often fail to factor in the impacts to and from a financial system built on the expectation of further growth—a system that could come unhinged in a non-linear, catastrophic fashion as growth ends. Financial and monetary systems can crash suddenly and completely. This almost happened in September 2008 as the result of a combination of a decline in the housing market, reliance on overly complex and in many cases fraudulent financial instruments, and skyrocketing energy prices. Another sovereign debt crisis in Europe could bring the world to a similar precipice. Indeed, there is a line-up of actors waiting to take center stage in the years ahead, each capable of bringing the curtain down on the global banking system or one of the world’s major currencies. Each derives its destructive potency from its ability to strangle growth, thus setting off chain reactions of default, bankruptcy, and currency failure.
The likely outcomes of a non-linear response of the monetary-financial system to the end of growth thus constitute a wall in our path. Beyond the wall are other challenges and opportunities—challenges like oil depletion and climate change, and opportunities to reshape the economy so as to make it more sustainable over the long run, and to make it better serve human needs.
The depletion of resources and the buildup of greenhouse gases are gradual processes, though their various impacts will be subject to tipping points and will provoke short-term crises. Efforts to deal with these problems—such as building low-energy transport infrastructure and low-carbon food systems—will take a generation or more. That kind of time just won’t be available to us if we can’t get past the financial-monetary wall. If we hit the wall at full speed, our options will be severely and suddenly reduced. The economy, and society as a whole, may undergo an abrupt, dramatic, and chaotic simplification as trade virtually ceases.
So far, we are on course for full-force collision. The fundamental problems with our monetary and financial systems have not been addressed, but only papered over.
Our financial-monetary system is not just vulnerable to periodic internal disruptions like credit crises, it is inherently unsustainable in the emerging context of energy and resource constraints. And if the financial-monetary system seizes up, this will imperil society’s ability to respond to any and all other crises. This means that, whatever our other priorities may be, we must also immediately devote effort to reforming the financial-monetary system.
This chapter is mostly about what governments can do—must do, in fact—to get past the wall of looming financial-monetary collapse. As we will see, there may be more than one strategy that could work. But having averted immediate collision, we won’t be in the clear: this short-term barrier in humanity’s path must be negotiated in a way that also steers us around slower-developing problems such as climate change and resource depletion. If not, civilization will carom from one crisis to the next.