By Enrique Lescure
Right now, the air is buzzing with the rumours of the next financial crash. This is starting to become an autumn tradition in the more conspiracist camp. The Petrodollar is going down, it is time to invest in gold, weapons or canned food. This time, however, even mainstream newspapers are warning for an impeding financial meltdown – which everyone with the slightest understanding of the current system and of Fiat currencies know is inevitable.
At the same time, we must bear in mind that a Fiat system can theoretically be rebooted by the addition of credits which are pumped into the finance industry. When these credits are not corresponding to what increased growth rates are needed, another financial crash will happen, a recovery occurs and the economy stabilises for shorter and shorter intervals with higher and higher structural unemployment as a result.
As long as there is reason for faith in economic activities, the system can be rebooted again and again, despite its glaring similarities with a pyramid scheme. There is a relationship between the Fiat economy and the Real economy, though it is often vague and the two systems are standing on different foundations. While one rests on human estimations, gut feelings, optimism and wishful thinking, the other simply is.
This entry will be about what the Real Economy is, and what consequences it will have running it to the ground. Sadly, one of the aspects of the Fiat system is to incentivise economic behaviour that is serving to run the Real Economy into the ground.
TL;DR notes (because I like lists)
- Since the Cambrian explosion, the Earth has formed complex multi-agent biospheres that are built around Earth’s natural cycles (sunlight, perspiration, rainfall, seasons), but which also are building themselves by slow but mostly continuous increases in complexity.
- For all what matters, to have a human economy demands interaction with the Earth’s biosphere, and human activities will affect the biosphere.
- Thus, the human economy cannot be seen as something separate from the biosphere in itself, but is essentially a part of what builds this planet.
- This also means that the biosphere will affect human well-being, and that this well-being depends very much on how we treat the systems on the planet that are making the biosphere possible.
- Ultimately, what we need now is to unlearn the cosmology of Individualistic Consumerism, and to approach the issue of what the economy is by looking at total resource flows and not just focus on the human activities.
On the Real Economy
The Real Economy is not linear but a multi-agent system, meaning that each species and each individual is both on the receiving and returning end of the system, and the purpose – rather than growth – is for individuals and species to survive and improve their survival skills within this context of existence. The system is interdependent with the soils it has created, with the groundwater and rainfall and with the climate it is engineering.
The cycle of ice ages and warm periods are partially affected by the amounts of trees, binding greenhouse gasses. Colder periods lead to a drier climate which in turns lead to forest fires that are releasing carbon dioxide into the atmosphere, increasing the average temperature. This leads to a moistlier climate that grows forests and bind carbon dioxide, slowing down the increase in temperatures.
A growth in the amount of vegetation increases the number of herbivore species, which creates a good opportunity for carnivores to increase their numbers as well, until the collapse of the herbivore population allows the flora to recuperate. As the carnivores are decreasing in number, herbivores can return to the fray.
This is the real economy. It has existed since time immemorial. As it gradually grew, it has transformed itself from a few one-celled organisms stewing in a primordial soup, into a vibrant dynamic equilibrium that can recuperate from mass extinction events such as the Cretaceous-Tertiary Meteorite that wiped away the dinosaurs. This economy is characterised by a slow, gradual increase of biomass and of complexity, off-set periodically by extinction events which could have destroyed complex life on Earth.
We can imagine a countless, countless number of Earths out there, tens of thousands of light years from us, where life has been wiped out by meteorite impacts, volcanoes, supernovae or climate change. There is perhaps an even greater number of worlds where life has never evolved beyond single-cell or even sub-cell organisms.
It is truly a miracle that our Earth has survived five mass extinction events and has built six biosphere regimes.
And this Earth is what allows you to live, to breathe and to aim for your objectives.
The economies of human civilizations, no matter how they look like, have all been dependent on the Real Economy, the Biosphere, and are thus – no matter if they want it or not – a part of it.
The Real Deficit
Often, we hear that many western economies are suffering under public and private debt, which can either be solved – within the framework of Fiat currencies – through either stimulus (to create growth that can allow us to grow the economy) or through austerity (cutting back the provision systems for the weakest members of society to save money). Often, these two policies are following one another, first a stimulus to the financial institutions taken from the tax payers, and then a punishment of the tax payers and the poor by tax increases and welfare cuts.
In the long-term however, only one deficit matters.
That deficit is marked by the Earth overshoot day, the day when our resource usage exceeds the ability of the planet to provide for our demands without the global biomass and biodiversity shrinking. This means that we have a global ecological deficit, which has grown above the limit since the 1970’s.
Five of nine vital life-supporting systems underpinning the biosphere are today being ravaged by the need for infinite exponential growth caused by the credit-based fiat system. The climate is being disturbed, the soils and the freshwater reserves depleted of nutrients, the land-based eco-systems are being outcrowded by artificial, linear production areas, and the oceans are being outright sexually molested.
All of this means that we are heading for a sixth mass extinction event, caused by our current civilization, within the next 100 years.
The root cause
The root cause for this is actually what we think of as our “economic system”. The creation of “money” is – through fractional reserve banking – preceding the actual creation of capital. That means that our current system is reliant on credits, meaning that for the system to survive, money must be used to increase economic production, by creating demand for products and satiating said demand.
A reduction in growth rates is not enough, since the growth must at least follow the increase of the amount of debt in the system, otherwise interest rates will go up and the social stability of the system will be threatened. Thus, the system in itself incentivizes economic activities that are destroying the Biosphere, and is rewarding behaviour that strives to minimise costs in terms of investment and maximises outcome.
Environmental Economics of the type where the needs of the Biosphere (i.e the needs of Life on Earth) is placed below the needs of maximising economic growth, are a consequence of the perverse idea that an economic system which has developed for around 200 years is more essential that an economic system that has existed for 65 million years.
Economic growth has one good effect, and that is an increase in living standards. The only good argument left by growth proponents is that within the next 50 years, a person earning €1,25 today would earn €5 instead (and afford a car). That is however offset by the fact that economists generally have little knowledge of how much damage our environmental destruction would do on our eco-systems in the long run, and that the system will invariably collapse.
Energy Accounting as an alternative
Energy Accounting is described in more detail in the article linked herein. We do not know how it will work out in real conditions yet, which is why we must test it. There are potential drawbacks and bottlenecks as well. The goal with Energy Accounting is however not just to install itself, but to fulfill three criteria which we need to fulfill to have a sustainable civilization.
Thus, Energy Accounting is designed as a tracking system, to keep an overview of the resource flows of the planet. It is designed as a post-monetary currency which aims to create a better balance between demand and supply – through creating a system where things do not have to be produced before there are willing users. It is also designed as a system which factors in the demand and supply curves of the Biosphere itself, thus incentivizing economic actions that are either neutral or beneficial to the well-being of the planet, while penalizing actions that are damaging to it.
Summary: A strategy to claim the problem formulation initiative
We must – as a movement – always strive towards focusing on the Real Economy. While we must accept the existence of the crumbling Fiat system for now, we must work towards a transition away from it, by transitioning away from looking at the world through the lenses of the City of London and Wall Street.
The Fiat System ultimately relies on faith in its regulations. It will crumble, probably faster than the Biosphere itself. The challenge is to transcend the worldview where the greatest potential disaster is a stock market crash and a massive hike in unemployment.
How we do that is not primarily by questioning or accusing or being obsessed by the injustice of the current system, but by instead laying our focus on the Real Economy, and how we as a species are embedded in it and how most of us for the foreseeable future will be dependent on it.
That does not mean that we should not focus on social issues, but that we must find a way to integrate social issues into the narrative of the Real Economy.
The Earth Organisation of Sustainability does not deal with the binary world-view of eco-systems contra humanity. Instead, we view Life in itself as the most valued and cherished concept. Thus, what is good for the Biosphere is good for you, as an individual, and for us collectively as a species.
We must as a civilization make a conscious choice to accept the truth – that we are a part of the Biosphere and that we need to model our civilization in a manner that integrates it into the Biosphere and integrates the Biosphere into the infrastructure. This also means a life-positive outlook, where we have an obligation to design our societies so they allow individuals the freedom to express themselves, create, form their lives and achieve safety, meaning and liberty.
After all, as a system, the Biosphere strives towards more and more diversity and abundance. We should definetly try to mimic the beauty and splendour of nature.