The evidence for a long-term economic decline

This blogger thinks the economy is into a long-term down trend. It could be that not everyone sees this; it may depend upon the color of hat you wear. If you are retired with a good defined benefit pension it may be more difficult to see a down trend than if you are a young person trying to find an unskilled job that pays enough to cover rent, food, entertainment and a little saving to get married and buy a house.

Some of the evidence relates to the resource base. There are lots of energy and mineral resources left on the planet. The problem is that we have used up the easiest accessible resources and what is left is difficult to extract and will take so much energy they are useless. Another type of evidence is geographic and long-term in nature. This includes famine, epidemic, uncontrolled migration, state failure and climate change.

dog-3277416_1920One of the difficulties is that we are used to seeing the economy as a straight line going up. Economics students learn about regression analysis which takes a number of data points and calculates the best straight line that indicates their direction. Using the slope of this line one can project the trend into the future. It is assumed the trend is up.

Another approach about which I did not learn until after I had completed my formal study of economics is fractal analysis. Fractals are lines that go up and down with a series of ups an downs within each. Like a seashore. Fractal analysis tries to identify major turning points in the ups and downs. The mathematics is not well-known. It involves the concept of fractal dimension which can be calculated by the formula two minus the Hurst exponent. If economists used this approach it would be much easier to accept the possibility our economy is going into a long-term down trend and their forecasts would be more accurate but not always what most people want to hear.

What then is the evidence for the long-term future?

In economic theory changes in prices are signals to producers to increase or decrease production. Increasing prices also indicate a shortage of a good and we have been experiencing a lot high prices for some basic goods. It may be that we need more information about prices relative to each other. Maybe our economic data collection has been to support our views on economic growth and is not sufficient to give us a clear picture of relative prices.

In recent discussions about energy a lot has been said about peak oil and solar. Maybe we do not have to worry about oil shortages because the cost of solar has been coming down and will soon be able to replace oil. This may well happen and it may have an interesting effect on economic decision-making. We as individuals will be able to make the basic decisions about solar use in place of bankers who now decide what oil projects go ahead and who gets to do them. The down side of this is that if a lot of oil infrastructure becomes obsolete and has to be written off a lot of the money supply will disappear and the lack of money will cause a lot of suffering to a lot of people.

In spite of all the talk about a service economy we still need lots of minerals for food, shelter and transportation. High prices indicate we have used up the most easily available mineral resources. The future may depend upon recycling and here the picture is cloudy. Recycling takes a lot of energy and the high cost may force us to reduce our use of minerals. Water is another issue. There are parts of the world where water shortages are becoming a serious problem.

Another indication of a declining economy is the trend to tiny houses, shared accommodation, young people continuing to live with their parents and even homelessness. It used to be that non-union working people could expect to live in a detached house with a front and back garden.

Most of the evidence for a down economy identified in the first part of this post has to do with the availability of energy and mineral resources. There are also some long-term geographic trends which could also cause mankind some serious problems.

The guideline here comes from a book by historian Ian Morris called Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future.

Morris’s book is a good summary of the long-term history of the world. Using evidence from a number of disciplines he shows how geography has influenced the rise and decline of civilizations. His perspective is much longer than most of us are familiar with.

He identifies what he calls the five horsemen of the apocalypse – famine, epidemic, uncontrolled migration, state failure and climate change and shows how these have combined to produce disastrous, centuries-long collapses and dark ages. Are we exempt from the consequences of these problems?

We are already familiar with these trends. The question is are they strong enough to cause us problems or are they gaining strength?  For me, a retired person living in Canada, they are mostly academic but for many people around the world they are very real and very serious.

Some people argue this planet is capable of providing enough food for the current population, especially if we reduce waste. Even so the situation is rather precarious and we should be paying a lot more attention to what is happening in agriculture. Monoculture, factory farming of animals and the use of pesticides could easily threaten our food supply.

The threat of epidemics is always with us and the more people are crowded onto this planet, the greater is the threat. We are lucky public health practitioners have been able to quickly control recent outbreaks.

Migration has been a big problem for Asia, Africa and Europe. It is also an enough of an issue for some Americans to want to build a fence and take children from their parents.

Climate change was a major issue until we realized how many plastic straws we are using. Stopping the use of plastic straws will be a lot easier than dealing with climate change but will not stop the changes from taking place. At least people will be doing something.

This blogger has found the concept of state failure difficult, fascinating and intriguing. It is a complex issue because justice is one of the most important functions of government. At the same time many people demand of government legislation that is exploitive because it restricts competition. This is a conflict of government responsibilities in which the exploiters tend to win. The balance between the two is by degrees and changes through time.

You will notice I said justice rather than law and order. I believe one of the indicators of state failure is that so many people, including The Economist and the Supreme Court of Canada, talk of law and order rather than justice. Law and order is easier to define and enforce. If some government were to pass legislation saying police are required to kill a thousand people at random each year, would we still be supporting law and order. The president of the United States has been quoted as encouraging police brutality and to me this sounds like encouraging them to kill at random. Maybe Trump is an indicator of American state failure.

There are lots of laws that are not just. Anything that tries to force the values, morals or religion of one group on everyone has to be unjust. There are lots of laws that are not written but which are enforced ruthlessly by the public, the media and the courts. For example, men are evil and any expression of male sexuality should be punished. Fathers are expected to walk away from their children without emotions. Men should not be emotional under any circumstances.

Governments like to reward their supporters and to purchase votes and/or support. It is easy to get governments to pass exploitive economic legislation and to get them to provide handouts to protect people from natural disasters and their own stupidity. A lot of government is supporting and encouraging special interests, often at the expense of everyone. Some people want minimum government but want their own interests protected,

As the economy goes more and more into decline it will be more and more difficult to provide handouts and this will be seen as state breakdown. Governments around the world are facing riots as fuel and food subsidies become difficult to maintain.

This conflict between justice and the exploitive demands of special interest may be pushing all governments into a state of failure.

In this post we have looked at a number of resource based and geographic indicators that the economy is on a down trend.

Here are some other indicators:

Unemployment

High public debt

The rise of radical left and radical right political movements

High interest rates

Non-performing loads held by banks

Falling standards of living – however one defines them

Expensive education

High crime rates

Crowded public transportation

Homeless people

People are losing confidence in their banks

Business people are will to exploit their customers for the sake of profit

Every time I read a news report at least one item supports the idea that the whole world is going into a long-term down trend. There are loads of problems with the resource base and if we go short we will not be able to sustain the standard of living to which we have become accustomed.

There are always positives and negatives. In terms of economic growth the negatives appear overwhelming. This guy has read about hunters and gatherers and believes it is possible for people to arrange their production of goods and services for long-term sustainability. It will require a major rethink of values. It will be a challenge.

 

 

 

 

This blogger thinks the economy is into a long-term down trend. It could be that not everyone sees this; it may depend upon the color of hat you wear. If you are retired with a good defined benefit pension it may be more difficult to see a downtrend than if you are a young person trying to find an unskilled job that pays enough to cover rent, food, entertainment and a little saving to get married and buy a house.

Some of the evidence relates to the resource base. There are lots of energy and mineral resources left on the planet. The problem is that we have used up the easiest accessible resources and what is left is difficult to extract and will take so much energy they are useless. Another type of evidence is geographic and long-term in nature. This includes famine, epidemic, uncontrolled migration, state failure and climate change.

One of the difficulties is that we are used to seeing the economy as a straight line going up. Economics students learn about regression analysis which takes a number of data points and calculates the best straight line that indicates their direction. Using the slope of this line one can project the trend into the future. It is assumed the trend is up.

Another approach about which I did not learn until after I had completed my formal study of economics is fractal analysis. Fractals are lines that go up and down with a series of ups an downs within each. Like a seashore. Fractal analysis tries to identify major turning points in the ups and downs. The mathematics is not well-known. It involves the concept of fractal dimension which can be calculated by the formula two minus the Hurst exponent. If economists used this approach it would be much easier to accept the possibility our economy is going into a long-term down trend and their forecasts would be more accurate but not always what most people want to hear.

What then is the evidence for the long-term future?

In economic theory changes in prices are signals to producers to increase or decrease production. Increasing prices also indicate a shortage of a good and we have been experieincing a lot high prices for some basic goods. It may be that we need more informtation about prices relative to each other. Maybe our economimc data colllection has been to support our views on economic growth and is not sufficient to giive us a clear picture of relative prices.

In recent discussions about energy a lot has been said about peak oil and solar. Maybe we do not have to worry about oil shortages because the cost of solar has been coming down and will soon be able to replace oil. This may well happen and it may have an interesting effect on economic decision making. We as indiivuduals will be able to make the basic decisons about solar use in place of bankers who now decide what oil projects go ahead and who gets to do them. The down side of this is that if a lot of oil infrastructure becomes obsolete and has to be written off a lot of the money supply will disappear and the lack of money will cause a lot of suffering to a lot of people.

In spite of all the talk about a service economy we still need lots of minerals for food, shelter and transporttation. High prices indicate we have used up the most easily available mineral resources. The future may depend upon recycling and here the picture is cloudy. Recycling takes a lot of energy and the high cost may force us to reduce our use of minerals. Water is another issu. There are parts of the world where water shortages are becoming a serious problem.

Another indication of a decling economy is the trend to tiny houses, shared accommodation, young people continuing to live with their parents and even homelessness. It used to be that non-union working people could expect to live in a detached house with a front and back garden.

Most of the evidence for a down economy identified in the first part of this post has to do with the availability of energy and mineral resources. There are also some long-term geographic trends which could also cause mankind some serious problems.

The guideline here comes from a book by historian Ian Morris called Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future.

Morris’s book is a good summary of the long-term history of the world. Using evidence from a number of disciplines he shows how geography has influenced the rise and decline of civilizations. His perspective is much longer than most of us are familiar with.

He identifies what he calls the five horsemen of the apocalypse – famine, epidemic, uncontrolled migration, state failure and climate change and shows how these have combined to produce disastrous, centuries-long collapses and dark ages. Are we exempt from the consequences of these problems?

We are already familiar with these trends. The question is are they strong enough to cause us problems or are they gaining strenth? For me, a retired person living in Canada, they are mostly academic but for many people around the world they are very real and very serious.

Some people argue this planet is capable of providing enough food for the current population, especially if we reduce waste. Even so the situation is rather precarious and we should be paying a lot more attention to what is happening in agriculture. Monoculture, factory farming of animals and the use of pesticides could easily threaten our food supply.

The threat of epidemics is always with us and the more people are crowded onto this planet, the greater is the threat. We are lucky public health practitioners have been able to quickly control recent outbreaks.

Migration has been a big problem for Asia, Africa and Europe. It is also an enough of an issue for some Americans to want to build a fence and take children from their parents.

Climate change was a major issue until we realized how many plastic straws we are using. Stopping the use of plastic straws will be a lot easier than dealing with climate change but will not stop the changes from taking place. At least people will be doing something.

This blogger has found the concept of state failure difficult, fascinating and intriguing. It is a complex issue because justice is one of the most important functions of government. At the same time many people demand of government legislation that is exploitive because it restricts competition. This is a conflict of governement responsibilities in which the exploiters tend to win. The balance between the two is by degrees and changes through time.

You will notice I said justice rather than law and order. I believe one of the indicators of state failure is that so many people, including The Economist and the Supreme Court of Canada, talk of law and order rather than justice. Law and order is easier to define and enforce. If some government were to pass legislation saying police are required to kill a thousand people at random each year, would we still be supporting law and order. The president of the United States has been quoted as encouraging police brutality and to me this sounds like encouraging them to kill at random. Maybe Trump is an indicator of American state failure.

There are lots of laws that are not just. Anything that tries to force the values, morals or religion of one group on everyone has to be unjust. There are lots of laws that are not written but which are enforced ruthlessly by the public, the media and the courts. For example, men are evil and any expression of male sexuality should be punished. Fathers are expected to walk away from their children without emotions. Men should not be emotional under any circumstances.

Governments like to reward their supporers and to purchase votes and/or support. It is easy to get govenrments to pass exploitive economic legislation and to get them to provide handouts to protect people from natural disasters and their own stupidity. A lot of government is supporting and encouraging special interests, often at the expense of everyone. Some people want minimum government but want their own interests protected,

As the economy goes more and more into decline it will be more and more difficult to provide handouts and this will be seen as state breakdown. Governments around the world are facing riots as fuel and food subidies become dificult to maintain.

This conflict between justice and the exploitive demands of special interest may pushing all governments into a state of failure.

In this post we have looked at a number of resource based and geographic indicators that the economy is on a down trend.

Here are some other indicators:

Unemployment

High public debt

The rise of radical left and radical right political movements

High interest rates

Non-performing loands held by banks

Falling standars of living – however one defines them

Expensive education

High crime rates

Crowded public transportation

Homeless people

People are losing confidence in their banks

Business people are will to exploit their customers for the sake of profit

Everytime I read a news report at least one item supports the idea that the whole world is going into a long-term down trend. There are loads of problems with the resource base and if we go short we will not be able to sustain the standard of living to which we have become accustomed.

There are always positives and negatives. In terms of economic growth the negatives appear overwhelming. This guy has read about hunters and gatherers and believes it is possible for people to arrange their production of goods and services for long-term sustainability. It will require a major rethink of values. It will be a challenge.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recycling is not enough

In this corner of the world recycling is almost universal.  Plastics, glass, metals, compost and drink containers are separated from the rest of the garbage.  Some people also take their own shopping bags to the supermarket.  The exceptions are that we have not mastered the technology of recycling energy and most of us continue to drive a lot

Unfortunately we are still experiencing environmental degradation, inflation and unemployment.  Recycling is not enough.  Its main function is to allow us to feel we are doing something. It allows us to ignore the real issues –  population levels and values.

I believe the most important way in to protect the environment is to reduce the number of people trying to live on this planet.  There are just too many people and I do not like the idea of saying some people should not have the same standard of living as others.  Who is to decide who gets shorted?

I also recognize it is a near impossibility as we cannot tell people not to have sex and not to have children.  What are the consequences of not taking action to reduce the population?  When the Europeans came to North America they brought with them some new diseases and close to 90 per cent of the native population died.  I understand there is some archaeological evidence that there was a similar population reduction in the Mediterranean some millenia ago.  If these precedents hold for us, then there is likely to be one hell of a stench.

We also need to get over our fear of death as so much energy and resources go into prolonging life.  Quite a few years ago The Economist reported that 80 per cent of health care spending is in the last six months of life.  I do not want to go into the 80 per cent and I hope that when my time comes I and those close to me will be able to accept it gracefully.

The other big challenge to protect  the environment deals with values many of which are a part of our committment to economic growth.

According to anthropologist James Suzman who recently published the book Affluence without Abundance, the most successful and long-lasting civilization was that of the Bushmen of the Kalahari desert.  These hunters and gatherers “worked” only ten to 15 hours a week.  As they relocated up to ten times a year they had little interest in material things and their society had high equality.  We cannot all go back to being hunters and gathers but we can choose some of their values and apply them to our daily lives.

If we really want to protect the environment then we should have fewer children, live in place, live a healthy lifestyle, have fewer and smaller toys, drive less, go easy on the travel and work as little as possible.  Recycling may make us feel we are doing something but it is not enough.

 

 

Immigration to solve economic problems?

One has to challenge the idea that rich countries need immigration to improve public finances and to meet the needs of an aging population.  This argument surfaces from time to time in Canada and is now being promoted by the UK’s Office of Budget Responsibility.  The problem is that some people make two major mistakes in economic analysis.  They analyze economic problems in financial terms and they assume economic growth will continue forever.

jetxee_people_near_a_blackboardWhen my economics professors stood at the blackboards they often drew an x-shaped graph.  For the macro economists one line represented the financial aspect of the economy and the other the real or physical aspect.  It is an important distinction and one that is forgotten when we get away from the blackboard.  Ultimately the economy depends upon the resources we use to look after ourselves.  To analyse the economy we need to be aware of what agricultural, energy and mineral resources we have with which to work.

We have problems using financial terms because of the way in which we create money.  It is a sort of Ponzi scheme which collapses from time to time.  Also the purchasing power of any sum of money varies because of inflation or deflation.  Thus it is difficult to use financial terms to evaluate what is happening on the real side of the economy.

Another problem with claims we need immigration to pay our bills is the assumption that economic growth will continue forever and that population drives economic growth.

It is certainly a big mistake to assume economic growth can continue forever.  We have used the most easily accessible agricultural,  energy and mineral resources and it takes more energy to retrieve those remaining.  We see this in increasing prices. (Marginal cost to use the economics term).  As more energy is needed to retrieve the same quantity of resources, the potential for economic growth goes down.

If population were a driver of economies, why aren’t India, China and Africa the richest parts of the world?

Immigration is a difficult issue because it often involves humanitarian and racist issues.  There may be humanitarian reasons for encouraging immigration, but this weblog focuses on economics and it is not clear we should see immigration as a solution to current economic problems.  It could be that immigration will put additional stress on economic resources and make problems worse.

The wisdom of a declining European fertility rate

The current issue of The Economist reports with some alarm that the European fertility rate is declining with the economic crisis.  It may be that young people have more wisdom than those who want the population to continue increasing.

Back in October of 2010 the World Wildlife Fund issued its Living Planet Report.

This report claims our ecological footprint exceeds the earths biocapacity by 50 percent and that by 2030 we will need two earths to support sustainable life on the planet.

Even if this report is exaggerated over population has to be a serious concern.  The more we increase the population the more resources will be consumed and the sooner there will be a major ecological and economic collapse.

The challenge is to rearrange our economic activity so that everyone can have comfortable life without the need for continued economic growth.

Population is a difficult and sensitive issue.  An interesting discussion of population limits is found in Raymond Firth’s book We the Tikopia.  Some excerpts from the chapter on population are on this  weblog.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Are evironmental and economic problems interconnected?

I always thought we lived in a highly interconnected world but when it comes to environmental problems and economics few people appear to make a connection.

For example, the fifth Global Environment Outlook (GEO-5) report from The U.N. Environment Programme.  It was released two weeks before a big environmental conference in Brazil.

This report identifies the key drivers behind climate change as population growth and urbanization, fossil fuel-based energy consumption and globalization.

It seems to me that all of these will have a steadily increasing negative impact on our economy.  It could well be that they are behind the current economic crisis.

However, the report says the annual economic damage from climate change is estimated at 1-2 percent of world GDP by 2100, if temperatures increase by 2.5 degrees Celsius.

I fear this report is overly optimistic and unless we get some more realistic assessments we will not change our behaviors in time to prevent a major catastrophe.

Aging population

Some people like to worry about an aging population.  Here is an article about projections that the Japanese population will decline by one-third.

The fear is that as the proportion of older people increases the burden of supporting them will fall on decreasing numbers of younger people. The easy answer is that this burden should not be too great thanks to technology which has improved tremendously over recent years and which many continue to improve.

A more difficult answer is that for all of us, and especially those of us who are retired, our well-being depends upon the ratio of population to goods and services produced and our ability to lay claim to those resources.

As there is some evidence the ability to produce goods and services throughout the world is declining there may well be declining standards of living for all of us.

In my essay “LETS go to market: Dealing with the economic crisis” which is a part of this weblog I try to show one way we could organize our economy to minimize the suffering from a declining economy.

Should retirement savings be forced?

An article on the CBC news website asks if Canadians should be forced to save for retirement.

The article points out that some people pushing for this are in the financial industry and have a vested interest in getting more people to put money into retirement funds.

I would point out our well-being and standard of living in retirement will depend upon the ratio of population to the quantity of goods and services being produced at the time of one’s retirement.  At this time it is not clear what that ratio will be next year let alone into the future.

There are three risks facing retirement savings.  Inflation could wipe them out,  the institutions holding them could go broke or they could bed lost to fraud.  The longer the term the greater the risks.

I still think the best investment is a market garden.

I would refer you to the story at the start of the previous post on this blog.

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