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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual choice for calories and water.

Here are two approaches to trying to influence people’s behavior for health or environmental reasons.

The first is a move to require some restaurants to state on menus the calories in each item.

This is in keeping with the perfect competition approach.  Give consumers as much information as possible and let them make their own decisions according to their values.

If a person wants to eat a high calorie meal they should have the right to do so.  The important thing is that they are able to know what they are doing and that they should be prepared to take the consequences whatever they are.

The second concerns a move to ban bottled water.  It is good to see that the colleges mentioned have so for resisted calls for an outright ban and are trying to provide alternatives.

Once again consumers should have the option to make their own decisions according to their values and circumstances.

Perhaps we could  deal with this by requiring water bottlers to include on the label a statement something like: “Some people are concerned about the environmental impact of water sold in plastic bottles.  In many cases tap water is at least as pure as bottled water.”

Unfortunately there are too many people who think they should have to right to force their version of the truth onto everyone.

Water and economics

It could be that one of the great injustices of the world is that for some of us the marginal cost of water is zero.

As this injustice is likely to get worse, the way for its victims to cope will be to apply supply and demand and marginal cost to pricing.  Here is an article about water markets.

When we were looking for a place to build our home we focused on a part of British Columbia through which there is a diagonal line.  One one side of this line it is dry sometimes getting close to desert.  On the other side is a cedar-hemlock forest.  Having previously lived in areas short of water I was determined we should be on the wet side.

As it turned out the  “pile of rocks” my wife refused to look at the first time we drove by has three streams on it.

The stream from which we take our water goes underground and flows into a river.  The water that goes through our house goes into a septic field and flows underground into the river.

Therefore the marginal cost of our water is zero and we don’t worry about water conservation.

I am not saying where we live because I don’t want a lot of other people coming to live in this valley.

Topsoil and civilization

A book review in last week’s The Economist reminded me of the book Topsoil and Civilization by Tom Dale and Vernon Gill Carter and published in 1955.  These guys attempted to analyze the entire field of world history from the point of view of man’s relation to productive soil.

Their conclusion was that all previous civilizations have risen on virgin topsoil and have declined when the topsoil was depleted.  Their book was a plea for soil conservation in the United States because they feared to same was happening in North America.

This is a very  interesting book with what is probably a serious warning which we should heed.  It also points out a fundamental of economics that  to have civilization we need a surplus from primary producers..

You can get an electronic copy for free from The Soil and Health Library based in Australia.

This book was published 57 years ago and it appears history has proven them wrong.  It could also be “not yet.”

We have lived through the golden years of prosperity during which we put huge amounts of oil energy and technology into the topsoil.  Have these permanently restored the topsoil to its prime condition?  Also some parts of the world that depleted the topsoil have been able to exploit other energy and mineral resources untouched by earlier civilizations.

I urge you to read this book and then ask: Are we exempt?  Are things different this time?

Following are some quotes from Chapter one.

Civilized man was nearly always able to become master of his environment temporarily. His chief troubles came from his delusions
that his temporary mastership was permanent. He thought of himself as “master
of the world,” while failing to understand fully the laws of nature.

Let us put it this way: civilization is a condition
of mankind coacting with an environment in such a way that progress results. Regardless
of the forces that stimulate cultural progress, both civilization and the enjoyment
of civilization rest on a surplus production by those who supply the necessities
of life. By surplus production, we mean a surplus above the actual needs of the primary
producers. A surplus production of food, clothing, shelter, and other necessities
by farmers, herders, fishers, loggers, miners, hunters, trappers, and other primary
producers is necessary before civilization can start. Furthermore, such surplus production
must continue on a relatively stable basis if civilization is to keep advancing.
The primary producers must supply a surplus before artisans, designers, engineers,
scientists, philosophers, writers, artists, and other civilizers can exist and function.
Few people ever advanced civilization while they had to produce their own food, clothing,
and shelter directly from the earth.

A common error has been to consider these resources
as static. The proponents of the standard formula, “capital plus labor plus
raw materials plus management multiplied by technology equals production,” have
nearly always considered raw materials as a constant. But they are not constant.
Soil fertility, usable water, forests, grasslands, beneficial wildlife, and other
resources have not remained a fixed item in any region. They have decreased in most
areas occupied by civilized man. In many of the older countries they have almost
disappeared. And with their decrease has nearly always come a decline in civilization.

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