Things Falling Off the Table - Economy
By Rowan Wolf
In the heat of healthcare reform and the mobilization of radical shock troops, the economy has drifted with little public discussion. When it comes up, it is frequently within the context that "the worst is behind us;" "we're leveling off;" or "recovery is just around the corner." While I wish all of this was true, I am concerned that it is not. While I wish that the Obama administration were being more honest, I believe they are engaging in the same type of spin we became accustomed to under the Bush administration.
The signs seem to indicate that the current economic downturn will continue, and perhaps even intensify over the next couple of years. Part of this has to do with more real estate issues, part with continued job losses, and part with the global economic scenario. For real people, things do not look all that good.
The real estate debacle is not behind us. The chart below from Credit Suisse shows mortgage reset activity remaining high through 2011. Elizabeth Warren, appearing on the August 12, 2009 MSNBC "Morning Joe," warned that another shoe would be dropping as commercial real estate entered a reset period that runs through 2012.
The chart below is an edited version found in an article by Doug Hornig, which is originally from page 47 of the Credit Suisse 2007 report Mortgage Liquidity du Jour: Underestimated No More
The U.S. (and other nations) continue to experience rising unemployment. The upbeat report by the Obama administration stating that the unemployment rate had dropped while the number of new claims increased was based largely on dropping 637,000 people from the labour count. In other words, a statistical change occurred in the number of people actively looking for work. It does not mean they became employed.
All those job losses translated into a 34 % increase in consumer bankruptcies - in July alone. Unemployment (and under-employment) is also fueling ongoing foreclosures. Foreclosures and tight credit drives down housing (and real estate values) putting more people (and businesses) upside down on their loans.
Not surprisingly, the global nature of the economic collapse is reflected in a major hit on global trade. It is down 36% from its peak in July 2008 or about $1.5 trillion.
And so we cycle around and around, sinking a bit lower on each spin. All of the indicators I see do not signal a recovery. However, there are other indicators which could be interpreted with a new meaning: that "recovery" may not mean the same thing any more. If "recovery" means returning to where we were before the current crisis, then the odds seem slim indeed. If "recovery" means returning to the growth path we were on, then the odds seem long beyond calculation. The reasons for this have to do with the physical constraints of the planet. Simply, there would appear to be a limit on the resources and capacity of the planet for continued development, growth, and exploitation.
Below are a series of graphs. The first one is a sample of an exponential growth curve. These curves are characterised by their "J" type formation. The sharpness of the "J" depends upon the rate of growth that the curve is measuring.
Sample of an Exponential Growth Curve
(From: Regents Prep Algebra Lesson
Here is the fossil fuels curve. This represents the dominant form of energy use around the world (and particularly in "developed" nations) at this point in time. Since it is frequently argued that the other human growth curves (population, development, per capita income, etc) are linked to energy availability, then the energy curve is distinctly important in any recovery.
(From: Geothermal Education Office slide 117)
However, fossil fuels are not the only resources that we use. This graph from The New Scientist is instructive (link gives scalable image of graph below).
Of interest is that if global consumption continues at the current rate, the materials indicated have a life expectancy of 58 years (on average). However, if the global rate increase to half of the U.S. current consumption, the expectancy drops to 20 years. Currently the uranium supply is expected to last another 30-40 years, but every nation that has the capability (including the U.S.) wants to dramatically increase the number of nuclear power plants to make up for the loss of fossil fuels (and decrease CO2 emissions). Such an increase would likely halve that 30-40 year estimate.
Certainly one major consideration is the global growth in population. That alone would naturally increase consumption of resources. However, if you add increasing consumption AND population growth, then the impacts increase significantly.
And of course we have the issue that consistently gets talked about, but not acted on - global warming. Below is a graph of CO2 concentration in the atmosphere. While CO2 is hardly the only contributor to global warming, it is an indicator we ignore at our own peril.
Atmospheric Carbon Dioxide
(From: Planet for Life)
Back to "J" curves.
I would make the proposition that an exponential growth pattern is not sustainable in a closed environment. When we look at fossil fuels, resources, population, CO2 (among a myriad of things we could measure), all are on an exponential curve. This means that any "recovery" will occur in a physical environment of increased demand and (soon) decreased availability. In other words, we cannot return to the previous path and continue on our merry way.
Some of you may be science fiction fans, and have read (or watched) the stories of people mining the junk yards for resources. We could well find ourselves in that situation. In fact, in poorer areas of the world, they are already "mining" our "junk." For example, in China (and elsewhere) electronics - particularly computers - are smelted down for precious metals or stripped for reusable parts. This may become a global (pre)occupation. Reducing consumption - or radically changing what and how we consume - is central to any recovery. So to is firmly addressing the issue of population. The U.S. consistently withdraws global family planning funds because of "religious" considerations. We have to get past this, and put reproductive control in the hands of women. That birth planning and control needs to be in women's hands. Such power increases the voice and status of half the population. It also reduces the number of unintended (or forced) pregnancies.
We need to look real hard at Reduce - Reuse - Recycle, and follow it. There are huge implications of the "three Rs."
Reduce, means consume less. Not good news in a society where consumption is 70% of the economy. However, reducing consumption would be aided by improving the quality and longevity of what is produced (get rid of planned obsolescence). On the other hand, there are those things which really do have a short use expectancy - packaging for example. These things should have an accelerated degradation so they do not persist in the environment, or can be remanufactured to other purposes.
Reduce also has possibilities for the energy scenario. It is estimated that we could globally reduce energy use by 60% by increasing energy efficiency across the board (transportation, electronics, buildings). Such efficiencies can lengthen the time frame to depletion, though not eliminate it.
Reuse means the repurposing of things. The simplest example is using plastic food containers for other storage purposes. However, it would be helpful if they could be used for the same food storage. In other words, instead of everything coming neatly packaged, people could refill their containers from bulk sources. Some stores already have this option for some consumables. Reuse may also be taking items and passing them on, or recycling them for a different purpose (clothing fabric into rugs for example).
Recycling presupposes a use for the recycled material. Right now, there is some recycling that occurs (unevenly across the country and across the world). However, the uses of recycled materials is not what it could be. Right now, the primary use for recycled plastic is outdoor furniture. We only need so many picnic tables in the world. Right now there is a global argument on the use of plastic bags. However, plastic bags are not the only plastic issue. Plastic seems to be the packaging of choice - even for food. It shouldn't be, and it doesn't need to be. It is something that the world can no longer afford to use the way that it does.
We need to look at the future (and the present) very differently. In that examination, we need to reframe the "economy." This may be the hardest for the U.S. to do. We have structured an economic system (and to some extent enforced it globally) where money stands between the individual and virtually everything needed to live (housing, food, power, education, water, medical care ...). This means that folks must get money legally, illegally, or through inheritance, to survive. When that legal path is based on high consumption, then we are chasing our tails through a tunnel of mirages. Profit means getting excess value - from the planet, from the workers, and from consumers. We are at the end of excess, therefore we need to reimagine a different way of living.
So where does that leave us? It leaves us with needing to either change our path - or be forced to change our path. The planet provides certain baseline realities that add dimension to the current economic crisis - and strategies to "get out of it." Simply regaining the status quo is not a solution (or at least not one that will last long). In fact, a return to our previous path will only accelerate the next collapse - for which we will have even less capacity to respond. It is critical that we not be lulled to sleep by soothing rhetoric, and demand real answers - and real leadership - from decision makers.
Posted by rowan at August 19, 2009 6:43 AM
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