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The New Economy

A while ago now, I wrote about reimagining the "American Dream." I've been reading a fair amount about economics lately, and I've found two interesting threads.

The more dominant thread is the one you know well. The story of the 99%, whose earnings and wealth have stayed pretty much the same over the past 30 years, while the earnings and wealth of the top 1% have grown tremendously. The solution to this story seems simple. First, decrease earnings and wealth inequities by going back to the tax policies of the 50s, 60s and 70s, where those who were wealthy paid much more in taxes than they do today. Second, spur economic growth by investing in infrastructure and creating jobs.

Occupy has made this argument mainstream. Further, Occupy has put pressure on the government to better regulate corporations and banks. All good stuff, and I'm not at all against any of this, of course, and I think as a short-term way out of the worst of our current problems, it makes a boat load of sense.

But for the long term, this is not going to even begin to solve our problems. This set of arguments makes the assumption that we will continue along as a capitalist country - with better income distribution, and better corporate regulation. The problem is that capitalism is no longer a viable option, and I'll explain in detail why. (A note, there are other, spiritual reasons why capitalism shouldn't be allowed to continue, having to do with how we see people, and people's work and lives, but this post is meant to be based simply on science and economics.)

The simple truth is this: we have reached the carrying capacity of our planet, and further economic growth will not be possible.

I'm going to detail why this is true. Most of this comes from reading the book: The End of Growth, which I would recommend to everyone. He lays it out really clearly, and I'll do a quick recap.

He starts with the origin and present state of the "science" of economics, which he says is really moral philosophy, and not really a science. I have to agree with his assessment:

"The classical theorists gradually adopted the math and some of the terminology of science. Unfortunately, however, they were unable to incorporate into economics the basic self-correcting methodology that is science’s defining characteristic. Economic theory required no falsifi-able hypotheses and demanded no repeatable controlled experiments (these would in most instances have been hard to organize in any case). Economists began to think of themselves as scientists, while in fact their discipline remained a branch of moral philosophy — as it largely does to this day."

He then talks about the underlying assumptions of capitalism regarding infinite growth. He says:

"Which brings us to the global crisis that began in 2007–2008. By this time the two remaining mainstream economics camps — the Keynesians and the neoliberals — had come to assume that perpetual growth is the rational and achievable goal of national economies. The discussion was only about how to maintain it: through government intervention or a laissez-faire approach that assumes the Market always knows best."

He discusses much of the underlying problems of the economic crisis, and then talks about why it is that perpetual growth is not a rational or achievable goal, because we are running out of all sorts of resources - fossil fuels, metals, minerals, rare earth elements, etc., and we are not going to be able to innovate ourselves out of these limitations in resources.

We do need a new economy, and it can't be capitalism. It's really clear, and, I'm sure for many, that prospect is pretty scary - so scary that no one in the mainstream media (even lefties like my favorite Rachel Maddow) is really talking about the end of capitalism.

Some sites you might be interested in to learn more:

There are lots more - if you come across them, put them in comments.

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