A World Without Growth?

Arthur Miller wrote that "an era can be said to end when its basic illusions are exhausted". Economic growth, the central illusion of the age of capital, may be ending.

Growth underpins every aspect of modern society. Economic growth has become the universal solution for all political, social and economic problems, from improving living standards, reducing poverty to now solving the problems of over indebted individuals, businesses and nations.

All brands of politics and economics are deeply rooted in the idea of robust economic growth, combined with the belief that governments and central bankers can exert substantial control over the economy to bring this about. In his 1929 novel The Great Gatsby, F. Scott Fitzgerald identified this fatal attraction: "Gatsby believed in the green light, the orgiastic future that year by year recedes before us. It eluded us then, but that's no matter—tomorrow we will run faster, stretch out our arms farther. 

[...] Over the last 30 years, a significant proportion of economic growth and the wealth created relied on financialisation. As traditional drivers of economic growth, such as population increases, new markets, innovation and increases in productivity waned, debt driven consumption became the tool of generating economic growth. But this process requires ever increasing levels of debt. By 2008, $4 to $5 of debt was required to create $1 of growth. China now needs $6 to $8 of credit to generate $1 of growth, an increase from around $1 to $2 of credit for every $1 of growth a decade ago.

Debt allows society to borrow from the future. It accelerates consumption, as debt is used to purchase something today against the promise of paying back the borrowing in the future. Growth is artificially increased by spending that would have taken place normally over a period of years being accelerated because of the availability of cheap money. With borrowing levels now unsustainable, debt engineered growth may be at an end.

Growth was also based on policies that led to the unsustainable degradation of the environment. It was based upon the uneconomic, profligate use of mispriced non-renewable natural resources, such as oil and water.

The problem is the economic model itself. As former Fed Chairman Paul Volcker observed on 11 December 2009: "We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export. It's involved with the financial crisis but in a way it's more difficult than the financial crisis because it reflects the basic structure of the economy." The simultaneous end of financially engineered growth, environmental issues and the scarcity of essential resources now threatens the end of an unprecedented period of growth and expansion.

Policy makers may not have the necessary tools to address deep-rooted problems in current models. Revitalized Keynesian economics may not be able to arrest long-term declines in growth as governments find themselves unable to finance themselves to maintain demand. It is not clear how if, at all, printing money or financial games can create real ongoing growth and wealth.

Low or no growth is not necessarily a problem. It may have positive effects, for example on the environment or conservation of scarce resources. But current economic, political and social systems are predicated on endless economic expansion and related improvements in living standards. Growth is needed to generate higher tax revenues, helping balance increased demand for public services and the funds needed to finance these. Growth is needed maintains social cohesion. The prospect of improvements in living standards, however remote, limits pressure for wealth redistribution. As Henry Wallick, a former Governor of the US Federal Reserve, accurately diagnosed: "So long as there is growth there is hope, and that makes large income differential tolerable."

The social and political compact within democratic societies requires economic growth and improvements in living standards. Economic stagnation increases the chance of social and political conflict. Writing in The War of the World: History's Age of Hatred, Niall Ferguson identified the risk: "Economic volatility matters because it tends to exacerbate social conflict…. periods of economic crisis create incentives for politically dominant groups to pass the burdens of adjustment on to others… social dislocation may also follow periods of rapid growth, since the benefits of growth are very seldom evenly distributed… it may be precisely the minority of winners in an upswing who are targeted for retribution in a subsequent downswing".

Politicians, policy makers and ordinary people do not want to confront the possibility of significantly lower economic growth in the future. Like Fitzgerald's tragic hero Gatsby, the incredulous battle cry everywhere is: "Can't repeat the past? Why of course you can!" But as philosopher Michel de Montaigne asked: "How many things we regarded yesterday as articles of faith that seem to us only fables today?"

A recent book The World Without Us was based around a thought experiment–what would a world bereft of humans revert to. We should be worried about what a world without growth, or, at best, low and uneven rates of growth will look like. 

Satyajit Das

Hubris

We decide on the amount and on the quality of the information we possess. The easier case is when the problem outcome is already known (the coin flip was heads, now what?); this is a case where we do not need to predict anything, the event already occurred. The next case is when we do not know the outcomes but know their probabilities (this is a biased coin, with a chance of 55% heads). We know how to solve this type of problem, and call it risk management. The harder case is when not even the probabilities are known (oops, this coin might even have two equal faces...). Usually, the literature calls it uncertainty, which is a different, uglier, beast than risk. And humans do not like uncertainty. We try to solve them using what we know about risk, by simplifying our models -- and possibly forgetting about this fact -- so that we can analyse the problem and compute its solution with the tools (like statistics) and assumptions (like normality) we understand. Sometimes our assumptions are not that far away and our decisions are good approximations/predictions of what happens. Sometimes we miss the mark and the chosen action results in disaster. Black swans, an expression coined by Nassim Taleb, are examples of this. It is when we assume that extraordinary events are impossible and one of them occurs nonetheless. This is the price of recklessness or laziness or both; the hubris of assuming too much.

Quantum Randomness

@Eamon: "I wonder what a *genuine* stochastic process *would* look like if not the ones I mentioned. In other words, what possible observational state of affairs would, for you, serve as evidence for genuine indeterminism?"

Good question. I think I would be willing to accept indeterminism despite my gut feeling that it is a mistake, if accepting indeterminism answered more questions than it raised. The prima facie reason for accepting indeterminism is the examples you cited (radioactive decay, etc.), but that interpretation has the following problem.

- Pretty much everybody accepts the reality of superposition, which is in effect Many-Worlds.

- Then, in order to explain the fact that our "thread of consciousness" sees only one discrete outcome, the Copenhagen interpretation posits a wavefunction collapse -essentially, all superpositions instantaneously "die," except the one containing my "thread of consciousness."

- But this collapse is the ONLY known phenomenon in physics that is inherently random/acausal, along with a bunch of other weird properties like non-locality, non-CPT-symmetry, faster-than-light influence...

- And then we get to the crux of the matter: what is this queer collapse theory trying to explain in the first place?

- Answer: why our "thread of consciousness" sees only one outcome, which outcome is apparently not predictable in principle.

- So the question becomes: what happens if we drop our intuitive idea of a single unique "thread of consciousness?"

- Answer: there is nothing left to explain. All branches of the wavefunction remember their own history, and to all of them it prima facie appears that their "thread" made it while the others didn't.

Summary: quantum randomness/collapse "explains" why our "thread of consciousness" sees only one outcome, but this is explained equally well by no collapse and no randomness. Quantum randomness does ZERO explanatory work (although at first intuitive glance, it seems to). -- Ian Pollock [link]

Mentir

"Mentir é um vício abominável. São as palavras que nos aproximam e nos tornam humanos. Se nos apercebessemos do horrível peso que representa a mentira, chegaríamos à conclusão que é mais digna do cadafalso do que muitos outros crimes. Uma vez adquirido o hábito da mentira, é impressionante constatar como é praticamente impossível desistir dele." Montaigne

Education

There is a critical aspect that every anarchist proposal should discuss: the secular education of every child. Modern democratic States have many flaws. They are inefficient and corrupt, they are ruled by oligarchies, hopelessly mixing corporation and government interests that have little to do with the needs of we the people. However they provide universal education. I wouldn't want any of us to have the sole word on the indoctrination of our children. It's a terrible danger to be brainwashed only by our parents. And yes, every person is a brainwashed human. What every one of us is, thinks and beliefs, depends on the society we are born into and the people we grow-up with. But diversity of views -- from our parents, our teachers, the mass media, the internet, our friends -- helps immunize us against radical pathologies of belief. Without a central organization to enforce universal education, which means structured education outside family or an inner-community domain, how this potential danger is dealt in an anarchic society?

A Chinese Tale

Once upon a time, there was a man who was riding in a horse drawn carriage and traveling to go take care of some affairs; and in the carriage there was also a very big suitcase. He told the driver to of the carriage to drive non-stop and the horse ran extremely fast. 

Along the road, there was an old man who saw them and asked, “Sir, you seem anxious, where do you need to go?” 

The man in the carriage then replied in a loud voice, “I need to go to the state of Chu.” The old man heard and laughing he smiled and said, “You are going the wrong way. The state of Chu is in the south, how come you are going to to the north?” 

“That’s alright,” The man in the carriage then said, “Can you not see? My horse runs very fast.” 

“Your horse is great, but your path is incorrect.” 

“It’s no problem, my carriage is new, it was made just last month.” 

“Your carriage is brand new, but this is not the road one takes to get to Chu.” 

“Old Uncle, you don’t know,” and the man in the carriage pointed to the suitcase in the back and said, “In that suitcase there’s alot of money. No matter how long the road is, I am not afraid.” 

“You have lots of money, but do not forget, The direction which you are going is wrong. I can see, you should go back the direction which you came from.” 

The man in the carriage heard this and irritated said, “I have already been traveling for ten days, how can you tell me to go back from where I came?” He then pointed at the carriage driver and said, “Take a look, he is very young, and he drives very well, you needn’t worry. Goodbye!” 

And then he told the driver to drive forward, and the horse ran even faster.

-- Chinese Tale