The debt crisis: plan B comes from oBjection to growth

For the last few years we have been living according to the ebb and flow of the “debt crises”. Recently, Greece has shaken the Euro-zone, whilst the state of Spanish, Italian, Hungarian or Irish public finances is deemed very precarious by the most enlightened economists. Even the U.S.A has had to increase their debt level to avoid bankruptcy, which is worthy of a Hollywood scenario. The attempts to salvage the damaged economic model has served to avoid a general panic and to safeguard the order of things; including its oligarchy.

There is strong media pressure to push us to swallow explanations concerning risks and to impose on us measures of austerity as a matter of necessity. Left and right politicians, economists and media commentators never cease to remind us that there is no such a thing as a plan B. It is a matter of implementing harsher austerity measures and praying for a return to strong economic growth in order to get out of this slump, and, above all, to protect the current economic and financial systems; the new religion of our times.

In order to address the situation, austerity plans appear to be the solution of choice for a return to strong growth, according to the mantra of the executives. Meanwhile, the risk of social unrest are increasing and becoming more tangible.

Let us now reflect on the following statements:
1) The current economic model stems from and is addicted to growth.
2) Unlimited growth in a world with limited resources is absurd, and impossible.
3) Predictable and predicted crises signify the failure, if not the end of the current economic model.
4) Similar causes produce similar outcomes; we are about to embark on the second stage of this financial – and socio-political – crisis.
5) A ‘plan B’ based on Degrowth is possible.

1) The current economic model stems from and is addicted to growth.

Our economic model is based on our private and public indebtedness. It is addicted to economic growth. In truth, when a bank, either public or private, lends money, its motive is to invest in a profitable venture, not only to recover the money but to receive some interest. The pattern is then repeated, with increased lending and greater and greater risk-taking.

During the last decades, we have witnessed the ‘financiarisation’ of the economy; that is, a gulf between the real economy (exchanged goods) and financial exchanges (share markets and financial products). We have observed the emergence of financial bubbles similar to the Subprime crisis but also an explosion of private debt (consumption credits, real estate) and public debt, whilst inequalities are growing and an ever-more-powerful oligarchy is still in charge.

This flight forward, facilitated by a lack of controls and safeguards and the private independent status of the central banks, has postponed the collapse of the system.
Thanks to the Subprime crisis and consumption credits of the early 2000s, consumption (i.e. growth), has been artificially boosted. Living standards have been maintained so that we can continue living our current lifestyles if we were living in a world where growth could be sustained forever. Unfortunately the planet does not offer an unlimited supply of resources that we can ransack at will forever.

2) Unlimited growth in a finite world is impossible

This fact seems to be the case, except perhaps for in the minds of orthodox economists. The limits to growth and the unsustainability of this economic model of growth have been demonstrated since the late 1960’s and throughout the 1970’s by the work of economists such as Nicholas Georgescu-Roegen or from the Meadows Report. Furthermore, this statement coincides with the research into oil resources, which have culminated in the Peak Oil Theory.

Peak Oil Theory is being proven; it is only the date of the peak that is disputable. Furthermore the peak concept applies to all other non-renewable resources (coal, oil, minerals, metals….). In the beginning of the exploitation of oil deposits, industrials prioritised liquid oil deposits; high in energy, easily extracted, and very lucrative: it was just a matter of digging a hole, linking up some pipes to start pumping: raping the earth whilst piling up the profits. When the money-well starts to dry up, a new source of wealth must be found to feed the ‘mega-machine’. Once these deposits have been squeezed to the last drop, it is more complicated to extract the black gold and it involves the exploitation of deposits which are less energetically efficient (i.e. are harder to exploit – more and more energy is required to extract less and less oil). The example of using shale gas and oil shale a hydrocarbon sources is only one of many examples.
But, since the 1970s, very few new oil deposits have been found, and in many countries the peak has been reached. At the planetary level, the peak is or is about to be reached: this means that production is stagnating – before the inevitable decrease.

Our economic model is based on growth which depends on consumption and therefore on production. To produce, one needs resources, mainly energy, hence oil. And, when the limits of production have been reached, prices rise, often pushed up by speculation.

3) Predictable and predicted crises: signs of the end of the model.

In July 2008 the price of a barrel was over $ 140; it was around $ 20-30 in the early 2000s.
Peak Oil experts who study peak oil and its consequences think that we may have reached the peak of oil production in 2006, hence the rise in price and the knock-on effects on the economy.
This economic turnaround created a reduction in consumption, a decline in the demand for oil, and, subsequently of its production.
The system has been saved by an injection of billions of dollars into the banks in order to prop up the all-mighty-growth paradigm which was responsible for causing a peak in production in the first place!

Since we have reached the peak of production of all non-renewable resources, we need to prepare for phases of recession which will require massive financial injections into the market. These are followed by timid economic stimuli hypothetically aimed at returning the economy to strong economic growth; the ‘only path’ towards a happy tomorrow. Given the circumstances, these stimulation packages may create a surge in demand and in the price of raw minerals, creating – one more time –  waves and waves of more and more damaging recessions. We can see that the worn out system creating some  periods of “pause” which carry heavy social and human costs, and rebound to ‘normality’ less and less often.

4) Similar causes produce similar outcomes; we are about to embark on the second stage of this financial – and socio-political – crisis.

Since the beginning of the year oil prices have gone up considerably (to $120). The same goes for most minerals such as copper.
This time around it affects public debts: Greece, Spain, Portugal, and Italy. In fact the entire Euro-zone is under threat. Last summer the USA (the first economic world power) just avoided defaulting. A conditional deal has been reached to lift the ceiling for borrowing. This is just trying to delay the inevitable.
Autumn is going to be shaky in view of the austerity plans and a belief in the return to growth on the horizon.
The austerity measures trigger a marked social downturn and instability since they affect the most disadvantaged. The aim of austerity is to return to economic growth, which, once reached, will create an even more devastating crisis. Capitalism is chasing its tail whilst the gap between the haves and the have-nots continues to increase.

5) Plan B; as offered by objectors to growth.

As with the Third world debt, used as a tool of economic interference to enforce privatisations, economic plans for the benefit of the northern powers, we are told again and again, that there is no other choice: what is needed is more and more austerity. ‘We must tighten our belts’. Refusing would be irresponsible… Thus all opposition and resistance, be they in Greece, in Spain or in France, are pushed aside.
In truth, what can be done? During the last few years growth objectors have been talking about the economic meltdown and have foreseen its demise. Without mentioning the social, political and environmental crises that ensue, we are in the middle of an anthropological crisis. We have reached the physical and cultural limits of a system of growth for growth’s sake and of ever increasing consumption, in the hope of saving the almighty capitalist system.

Yes a plan B exists: Degrowth: we offer a re-appropriation of politics and, matter-of-factly, of the economy, in order to promote a roadmap for transition.

Political will: Down with oligarchy, up with democracy: suspension of illegal debts and postponing of the repayment of public debts, which, regardless, will never be settled, and higher taxation for the better off.

The most urgent step is to reconquer the creation of money and the central banks in a democratic manner. We must opt out of the religion of the ‘holly Economy’ and ‘holly Money’; it is a matter to put the ‘Clergy’, the banks and the rating agencies back where they belong. The economy and money are tools for realising political projects and not the other way around. We must question the paying back of these debts, postponing, even refusing them conditionally.
We have reached an historical fork in the road – more than ever we need to seize the political field and define our life choices in order to engage in a transition to new economic models which would be sustainable and desirable.
This requires political will, and also, more participation. Waiting for the established order to change, refusing to think about a plan B amounts to supporting an inegalitarian system. It means supporting the winners in this system: the oligarchy!

Neo-liberal economists explain to us that economy and money is just a game. It is about investing and taking risks. Sometime we win and sometime we lose. Up to now, only the poorest, the most disadvantaged, in the South and in the North as well, have been the losers. Oligarchy always wins, as with the post 2008 crisis, with the bail out of the banks to the tune of trillions of dollars.
This time, the financial oligarchy has been the main player, putting all its hope into the dream of infinite growth…..and lost without acknowledging it!

Therefore, we propose:

  • Not to pay any portion of a debt which is illegal.
  • To stop any creation of private money to make it public money under the control of public banks (local and national) and to facilitate the creation of local currencies linked to transition projects such as the relocalisation of the economy.
  • To set up an income ceiling beyond which any revenue is taxed.
  • To set up a Unconditional Autonomy Allowance (UAA): a political, social and economic tool of transition and emancipation that would allow for re-politicisation of society. This allowance could take the form of a basic income, together with rights of access to free services (health, education), of usage (water and energy) and of local alternative currencies (local biological primary goods and services).

Nota bene

The growth Objectors’ proposals are akin to the Keynesian approach, particularly with the role public institutions play in regaining control of the monetary field to pursue different outcomes: not in order to kickstart the economy, hoping for a return to almighty economic growth, but to build new economic models that are both sustainable (reduction of the ecologic footprint but an increase in resilience and local sustainable productions) and desirable (reduction of inequalities and increase in democracy, culture, solidarity and conviviality).

These proposals are being developed. Stay tuned…

And also: Degrowth: Plan B for the crises (mp3)

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