“I think there are good reasons for suggesting that the modern age has ended. Today, many things indicate that we are going through a transitional period, when it seems that something is on the way out and something else is painfully being born. It is as if something were crumbling, decaying, and exhausting itself, while something else, still indistinct, were arising from the rubble.”
Vaclav Havel, former President of Czech Republic
Editor’s note: This op-ed is by Will Patten, owner of Back to Basics, Strategies for the New Economy. He lives in Hinesburg.
I’ve kept this quote from Vaclav Havel on a scrap of paper in my wallet for several years. It articulates better than I can a feeling that things aren’t going well. Progress, as Webster defines it, is a “gradual betterment; esp. the progressive development of mankind.” But in recent decades we seem incapable of bettering our education and health care systems or even maintaining current infrastructure such as roads, bridges, airports and housing stock. We are consuming finite supplies of clean air, fresh water, arable soils, forests and oceans.
Is “progress” an idea whose time has passed?
Yes, is the answer, according to recent books from Bill McKibben, (“Eaarth”), Richard Heinberg (“The End of Growth”) and Chris Mortensen (“Crash Course”).
Two hundred years ago, when 1 billion people walked the earth, the discovery of easily accessed and abundant supplies of coal and oil signaled the start of the Industrial Revolution and fueled the notion of perpetual economic growth. Today there are 7 billion people in the world and fossil fuels must be pulled from the bottom of the ocean or wrung from shale deposits. While we may have tapped only half of the world’s supply of fossil fuels (reaching the peak of production) the remaining fuels will be increasingly expensive to extract.
So, our authors claim, an impending inability to supply a constantly increasing demand for affordable energy to power continual economic growth signals the end of the Industrial Revolution.
Compounding the inevitable energy crisis is a financial crisis that erupted in 2008 but which began in 1974 when the convertability of the American dollar to gold or silver was ended by Richard Nixon. The amount of money in the economy was then on to be determined by the Federal Reserve Bank and could be increased simply by loaning money through member banks to customers. Money is created through credit.
To supply a global economy with the liquidity required to produce perpetual economic growth, more and more money was loaned into existence that would be paid back – with interest – from the constant growth of the economy. With today’s debt underwritten by tomorrow’s growth, we now had a financial system that was entirely dependent on growth.
When tomorrow’s growth doesn’t happen and debts can’t be paid, we have today’s global financial crisis. According to our politicians and economists, the only solution to this crisis is to get the economy growing again. Growth will create jobs and jobs will service the debt that will fund the growth in consumption of a constantly growing population. More and more people buying more and more goods and services more and more often.
“Wrong” say McKibben, Heinberg and Mortensen. We have depleted the world’s energy assets that enabled 200 years of economic growth while gambling the world’s financial assets that we could maintain that growth. According to one source, maintaining our current rate of growth requires the resources of 1.44 planet earths (www.amiiko.com). We only have one.
When Richard Heinberg was asked recently where one should go to weather the oncoming storm he replied, “Vermont.” Vermont is indeed better prepared for the new economy than most states. Our total public debt (current and future liabilities) is the smallest of all 50 states. We have preserved natural assets that others have squandered. And we are well managed. Last year the Wall Street Journal ranked us as the 4th Best Run State in America. But we will not be able to dodge the future economic impacts like we avoided the housing or technology bubbles.
Here, then, are some of the impacts of the end of economic growth in world and opportunities they present to Vermont families and businesses.
1. The technology that permitted the global economy to move money and ideas around the world in nanoseconds will live on but the rising cost of oil and political instability will make the shipment of products around the world prohibitively expensive. Local economies will be strengthened by this development; local manufacturing will make a comeback. However, both manufacturing and retail will be hampered by reduced buying power and product selection.
2. The resiliency of local economics is attractive but Vermont continues to be the “leaky bucket” that was identified in the 2000 Jobs Gap Study. We “leak” billions of dollars out of state every year for food and energy that will be needed more urgently than ever to sustain the new economy. New state regulations will be needed to encourage “main street” investors to fund local generation of food and energy. The return on these investments will become more attractive as the market value of both food and energy increase.
3. Public and non-profit sectors of the economy will face a sharp decline in revenues. Income and consumption tax collections will decline. Colleges and universities will scramble to become affordable as students stop borrowing against their future. Workforce training will become the focus of secondary schools and continue in online, technical and community colleges. Reform of the health care industry will gain momentum. A collaborative partnership of private, public and NGO sectors will be needed to set the priorities and write the budgets that preserve the social infrastructure.
4. Behavioral change will be the hallmark of the new economy and businesses will be forced to adapt to new realities. As the economy contracts, cost management will be more important than sales growth; current customers more precious than new ones. Planning cycles will be shortened. Open book management will be widely adopted as employee compensation becomes a direct function of a company’s financial performance. To maintain cash flow, alternative currencies such as Vermont Sustainable Exchange will become popular. Labor and purchasing cooperatives will flourish and bartering will gain new acceptance.
5. The number of Vermonters with jobs will decrease as general economic activity declines, the public sector shrinks and technology continues to replace people. Employment will no longer serve as the prime distributor of social services such as health care and retirement plans. Self employment will increase and micro finance will be available for micro businesses. More importantly, quality of life will replace career as the definition of success.
6. Finally, it is important to recognize that Vermont is blessed with assets that the world increasingly covets. Fresh water, lush farm land and healthy forests are much more attractive assets today than credit default swaps and securitized mortgages. Vermont’s culture of community will enable the needed shift in our aspirations from Quantity of Wealth to Quality of Life. Our quality of life has long served as an engine of economic development and will become a key measure of new public policies. Protecting and replenishing Vermont’s precious assets will be essential to future economic vitality.
Opportunities will abound in the new economy for those Vermont families and businesses capable of changing established behavior.There will be life after growth. Gandhi said, “There is more to life than increasing its speed.” If we have to learn to slow down, Vermont is a pretty good place to do it.
