Our mismanaged world economy today has many of the characteristics of a Ponzi scheme. A Ponzi scheme takes payments from a broad base of investors and uses these to pay off returns. It creates the illusion that it is providing a highly attractive rate of return on investment as a result of savvy investment decisions when in fact these irresistibly high earnings are in part the result of consuming the asset base itself. A Ponzi scheme investment fund can last only as long as the flow of new investments is sufficient to sustain the high rates of return paid out to previous investors. When this is no longer possible, the scheme collapses—just as Bernard Madoff’s $65-billion investment fund did in December 2008.
Although the functioning of the global economy and a Ponzi investment scheme are not entirely analogous, there are some disturbing parallels. As recently as 1950 or so, the world economy was living more or less within its means, consuming only the sustainable yield, the interest of the natural systems that support it. But then as the economy doubled, and doubled again, and yet again, multiplying eightfold, it began to outrun sustainable yields and to consume the asset base itself.
In a 2002 study published by the U.S. National Academy of Sciences, a team of scientists concluded that humanity’s collective demands first surpassed the earth’s regenerative capacity around 1980. As of 2009 global demands on natural systems exceed their sustainable yield capacity by nearly 30 percent. This means we are meeting current demands in part by consuming the earth’s natural assets, setting the stage for an eventual Ponzi-type collapse when these assets are depleted.
As of mid-2009, nearly all the world’s major aquifers were being overpumped. We have more irrigation water than before the overpumping began, in true Ponzi fashion. We get the feeling that we’re doing very well in agriculture—but the reality is that an estimated 400 million people are today being fed by overpumping, a process that is by definition short-term. With aquifers being depleted, this water-based food bubble is about to burst.
A similar situation exists with the melting of mountain glaciers. When glaciers first start to melt, flows in the rivers and the irrigation canals they feed are larger than before the melting started. But after a point, as smaller glaciers disappear and larger ones shrink, the amount of ice melt declines and the river flow diminishes. Thus we have two water-based Ponzi schemes running in parallel in agriculture.
And there are more such schemes. As human and livestock populations grow more or less apace, the rising demand for forage eventually exceeds the sustainable yield of grasslands. As a result, the grass deteriorates, leaving the land bare, allowing it to turn to desert. In this Ponzi scheme, herders are forced to rely on food aid or they migrate to cities.
Three fourths of oceanic fisheries are now being fished at or beyond capacity or are recovering from overexploitation. If we continue with business as usual, many of these fisheries will collapse. Overfishing, simply defined, means we are taking fish from the oceans faster than they can reproduce. The cod fishery off the coast of Newfoundland in Canada is a prime example of what can happen. Long one of the world’s most productive fisheries, it collapsed in the early 1990s and may never recover.
Paul Hawken, author of Blessed Unrest, puts it well: “At present we are stealing the future, selling it in the present, and calling it gross domestic product. We can just as easily have an economy that is based on healing the future instead of stealing it. We can either create assets for the future or take the assets of the future. One is called restoration and the other exploitation.” The larger question is, If we continue with business as usual—with overpumping, overgrazing, overplowing, overfishing, and overloading the atmosphere with carbon dioxide—how long will it be before the Ponzi economy unravels and collapses? No one knows. Our industrial civilization has not been here before.
Unlike Bernard Madoff’s Ponzi scheme, which was set up with the knowledge that it would eventually fall apart, our global Ponzi economy was not intended to collapse. It is on a collision path because of market forces, perverse incentives, and poorly chosen measures of progress.
In addition to consuming our asset base, we have devised some clever techniques for leaving costs off the books—much like the disgraced and bankrupt Texas-based energy company Enron did some years ago. For example, when we use electricity from a coal-fired power plant we get a monthly bill from the local utility. It includes the cost of mining coal, transporting it to the power plant, burning it, generating the electricity, and delivering electricity to our homes. It does not, however, include any costs of the climate change caused by burning coal. That bill will come later—and it will likely be delivered to our children. Unfortunately for them, their bill for our coal use will be even larger than ours.
When Sir Nicholas Stern, former chief economist at the World Bank, released his groundbreaking 2006 study on the future costs of climate change, he talked about a massive market failure. He was referring to the failure of the market to incorporate the costs of climate change in the price of fossil fuels. According to Stern, the costs are measured in the trillions of dollars. The difference between the market prices for fossil fuels and an honest price that also incorporates their environmental costs to society is huge.
As economic decisionmakers we all depend on the market for information to guide us, but the market is giving us incomplete information, and as a result we are making bad decisions. One of the best examples of this can be seen in the United States, where the gasoline pump price was around $3 per gallon in mid-2009. This reflects only the cost of finding the oil, pumping it to the surface, refining it into gasoline, and delivering the gas to service stations. It overlooks the costs of climate change as well as the costs of tax subsidies to the oil industry, the burgeoning military costs of protecting access to oil in the politically unstable Middle East, and the health care costs of treating respiratory illnesses caused by breathing polluted air. These indirect costs now total some $12 per gallon. In reality, burning gasoline is very costly, but the market tells us it is cheap.
The market also does not respect the carrying capacity of natural systems. For example, if a fishery is being continuously overfished, the catch eventually will begin to shrink and prices will rise, encouraging even more investment in fishing trawlers. The inevitable result is a precipitous decline in the catch and the collapse of the fishery.
Today we need a realistic view about the relationship between the economy and the environment. We also need, more than ever before, political leaders who can see the big picture. And since the principal advisors to government are economists, we need either economists who can think like ecologists or more ecological advisors. Otherwise, market behavior—including its failure to include the indirect costs of goods and services, to value nature’s services, and to respect sustainable-yield thresholds—will cause the destruction of the economy’s natural support systems, and our global Ponzi scheme will fall apart.
Adapted from Chapter 1, “Selling Our Future,” in Lester R. Brown, Plan B 4.0: Mobilizing to Save Civilization (New York: W.W. Norton & Company, 2009), available on-line at www.earthpolicy.org/index.php?/books/pb4.
Wednesday, October 14, 2009
Yesterday at our MIT seminar, we heard a presentation from Michael Specter of The New Yorker, who will soon be out with a book called Denialism: How Irrational Thinking Hinders Scientific Progress, Harms the Planet, and Threatens Our Lives. I won’t say more about its contents yet, but suffice it to say that while this book may sound a lot like The Republican War on Science or Unscientific America–all the way down to the cover image with the trusty test tube/beaker–it actually appears to be pretty different, in a good way. I’m hoping I’ll have a lot more to say about it soon.
Meanwhile, I’ve just gotten an email notification that an even bigger scientific publishing event is happening: Timed for the IPCC-Copenhagen Summit, famed climatologist James Hansen will be out with a book entitled Storms of My Grandchildren: The Truth About the Coming Climate Catastrophe and Our Last Chance to Save Humanity, with an initial press run of 100,000 copies by Bloomsbury USA. I can’t yet seem to find a good image of the book, so I’ll do without one here–but it sounds like Hansen is going to upbraid the world, and the U.S., for moving way too slowly and lamely on climate change, and basically lay it all out there–if we don’t do something really radical, it’s going to be too late. No doubt this is going to be a very, very important statement.
So look out for both books…..
This picture, titled "Guardians in the Mist," nicely illustrates the role that newspapers SHOULD but so often fail to play -- helping people navigate through the fog generated by shills like Patrick Moore. Image by Coast Guard News via FlickrThe pros and cons of nuclear energy merit intensive study and debate, that's for sure. But one thing that derails the debate faster than anything else is deception, such as when paid propagandists hide their status behind an "astroturf" (fake grassroots) title, as Patrick Moore successfully did yet again, this time fronting an article into the Salem Statesman-Journal while pretending to be simply an interested citizen:
Dr. Patrick Moore, co-founder and former leader of Greenpeace, co-chairs the Clean and Safe Energy Coalition (CASEnergy) a grassroots coalition which promotes the economic and environmental benefits of nuclear power as part of a green energy economy.The reality is that Moore, whose doctorate is in Ecology, not in Physics or Nuclear Engineering, spent a brief few years involved with Greenpeace and has spent the next few decades trying to profit from that stint by selling himself and his opinions to industry for "green credibility."
By failing to perform a few seconds of checking on the background of a "contributor" and publishing the misleading attribution whole, the Statesman Journal offers yet another exhibit in the long line of examples of why we're going to miss newspapers like the SJ less than we thought.
Salem is becoming ever more hostile to pedestrians and bicyclists. In just the past couple years alone, the city has
- Abandoned its responsibilities for sidewalks, leaving miles of them in terrible condition with huge gaps and gigantic discontinuities that make them all-but-impassable for wheelchairs and dangerous to walkers and people with children in strollers;
- Put all its efforts into maintaining and expanding roads for cars and coveting yet more asphalt for autos such as a third bridge over the Willamette;
- Regularly putting the convenience and pleasure of car drivers ahead of the needs of pedestrians and bicyclists, such as the recent privatization-in-all-but-name of the railroad crossing that connected State Street with Riverfront Park. The Council has decided to give that crossing to a developer and force pedestrians to walk well out of their way south and then north again to reach the Carousel . . . but hey, it adds more parking for the Carousel, so it's a good deal, right?!
UPDATE: It's not like we don't know any better. We could learn from examples like this:
Minn. city's get-healthy effort called a successFitness project adds years to lives of Albert Lea residents, organizers say
. . . The 69-year-old's radical lifestyle change came as part of the "Vitality Project," an endeavor spearheaded by AARP and United Health Foundation that organizers say has added several years to the lives of Albert Lea residents through improved diet, exercise and living habits.
With organizers' help, the city crammed five years of sidewalk and bike trail construction into a year to make exercise easier for its 18,000 residents. Restaurants added healthier menu options and grocery stores showcased wholesome foods. People snacked on fruits and veggies and ate less fast food.
Schools stopped celebrating birthdays with sugary treats and started setting up "walking buses" that allowed kids to walk to and from school together with adult supervision. Employers gave workers time to exercise.
Organizers say the first-of-its kind experiment added an average 3.1 years to the longevity of about 2,300 residents who calculated their lifespans by answering 36 lifestyle questions dubbed the "vitality compass.". . . Mayor Mike Murtaugh said the city had little expense other than some staff time. . . . "A lot of health professionals are buying into the idea that this is a problem we're going to have to tackle in a lot of different ways," Nelson said. "This idea of a community approach is something a lot of people are really getting excited about."
Outside Lakeview Elementary on Tuesday afternoon, adults shepherded a large group of children headed home in a "walking bus."
Judy Dilling, 60, was escorting her two grandchildren the mile to their house, which didn't happen before the project. Dilling also has joined a group dubbed the "Walkie Talkies" and now walks the mile-and-a-half home from her part-time job instead of driving.
"It's invigorating," she said. . . .
An inn situated to provide rest to weary travelers about a day's travel from nearby cities. Image by Visit Hillsborough via FlickrGiven the emerging maintenance crisis with roads -- America can no longer afford to allow heavy trucks designed for long-hauling on the interstates to keep destroying most roads, many of which were the descended from deer-paths, this is an excellent idea.
As we begin to head down the economic slope, our decline caused by peak oil, we will necessarily have to stop allowing heavy trucks and vehicles to destroy all our paved roadways (starting with the smaller ones and then ultimately kicking them off the interstates when those are converted to electric rail and power distribution rights-of-way). We simply cannot afford all the road maintenance, which is why Michigan is among the states that are depaving some roads entirely.
The first step to eventual electrification of all long-distance travel could very well be limiting trucks to interstates only, and using all the "blue" (second-tier) cross-country highways for human- and battery-powered travel modes.
If you travel with your eyes open, you will often note that there were hamlets or inns situated about a day's ride or walk through much of the country. We're probably heading back to that -- with inns and hostels situated about an easy day's biking apart (or a full-charge distance for a lightweight EV). Roads last a lot longer when you get the heavy trucks and SUVs off them.