Myth of Perpetual Growth is Killing America

Editor’s preamble: It’s refreshing and even somewhat reassuring when a major stock market website runs an article like the one below….

Everything you know about economics is wrong

Permaculture Student

A stray dog stands on a rubbish dump at the seafront
in Sidon, southern Lebanon.

Yes, everything you know about economics is wrong. Dead wrong. Everything. The conclusions of economists are based on a fiction that distorts everything else. As a result economics is as real as one of the summer blockbusters like “Battleship,” “The Avenger” or “Prometheus.”

The difference is that the economic profession is a genuine threat, not entertainment. Economics dogma is on track to destroy the world with a misleading ideology.

Why? Because all economics is based on the absurd Myth of Perpetual Growth. Yes, all theories and business plans based on growth are mythological.

Economists are master illusionists who rely on a set of fictions, fantasies and forecasts that emanate from a core magical mantra of Perpetual Growth that goes untested year after year.

And yet it’s used to manipulate the public into a set of policies and decisions that are leading the American and the world economy down a path of unsustainable globalization and GDP growth assumptions that will self-destruct the planet.

Denial? We’re all addicted to the Myth of Perpetual Growth

Yes, economists are addicted to this ideology. Trapped deep in their denial, can’t see the problem, or admit it, or if they do, they are unable to stop themselves, see past their own myopic world view. They’re mercenaries working for capitalists who pay their salaries, and expect them to support the capitalist’s bizarre Myth of Perpetual Growth.

Worse, the public also bought into the myth. Yes, you believe everything you learned in college about economic theories, all the textbooks, everything you read in the daily press, the government reports, all those Wall Street analysts’ predictions relying on studies prepared by economists with credentials.

But everything you think you know about economics … is wrong. Dead wrong. And until economics acknowledge this, the discipline is on a self-destruct path.

Why? The science of economics is not science. Yes, it looks scientific with all the fancy math algorithms and computer models that economists use, but all that’s just window dressing to make the economist look scientific and rational.

They’re not. Their conclusions are pre-ordained, fabricated, based on their biases, personal ideologies and whatever their employer wants to prove to manipulate consumers, voters or investors to buy what they’re selling.

‘What do you call an economist with a prediction? Wrong’

Don’t believe me? Go look at USA Today’s quarterly surveys of 50 economists projections of GDP growth. Invariably off by a large margin. And Barron’s Big Money poll? In past reviews we’ve seen a wide gap in forecasts by the bulls and bears.

Bottom line: Whether it’s Roubini or Roach, Kudlow or Krugman, you can’t trust the predictions of any economist. Ever. Best warning: That famous BusinessWeek editorial several years ago headlined: “What Do You Call an Economist with a Prediction? Wrong.”

Unfortunately, we live in a world of capitalists who thrive on the great Myth of Perpetual Growth, endless growth, ad infinitum, forever, till the end of time.

But driving the economists’ growth myth is population growth. It’s the independent variable in their equation. Population growth drives all other derivative projections, forecasts and predictions. All GDP growth, income growth, wealth growth, production growth, everything. These unscientific growth assumptions fit into the overall left-brain, logical, mind-set of western leaders, all the corporate CEOs, Wall Street bankers and government leaders who run America and the world.

But just because a large group collectively believes in something doesn’t make it true. Perpetual growth is still a myth no matter how many economists, CEOs, bankers and politicians believe it. It’s still an illusion trapped in the brains of all these irrational, biased and uncritical folks.

No-win scenario: Damned if we grow? Damned it we don’t grow?

Capitalism itself is at a crossroads. Growth is capitalism’s sacred cow but it’s “grow or die” theory doesn’t work anymore. With us since 1776, it’s being challenged by a “new god of reality” that’s flashing warnings of an emerging new reality from critics, contrarians and eco-economists. This war is pitting old and new economists:

Grow OR Die. Traditional economists (pro-capitalism): We’re told we need 3% GDP growth to support the next batch of 100 million Americans. We believe it on faith. Drill Baby Drill. Buy stuff. Get new jobs to fuel growth. We’re out of control. Exploding growth fuels demands as the rest of the world adds 2.9 billion new humans, all chasing their “American dream.”

Grow AND Die. New eco-economists (environmentalists): They see Big Oil’s destruction of our coastal economies, the rape of West Virginia’s coal mountains, the unintended consequences of uncontrolled carbon emissions and they ask: “When will economists, politicians and corporate leaders stop pretending Earth’s resources are infinitely renewable?”

Yes, our world is at a crossroads, facing a dilemma, confronting the ultimate no-win scenario, because the “Myth of Perpetual Growth” is essential to support the global population explosion. But all this “Growth” is also killing our world, wasting our planet’s non-renewable natural resources. “Eternal Growth” is suicidal, will eventually destroy Earth. We’re damned if we grow. Damned if we don’t.

Future economists will be forced into a No-Growth Economics

But will economists change as long as they’re mercenaries in the employ of Perpetual Growth Capitalists? No. It will take a new mind-set. The difference between the mind-set of traditional economists and the new eco-economists is simple: Traditional economists think short-term, react short-term, pursue short-term goals. New eco-economists think long-term.

Initially this may seem overly simplistic, but fits perfectly. Here’s why:

Old traditional economists — short-term thinkers: Traditional economists are employees and consultants for organizations with short-term views — banks, big corporations, institutional investors, think-tanks, government. They all think in lock-step, driven by daily returns, quarterly earnings, annual bonuses. Short business and election cycles are more important than what happens a decade in the future. Their brains are convinced: If we can’t survive the short, long-term is irrelevant.

Environmental economists — long-term thinkers: New eco-economists see, think and plan for the long-term. They know traditional economists’ and capitalists’ thinking is setting America up for more and bigger catastrophes than the Gulf oil spill and the last meltdown. The “Avatar” film is a perfect metaphor: Soon capitalism will exhaust Earth’s resources forcing us to invade distant planets searching for new energy resources.

Actually something more immediate will force change much sooner. You are not going to like it: United Nations and Pentagon studies predict population growth (the main driver of all economic growth) will create unsustainable natural-resources demands as early as 2020 with global population exploding from seven to 10 billion by 2050. So expect Depression Era austerity, unemployment and a new no-growth economy.

Will we change? In time? Plan ahead? No, we won’t wake up without a collapse. We know the Myth of Perpetual Growth is pure fiction. But we also know our leaders, capitalists, economists and politicians all live in a collective conscience that must believe in this bizarre myth in order to justify everything they believe about the future, about progress, about income and wealth increasing, about a better life.

So we will all hang on… until a catastrophe shocks our world, forces us to wake up and let go, newly aware of the absurdity of the Myth of Perpetual Growth on a planet of finite resources. And it will happen sooner than you think.

~~~~~

Originally published on MarketWatch.com

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17 thoughts on “Myth of Perpetual Growth is Killing America

  1. ok ok. lets start with ourselves. Not?
    Hands up who use useless teabags?
    We are considering getting a tea bag free zone ourselves to help the planet. Just imagine the mountains of tea bags consumed by 2050….if everyone does it that is..let me calculate per year. 10 biillon times 365 ( not counting the extra day every 4 years) timeX let say three times a day. Anyone got a calculator? need another cuppa witout milk or sugar not bag. Just the tea pot from home grown semi fermented, very light roasted Oolan tea.

  2. Paul, you’ve nicely summed up the state of affairs and I agree it will take a collapse before a change of course occurs.

    It’s been said that economics is one part mathematics, one part politics and one part voodoo, and that pretty well describes the politically motivated, subjective unscientific mess of a discipline that it is.

    The premise of having a finite, closed system with limited resources (the planet earth) capable of producing continual growth is so absurd it defies plain logic, as well as the laws of physics. The fact that such a concept can go unquestioned, be taught in universities, and furthermore be used by governments in formulating their policies for running their nations really shows that our societies are victims to the “cult of expertism”, where people will believe any claptrap presented by someone who is an “expert”. This is a seriously sorry state of affairs.

    It’s high time people start questioning the way things are, and thinking about solutions. We can take responsibility for our own survival, rather than practising learned helplessness and waiting for those in power to provide all our needs, or even worse, to save us. How can they save us when they can’t save themselves…?

    By adequately preparing before a collapse happens, we have some choice in how the future unfolds. People, especially urban populations, have been systematically deskilled with each successive generation, and we need to start reskilling ourselves with real practical skills that will grant us a reasonable degree of self-reliance.

    We also need to wind back the social decay of our modern societies, where individuals have become separated, isolated, alienated and purposeless. We need to reconnect with each other to form intentional self-sufficient communities that permit a synergy of our efforts, supporting each other and increasing our chances of survival. This is how humans, being social creatures, have always existed in the past, it’s the only way we actually managed to survive up to this point, and this is our natural behaviour.

    We have a way out, only if we choose to take it…

  3. Great article! I love it. And thank you. I appreciate that there are people like you willing to speak up and be realistic, not always warm and fuzzy. :)

  4. Actually, the academic system should have internal checks and balances to self-correct.

    So, if the discipline of economics (I deliberately avoid the term “science”) doesn’t get its act together and cannot meaningfully separate sound work from ideological fiction, it should be up to nearby disciplines that also have the technology to study complex systems to look into this and assess the situation. I am thinking especially of statistical physics here.

    If that does not happen – and this is what I think many scientists do not realize – there is a very real danger that science loses society’s trust on a broad front. And that would to some extent even be justified.

    I’ve myself always been very outspoken about some important cases of plainly evident non-science trying to hide from attacks in the ivory tower of “academic economics” – but by and large, I do not have the impression that a majority of scientists considers it an important duty to expose fraudulent pseudo-scientific reasoning, in particular in economics.

  5. This is a very important point, and I want to expand it further. First a few clarifications. You say, “All economics is based on the absurd Myth of Perpetual Growth.” That should be clarified as “all mainstream economics” just as you then use “eco-economists” as an exception.

    You also use the date of 1776 as a start date of this myth, but the birth of the USA, is not specific or informative enough. Instead we should use the date of 1694, which was the founding of the Bank of England.

    Why that event? England lost a war with France and wanted to regain/retain its position as dominant global power. To do so it needed much more money to finance its military, navy, and government expansion. It did not want to be limited to what credit it could obtain through the natural markets…so it nationalized the credit market by creating the world’s second central bank.

    In natural society, money is the most marketable commodity, and credit is loaning money at a rate determined by the supply and demand for credit. A central bank, such as the Bank of England (or Federal Reserve in the USA), maybe “capitalist” in some definitions of capitalism, but it is the opposite of a free market.

    Money is like language. It is naturally created by societies without and before government. Governments (central banks) replace natural money with fiat money only for their own benefit, so they can expand their power faster than they could with natural money. Ah, there is the mainstream economic profession’s origin of the myth of perpetual growth.

    Fiat money is just pieces of paper that have no value apart from the weapons of government pointing to the head of society saying this must be accepted as money. However, it can’t perfectly control the degree of value, and that is where “respectable central banks”, unlike that of Zimbabwe or Weimar Germany, exercise enough self control to stop hyperinflation.

    So what are central banks doing with money? Instead of a natural market determined rate of interest, they dictate a rate. This explains how we should define “actually existing capitalism” instead of theoretical capitalism. Such capitalism is when the foundational layers of money and credit are controlled by a central bank, but most other layers on top of that are open/free markets. However, since that fundamental layer is not free, all apparent freedoms that are built above it are not nearly as free as they may seem. It is like in George Orwell’s 1984 where the government has altered language with Newspeak. Language is fundamental, just as money is the language of economics.

    In order to stop hyperinflation, while still transferring wealth to capitalist government, a central bank perpetually inflates the money supply

    In Colonial America, tobacco was often the medium of exchange, i.e. money. Sometimes it was wheat, or even whiskey.## So if the “money supply” increased, it did so because people went to the effort to create the valued items to increase it. In contrast, when central banks increase fiat money, that does not increase goods of value. A 10% increase in the fiat money supply means that the previous owners have had their money decrease by 10%.

    So when economists from Milton Friedman to Paul Krugman say they want a stable increase in the money supply of about 3% per year, that is a 3% transfer of wealth per year to Wall Street and government. Why 3%? Because they can get away with that without causing hyperinflation.

    But economists don’t want to focus on money supply as inflation, instead they prefer to leave that to “the man behind the curtain” and focus on prices. So in the 1920s, productivity was increasing such prices should have been falling due to increased efficiency. Instead, the Federal Reserve increased the money supply to keep prices stable. The father of mainstream economics, Irving Fisher, thought such fine and said there was no bubble in 1929, and proceeded to lose his family fortune in the crash to prove he believed it.

    But there is another layer of the perpetual growth myth. Without perpetual growth, then all that government “sovereign” debt cannot be repaid. Market value would become less than book value…much, much less, like in Greece. Ah, but as you’ve discovered…it isn’t likely to happen with perpetual growth either, because that is impossible as it pushes against natural limits.

    Finally, here is why there are no mainstream economist exceptions: The Federal Reserve pays major stipends to economists all over the world to buy their allegiance and cement the Federal Reserve’s legitimacy among economists as a guild.

    What about exceptions like Prof. Hayek? Even though he won a Nobel Prizegl economics, the University of Chicago where he taught refused to even let him teach in the Economics department! So he was not mainstream.

    ##Historical tangent: the “Whiskey Rebellion” of 1792 was because Washington’s tax on whiskey made it effectively impossible for people to use whiskey as an alternative currency. You’ve read too few historians if you don’t recognize that the Whiskey Rebellion was crushed to keep control over currency.

  6. Economic growth = production of more economic goods (things scarce relative to demand). Many goods have no bad environmental effects, or are actually environmentally beneficial, e.g., swales, seminars, water tanks, fruit trees, youtube videos, chisel plows, etc to name a few familiar to permaculturalists.

    “Growth” can be good or bad, so I see no sense in being “anti-growth.”

    Additionally, wealth/economic growth is necessary for people to be able to afford environmental protection. No such thing as a poor environmentalist, as they say. https://mises.org/daily/5586/

  7. Unfortunately Thomas, academic systems can be as dogmatic, unscientific and self-serving without any self-regulation like any other system in existence. I’m not talking about the “hard sciences” like physics and chemistry or all the other evidence-based sciences here, think more the “soft sciences” such as psychology and the social sciences such as sociology, anthropology and I would also include economics in this category. Dig deep enough and you will find some real surprises.

    Sigmund Freud’s theories of psychosexual development in psychotherapy were basically a figment of his imagination, there was not a shred of physical evidence for anything he suggested, yet his theories were promulgated taught through universities worldwide.

    To quote Paul Churchland’s “The Engine of Reason, the Seat of the Soul” (1st ed.). MIT Press. 1995. pp. 181.:

    “How such an elaborate theory could have become so widely accepted – on the basis of no systematic evidence or critical experiments, and in the face of chronic failures of therapeutic intervention in all of the major classes of mental illness… – is something that sociologists of science and popular culture have yet to fully explain.”

    Current evidence based advances in evolutionary biology are undermining some of the nonsensical concepts in anthropology, and evolutionary psychology is making great progression currently and is laying waste to a lot of dearly held concepts in the social sciences, but yet academia resists the change, even with evidence, because their pseudo-scientific subjective ideas really have foundation in political idieologies or some other “ism” to which they have some personal investment in.

    The unsound nature of the predominant economic model (Keynsian economics) embraced by governments worldwide has been exposed by the financial commentator Peter Schiff who subscribes to the Austrian school of economics. In the early 2000’s he warned the world about the current economic crisis that would hot the US, and made many accurate predictions which were of course ignored – see http://en.wikipedia.org/wiki/Peter_Schiff.

    When the reent financial trouble stsrted in the US, some of the economists saw Peter Schiff’s “I told you so” reminders as clearly pointing out that their economic models were completely wrong, some lecturers and many students began to question what was taught as gospel in universities. But as expected, many economist dug their heels in, preferring to twist reality to fit their mental preconceptions.

    The majority of scientists are too busy working in their own fields (and struggling with research grants to stay in work) to look at pseudosciences in their midst. That’s why people need to exercise some healthy skepticism and not take everything put out by academia as gospel.

    Even pseudo-scientific nonsense such as “invasion biology” has crept into the biological sciences, where the underlying premise is that there are all these nasty exotic species that want to come into our countries and lay waste to our native ecology, it’s all a siege mentality perspective where the proponents have no qualms about saturating the environment with toxic herbicides such as glyphosate, killing the very ecosystem they are trying to protect. These ideas are being taught right through our colleges and universities, unquestioned, and when the graduates take up government roles in planning, environment and horticulture areas, we get this dogmatic mindset permeating government, which defies the curent worldwide agreements among ecologists as to what constitutes an ecosystem.

    Anyway, the important point here is that we have not evolved much as a society from ancient times as we like to pretend we have or like to think, our primal tribalism is covered by a thin veneer of modernisation, but we have simply replaced our chiefs and kings with political leaders, and substituted the high priesthood who were the guardians of arcane knowledge with scientists, academics and experts. People follow without questioning any of it, and we wonder why we are in the situation that we are! If it wasn’t so sad it would be very amusing!

  8. We (collectively the planet) were able to recover from the impending disaster of the disappearance of the ozone layer only because the severity of the problem was recognised early and action was taken early, and because the chemical reactions involved happen quite quickly.

    This is not the case with the current problem. The chemical reactions have been going on for a long time and reversing them will also take a very long time. The only real control on population growth, rightly identified as the basic cause of all this, historically has been war and epidemics or severe climate change. Sadly, we can expect all three.

  9. I read this whole article waiting for the author to provide a fact. But just read one harsh word strung after another with no substance. Really just a horrible factless article.

  10. I loved all that talk about globalisation, early in the piece of our history, as the motor for continued growth. It made me laugh because I saw the western world get right behind developing countries joining the treadmill of economic progress. Currencies were floated for a global finance market. All were carrying that old colonist belief of growing wealth through development. I felt that this course would mean having to sacrifice the exploitations of the past in which uneven wealth grew. Ultimately, as we share wealth and markets, we in the west will have to come to terms with lower income and how to make good with less resources. I prefer the view of globalisation that did not mean that everyone’s wealth would increase but that everyone’s wealth would equalise. This is our challenge now. Australians will have to get used to lower ‘standards’ of living as they are in US and Europe. But don’t forget that Bhutan is reportedly on its way to having the highest state of wellbeing even if incomes are low. There are other ways of being ‘rich’.

    Now, maybe economics can get clever enough to start to value the system that it capitalises on. At the moment I think some economist are asking themselves how they can keep capital circulating. That’s a start that might lead to some innovative economic modelling for a sustainable future.

  11. Economics is absurd, but I think you can play along with the absurdity and have perpetual growth. And that there are advantages to it. We can increase our wealth, and thus our GDP in art, science, welfare, knowledge, perpetually, and it’s a good thing.

    If I do my own housework and my neighbour does his, economic growth in our little system is stable. If we pay each other to do each other’s, our GDP doubles. Both of us are just as well off as before, and the extra environmental and resource costs are nil. If the trade is a bit more sophisticated – I make him a cake and he makes me a sonnet, GDP has doubled, we’re both better off, and extra resource costs are nil. Economic growth is silly and absurd, but not necessarily of itself the problem.

    Economics is capable of “getting” the problem – that there are a whole heap of resources that up till now we haven’t been smart enough to count, so they seemed infinite (primitive maths – 1,2,3, many). And because we falsely believed they were infinite, supply had no cost. So they had no price. So they became externalities in the production and trade of stuff (carbon as a big example) that have a huge huge huge real cost but no price. And now we’ve realised they’re not infinite and need to be counted in the cost of production, and actually now the cost is really quite high because not only are they not infinite but actually pretty close to the limit…Hey folks, that freebie you’ve been skimming is actually worth thousands of dollars…

    And people and corporations who have been getting them for nothing are screaming blue murder at the idea that they should be(should have all along have been) paying for them. The political and social problem is to manage the disruption, change, unrest, upset, of setting huge huge huge increases in the price of air, water, space, airwaves, and a way to collect the price, to truly reflect their value. But, if that can be done, we can have perpetual growth. There is no limit to the number of art pieces Jeff Koons might make, or what they might sell for. Or, closer to home, how much quality early childhood education we can give, or what it might sell for.

  12. Jon, the facts are pretty obvious, and if you think there aren’t enough facts in this article, then I thoroughly recommend you read Peter Schiff critiques of Keynsian economics from an Austrain school economics perspective. The guys predicted the Us current financial woes a decade a go, if you want a detailed technical perspective, look at his work and you should be more than satisfied.

    Linda, similarly, you can’t play along with a fallacy without negative consequences. Peter Schiff understood the problems of the Keynsian model and forecast what would happen if the government based its economics policies on that model, and no surprises, he was right, a crisis eventuated. It’s not that we’ve discovered hidden resources or hidden costs, it’s more serious than that though the big financial players are playing down the seriousness of the issue the best they can, the reality is that the system is nosediving into a crash because of unsound unscientific foundations, more like a plane with a wrongly designed flight system, its something that would never have worked in the first place, now we’re discovering we’ve been duped…

    All the US has managed to do is delay their economic woes by selling their treasury bonds to China. It’s only because other countries still consider US currency of any value and consider their bonds worth buying that the US economy is staying afloat. They are selling off their trillion dollar debts, and becoming dependent on the countries, so the US is dependent on China’s money to keep itself running as a nation.

    The warnings have been sounded, but alas, they are falling on deaf ears. With the kind of complacency and denial that exists, the crash will come, and it will come hard. Watch this space…

  13. Have a look at ‘Griftopia’ by Matt Taibbi, it provides an explanation as to why economic growth is important to some. People may bag this book as being rubbish, but to my knowledge no lawsuits arose from this publication. Given the sensitivity and power of the money in the community that Taibbi has exposed, one conclusion is available,ie: Taibbi’s publication holds truth to at least a standard beyond probability. In a nutshell the masses are being ripped dry. His analysis of the global financial crisis, especially the mortgage crisis and subsequent bail out in the US is an absolute eye opener. The jails/gaols couldn;t hold the number of financial crooks. An interesting read absolutely relevant to the above article.

  14. Another critic of orthodox economics, Steve Keen, from University of Western Sydney, has had some profile recently. He was one of the few economists who expected the 2008 global financial crisis and its aftermath. His book Debunking Economics (Zed 2011) is a bit technical, but worth the read. His main target is the moronic “logic” of neoclassical economics (standard dogma of “perfect competition” and static equilibrium in western universities), with a lot more critical detail than the article above. Debt expansion and financial speculation (facilitated by banking sector) are the prime culprits, eventually collapsing and leading to debt-deflation. But neoclassical economics ignores the role of debt in the real world (effectively, someone lends, someone borrows so net = zero). Inevitably neoclassical economists and central bankers like Ben Bernanke (USA) were incapable of seeing the GFC coming, explaining it and responding to it.

    Good interview (worth a couple of goes, because it’s fairly fast) is at http://podcast.radionz.co.nz/sat/sat-20120526-0815-steve_keen_economic_crisis-048.mp3

    His website is http://www.debtdeflation.com

    Worth thinking about in context of permaculture design principles…

  15. One more fundamental explanation:

    Modern central-bank-capitalism is a debt based system. Central bank money is created into existence by debt–selling government bonds.

    There is an equally famous debt based system called — a Ponzi scheme. The two systems share fundamental similarities. The only way a Ponzi scheme can forestall collapse is to perpetually grow faster with new victims than it pays out to early participants. Bernard Madoff showed that it could go on for a couple decades with just one person knowing the facts.

    This is how a central bank operates, but instead of just one person at the helm, it is a semi-united effort of all industrialized central banks. Futher, they have financial control over nearly all the wealth in the world. So the fact it can survive hundreds of years does not remotely prove it is sustainable. It merely proves they have so far managed to encourage on average growth faster than they have expanded the money supply.

    There is a specific financial predictor that shows this is collapsing, discovered by the late Dr. Kurt Richebacher. Namely, the declining productivity of each dollar of new debt, sometimes referred to as the change in debt to change in GDP ratio.

  16. I believe the real problem is not growth but the type of growth. Without growth we would not be able to converse on the internet. We would not have the technology to know that we are wrecking the planet.
    The picture of the Lebanese tip tells it all. Too much of the world’s human and natural resources are being squandered on “stuff” which we are encouraged to want but don’t really need.
    Example: Is anyone reading this short of clothing? Well our shops are desperate for us to buy more clothing.
    You can stroke your ego by buying a car which does 3 times the legal speed limit. Will you drive it that fast? Not for long.
    Ireland and the USA got into financial strife because the only thing that the people with money could think of doing was building more houses that people either did not need or could not afford.
    Governments need to work out how to keep everyone happy and employed in growing the quality of life and not the quantity of “stuff”.

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