Dr Yunus’ track record is as incredible as his ideals are worthy. His present-day work began in 1974 when he loaned US$27 to a Bangladeshi woman who made bamboo furniture. Viewed as a ‘repayment risk’, traditional banks were not interested in considering such individuals for the provision of small loans. This experience was to prove life-changing for Dr Yunus.

Nine years later he established the Grameen Bank that has since disbursed US$6.6 billion in micro-loans averaging US$130 to ‘the poor’. Bypassing the traditional method of a customer needing to demonstrate collateral before a loan can be administered, the Grameen bank uses a customised approach to solidarity lending whereby each drawer must be in a five-person group that merely serves to encourage repayment. The results have been stunning. The bank boasts a repayment rate of 98.35 per cent and 97 per cent of its members are women. As Dr Yunus noted with a smile in his Sydney presentation, the global financial crisis showed who you can really bank on when it comes to repayments.

The Grameen model has now been replicated in over 100 countries, with proposals on the table for its extension to poverty-stricken cities in the ‘developed world’ such as Glasgow, in the U.K.

There is no doubting that Dr Yunus’ approach continues to challenge attitudes of business in both the ‘developed’ and ‘developing’ world. But does it challenge these views enough to ensure our longer-term sustainability as a species? Thinking ahead, perhaps Dr Yunus’ approach sets us up to hit a fundamental ceiling in which inequity-creating businesses continue to thrive, removing hope for ‘poverty alleviation’ and sustainable futures, because their image in the community is largely defined by publicly-embraced subsidiary social businesses.

Unfortunately, Dr Yunus’ presentation reinforced my frustration with what I see as ultimately atomistic arguments made by our ‘poverty champions’ (think Jeffrey Sachs, Bono, Hugh Evans). Thus, when the floor opened up to questions I asked:

“In a world with serious biophysical limits, how can any growth-based financial system – including micro-credit – ever be truly sustainable?”

Dr Yunus quickly replied that human creativity is an amazing thing and that I should not be so grim.

I sat down. Given the chance, I would have responded by saying that his answer is the kind men have been giving ever since anthropogenic global warming became accepted by mainstream audiences and the news on this front is not getting any better. At its heart, I believe Dr Yunus’ answer falls somewhat into the common habit of using the term ‘creativity’ as a pseudonym for ‘technological innovation’. In this sense, there is mounting evidence that such faith is misplaced; that the idea of de-coupling economic growth from environmental degradation at the speed required to avoid catastrophic effects from climate change is totally unrealistic. In addition to the problem that increased technological efficiency often equates to greater levels of associated consumption, as Professor Tim Jackson from the University of Surrey in the U.K. has recently shown:

“In a world of 9 billion people, all aspiring to a level of income commensurate with 2% growth on the average European Union income today, carbon intensities (e.g.) would have to fall, on average, by more than 11% per year to stabilize the climate, 16 times faster than they have fallen since 1990. By 2050, the global carbon intensity would need to be only 6 grams per dollar of output, almost 130 times lower than it is today…”

All said and done, I remain critically hopeful. I think Dr Yunus is inspiring and well-intentioned, and I like his concept of social business – similar to what we, in Australia, call not-for-profit social entrepreneurship. In fact, I like his concept so much that I propose we be brave enough to entertain the thought of a world in which every business is a social business.

From large multinationals to small cafes, what could we create if the ‘developed world’ unhooked itself from its addiction to quantitative growth and the ‘developing world’ was free from ideological and physical coercion to adopt unsustainable ‘development models’? As Dr Yunus is quick to note, when you take the individual profit motive out of it, anything becomes truly possible.

Guest contributor Donnie Maclurcan runs an Australian social business, is investigating nanotechnology and its consequences for global inequity and is working on a film about the limits to growth.

Related posts:

1. Development vs Growth
2. Growth Isn’t Possible
3. Wealth & Poverty

The chemist turned rogue economist Frederick Soddy was one of the first to lay out the difference of real wealth and, what he termed, “virtual wealth.” Today, “real wealth” is a term being used by the planners of the coming “new economy” to represent physical wealth in the real world. “Phantom wealth” (or Soddy’s “virtual wealth”) is the monetary representation, or store, of real wealth. It is being described as phantom because we have inflated our system to allow money to make more money – money out of thin air is virtual, phantom wealth. But isn’t that money is a store for real, physical value?!

So if we create new money, either by printing it, loaning it into existence, speculative trading, or some other devilish creation of the private banking system, do we also create correlating real wealth? No. This means as we allow money to earn more money, without ever being traded for a real, valuable good or service, we are devaluing those real goods. Banks are essentially stealing real wealth by creating more phantom wealth for themselves. (All the more reason for a Robin Hood Tax)

I just picked up one of Soddy’s books that outlines these concepts: Wealth, Virtual Wealth, and Debt. Soddy set a lot of the ground work for today’s ecological economists and his work was greatly expanded upon by Herman Daly, Richard Douthwaite and Nicolas Georgescu-Roegen. I am excited to read some of Soddy’s work and in researching his (spot-on) views of money, debt, and the banking system I found more great quotes on the subject I wanted to share.

Quotes on Money, Debt, and the Banking System

Frederick Soddy, Nobel chemist and rogue economist, once said:

“The whole profit of the issuance of money has provided the capital of the great banking business as it exists today. Starting with nothing whatever of their own, they have got the whole world into their debt irredeemably, by a trick…

“This money comes into existence every time the banks “lend” and disappears every time the debt is repaid to them. So that if industry tries to repay, the money of the nation disappears. This is what makes prosperity so “dangerous” as it destroys money just when it is most needed, and precipitates a slump…

“There is nothing left now for us but to ever get deeper and deeper into debt to the banking system in order to provide the increasing amounts of money the nation requires for its expansion and growth…

“An honest money system is the only alternative.”

John Adams, United States’ second president and founding father, once said:

“All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.”

Thomas Jefferson, United States’ third president, founding father, and a personal hero, once said:

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power (of money) should be taken from the banks, and restored to the people to whom it belongs…

“If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered…

“I hope we shall crush in its birth the aristocracy of the moneyed corporations, which dare already to challenge our Government to trial of strength and bid defiance to the laws of our country.”

Here’s a good one from left-field, Henry Ford, founder of the Ford Motor Company, once said:

“The function of money is not to make money but to move goods. Money is only one part of our transportation system. It moves goods from man to man. A dollar bill is like a postage stamp: it is no good unless it will move commodities between persons. If a postage stamp will not carry a letter, or money will not move goods, it is just the same as an engine that will not run. Someone will have to get out and fix it.”

Related posts:

1. The Creation of Money And Illusion of Wealth
2. The Money Fix
3. Wealth & Poverty

In addition to Professor Daly, the core rotation of authors at The Daly News includes Brian Czech (wildlife biologist, ecological economist, and author of Shoveling Fuel for a Runaway Train), Brent Blackwelder (former president of Friends of the Earth and founder of American Rivers), and Rob Dietz (environmental scientist and executive director of CASSE). (There is even a rumor that yours truly might be privileged enough to post along side these greats as a guest contributor!) You can access the blog on CASSE’s website or via RSS feed.

CASSE has also released an entertaining animated short called Add It Up that tells the truth about pursuing perpetual economic growth. The animation, produced by film students at the University of Southern California, is available on CASSE’s website and YouTube, as well as here:

For more information about these resources and other news about the steady state economy, please read the most recent edition of CASSE’s The Steady Stater newsletter (pdf)

Related posts:

1. The New Green Economy Day 2: Recap
2. New Green Economy Day 1: Prologue
3. Vote For CASSE!

Through the 50-100 posts I receive daily, I manage to pick out a handful of good ones and post on twitter (follow me), but some of these deserve some recognition on this blog. This monthly report is for the exciting things happening I just don’t have time to post about in-depth. Here are some cool things happening in the world:

Maryland’s New Alternative Metric: The GPI

Herman Daly’s home state has just instituted their version of the Genuine Progress Indicator. This alternative to the grossly inadequate GDP takes into account 26 factors, from incorporating the costs of crime to the costs of ozone depletion. The state is using the GPI as a tool to education the public and policymakers on the balance between costs and benefits of decisions regarding resource use.

As Governor O’Malley said, “The GPI will help us ensure that our economic growth will not come at the cost of our natural resources, and that they both support our progress toward a sustainable future and a better qualify of life for all Maryland families.”

21 Hours: Work Less, Live More

Part of the many policies of a steady state economy, adjusting the work hours for increases in efficiency is a policy that could revolutionize our society. Not only does this policy fight unemployment head-on by making more work available, it frees up time in our weeks to do something really important – live.

The new economics foundation’s new report, 21 Hours: Why a shorter working week can help us all to flourish in the 21st century outlines how the average time worked in Britian, 21 hours, should  be the new standard. As nef explains, “A ‘normal’ working week of 21 hours could help to address a range of urgent, interlinked problems: The average overwork, unemployment, over-consumption, high carbon emissions, low well-being, entrenched inequalities, and the lack of time to live sustainably, to care for each other, and simply to enjoy life.”

The IMF Rethinks Macroeconomics

The International Monetary Fund (IMF) has not only recently acknowledged that macroeconomic policy may have “exacerbated the recent financial crisis,” but also has begun to rethink those policies.

Olivier Blanchard, the IMF’s chief economist, published a paper, “Rethinking Macroeconomic Policy” (pdf), stating that better economic policies might include increased government involvement, higher inflation, and help for the poor. The IMF’s typical policy of telling governments that less intervention and low inflation were powerless to prevent the “Great Recession.” Great news for those of us hoping for changes in the IMF and World Bank.

Related posts:

1. Blueprint For A Better World
2. Consuming Our Way To Prosperity
3. Happy Planet Index 2.0

Contraction Might Do Us Good

In just over a month another gathering of minds will discuss the many aspects of an economy not devoted to growth for growth’s sake. The 2nd Conference on Economic Degrowth for Ecological Sustainability and Social Equality will take place March 26th through 29th in Barcelona, Spain.

Whilst I would love to be in attendance, I can neither afford the plane ticket (nor do I like the idea of so much plane travel) or the associated costs of attending. However, Donnie Maclurcan, a prominent steady-stater we’re trying to get working with us on Post Growth, will be attending as well as at least one member of CASSE.

The goal of the conference is to “develop clear policy proposals and strategies for action on degrowth and define the key open questions and research agenda.” They are hoping to create a publication from the conference and publish articles in scientific journals – I hope they do just that.

Degrowth is an interesting movement, a step most likely necessary in transition to a sustainable economy, it is one oriented towards the contraction of the physical size of the economy as a means of creating social justice and ecological sustainability. It is focusing on people instead of technology for the prosperity of society.

To learn more about the Degrowth movement, please check here, here, here, here, and here.

Related posts:

1. The New Green Economy
2. New Green Economy Day 1: Prologue
3. Sustainable Scale

By taxing a minuscule amount of each financial transaction (we’re talking half a percent – 0.5%) you could raise up to $500 billion or more a year, reduce speculative investing (the kind that promoted the recent Great Recession), and put the banks in check (those guys we just bought out with taxpayer money that made $5 million bonuses).

Check out the video here:

Related posts:

1. Federal Reserve Transparency
2. Accountability in Media?
3. Financial Policy the Definition of Insanity

Can We Separate GDP Growth And Ecological Limits?

Next time you run into a classically trained economist (happens all the time, right?) start talking with him/her about ecological limits. They might squirm a little, but probably respond as trained: with some zombie-like responses about “decoupling.” What is decoupling? Basically, it’s a concept of being able to continue growing economic output without a corresponding increase in environmental impact.

The overall idea is that improvements in production efficiency allow you to make more with less. Theoretically we can increase our efficiency and make more stuff using the same amount of resources and/or generating the same amount of pollution.

Applying this concept to renewable resources would be incredibly beneficial. We could use wood, for instance, in a more sustainable fashion if we decoupled the economic growth from resource use and did so under the ecological limits of forest regeneration.

As you might have already guessed, there are quite a few flaws with this concept. You might have also noticed that it seems at first glance to have a broad definition. In general, however, there are two types of economic decoupling: relative and absolute. The first type appears to have a cursory chance of working, the latter is fundamentally impossible.

Relative decoupling refers to a decrease in environmental intensity per unit of economic output. This means the impacts on resources decline relative to GDP, but they don’t decline completely – just grow slower than GDP. Absolute decouple occurs when ecological intensity declines in “absolute terms,” or an overall decrease as GDP increases.

Relative Decoupling

Inputs in production (aka, resources and natural capital) are costs to the producer. So it seems reasonable to argue that in a free market economy producers will push to reduce costs by increasing their efficiency. This leads one to believe that over time we should use less materials to produce more – relative decoupling. One example of this is found in the amount of energy needed to produce each unit of economic output, which globally has fallen over the last 50 years.

However, this tread is only apparent in some developed nations. Outside of the US and Europe this number has been less consistent, in many cases increasing. This makes it difficult to say for certain that a free-market, growth-centered economy will lead to reduced energy intensity, or relative decoupling.

As one might think, as the overall energy intensity of the global economy has decreased, so has our emission intensity (remember, this is per unit or per dollar of GDP). Unfortunately, this tread has begun to falter, and in the last decade has been slowly increasing. This is disconcerting to those fearful of continuing economic growth in a finite world. As Tim Jackson puts it in his book Prosperity Without Growth,

“For decoupling to offer a way out of the dilemma of growth, resource efficiencies must increase at least as fast as economic output does. And they must continue to improve as the economy grows, if overall burdens aren’t to increase. To achieve this more difficult task, we need to demonstrate absolute decoupling. Evidence of this is much harder to find.”

Absolute Decoupling

In the face of the overall decrease of energy intensity, we must remember that our total economic output has increased – the growth economy is the whole reason this blog exists! Taking the example of emissions we can see that in general our emission intensity per unit has decreased over the last half century, yet our total emissions have steadily increased. Even in the face of arguable relative decoupling, our growth has seriously outpaced improvements in efficiency.

Today’s global emissions are 40 percent higher than the Kyoto base year, 1990, and 80 percent higher than 1970 levels. While we claim emission cuts in some developed nations, these results are deceiving at best. The decrease in emissions is always connected to simply moving production out of the country, along with the pollution it generates. European countries that have decreased their emissions have failed to account for increased imports and the carbon emissions associated with them.

This leads us to a critical point: the important thing is the global statistic. Worldwide our resource use has increased. In the case of cement production it has doubled; structural metal extraction is increasing quicker than GDP. While some argue that developed economies make improvements in air pollutants like sulphur dioxide, they seem ambivalent to other indicators like CO2 emissions or species lost.

The overwhelming truth is that for every unit of growth we use more resources and create more waste – decoupling is not happening, nor does it appear to have any hope of ever happening.

Something Doesn’t Add Up

Economic equations can be a bit of a drag, but there are some that don’t completely suck. One in particular has been around for 40 years, developed by Paul Ehrlich and John Holdren. The Ehrlich-Holdren Equation states that impact of human activity is the product of three factors: population, affluence, and a technology factor (the impact per dollar spent). It’s a simple equation: I = P*A*T.

In order to sustain a growing population and growing affluence (economy) we force ourselves to rely on decreasing T, our impact per dollar (or increasing our efficiency). This is where the “simple equation” gets tough. In order to reduce, for instance, our carbon emissions to stabilize atmospheric CO2 at 450ppm (a weak target) with a growing population and economy we’d need to make some seriously unprecedented technological improvements to efficiency.

Assuming population growth slows, and the economy only grows at a low rate, we’d still need to improve efficiency some ten times faster than we have been doing in the past. That is a low-end estimate, if population and/or economic growth expand faster than expected we could need up to 21-times current efficiency improvement rates – or more. Unfortunately, the latter is more likely necessary as there is virtually no political will behind stabilizing population or economy for the most part.

Here’s another crux to the idea that we can continue to improve efficiency and save our precious growth economy: the first law of thermodynamics. We are physically constrained by the fact that efficiency cannot increase forever. We can only get so efficient. Even if you can get past the historical precedence showing efficiency can’t keep up, and you are willing put all your eggs in the basket of a miraculous technological increase, you still will have to face the  laws of nature in the end.

Absolute decoupling is not supported by the history. Even relative decoupling is founded in false statistics. Without decoupling growth from environmental impact we will be forced to face the limits of our finite planet. If we fail to adjust our course, the Earth will take care of it for us. And no one will like that outcome, so let’s try an make a peaceful, amiable transition to a stable economy and sustainable society.

The answer is to seek out a society with a stable population, a stable economy, and increasing technological efficiency (as far as we can push it) to decrease environmental impacts. This will make a better world for those living in it. We can pursue what Tim Jackson calls “a credible vision of what it means for human society to flourish in the context of ecological limits.”

A major source for this post was Tim Jackson’s amazing work Prosperity Without Growth. I highly recommend reading it. If you don’t have time for 215 pages, then download the free report. If you’re attention span is even shorter at least read the summary of the report!

Related posts:

1. Growth Isn’t Possible
2. Uneconomic Growth
3. Citizen or Consumer? A Year in Reflection

Growth Will Kill Us All, If The Hamster Doesn't Get Us First

The new economics foundation (nef) has released a report title Growth Isn’t Possible, which is available for free download (pdf here) or purchase in a bound copy. The low-down is simple: in order to maintain the international goal of avoiding an increase of 2°C in global temperatures from carbon emissions we must stop economic growth. Basically, economic growth will kill us if we don’t “change our economy to live within its environmental budget.”

nef figures that with a growth rate of only 3%, the global economics “carbon intensity” would need to decrease by 95% by 2050 from 2002 levels. This requires an average annual reduction of 6.5%, which is even optimistically impossible in the best of circumstances. All of the “magic bullets” in the public discourse: carbon capture, nuclear, geo-engineering, et cetera are “dangerous distractions from more human-scale solutions.”

Sure, our carbon intensity has nearly flatlined in the last few years, but we need to reverse this trend not flatten out or encourage growth. Technological efficiencies can help, but physical laws limit the amount of efficiency you can pump out of any system. Worse yet, we’ll never match growth in efficiency with even mild economic growth that our system has been designed to need. It’s simple mathematics, which neoclassical economists have never been good at in the first place.

A broader support for community-scale projects like decentralized energy systems are needed over the pipe dreams currently getting all the political attention and funding. nef’s research shows that in order to prevent runaway climate change we need to change. An economy that took into account environmental thresholds will be more likely able to not only avoid runaway climate change but provide improved human well-being in the future.

As nef’s Andrew Simms points out on the Triple Crunch Blog,

“The banking crisis taught us that when things look good on paper, if the underlying accounting system is faulty, it can conceal high risk and imminent disaster – as Jared Diamond put it in Collapse, his book about societies throughout history that fell by wrongly estimating the resilience of their environmental life-support systems. What looks like wealth might just be a one-off fire sale of irreplaceable natural capital. Ecologically speaking, he writes, ‘an impressive-looking bank account may conceal a negative cashflow’.

To avoid collapse the economy has to operate within thresholds that do not critically undermine the things that we depend on on a daily basis. They’re often interconnected, like a sufficiently stable climate, productive farmland, fresh water and a healthy diversity of plants and animals.

On climate change, a new piece of research by the New Economics Foundation thinktank looks at which rates of global economic growth are compatible with prevention of a dangerous level of warming.

It shows that, even with the most optimistic likely uptake of low-carbon energy, it is seemingly impossible to reconcile a growing global economy with a good likelihood of limiting global temperature rise to 2C, the agreed political objective of the European Union, and widely considered the maximum rise to which humanity can adapt without serious difficulty.”

We Need A Sustainable Economy First, or Must We Believe In The Impossible Hamster

A steady state economy is the only means of staving off the worst climate change can bring while preserving jobs, improving economic stability, encouraging income equality, and providing a human society that can flourish indefinitely on Earth. The alternative of growth addiction will mean less biodiversity, increased resource scarcity, and now nef has shown it will mean the worst case scenarios of climate change.

Questioning economic growth may seem way out of the mainstream, if not also politically unwise, but it is the only way we can preserve human society past the next century. As odd as it might be to question continued economic growth, stranger still is the complete acceptance of it in the face of natural systems that deny the same growth. An example that the nef Triple Crunch Blog references is the hamster.

“From birth until around six weeks old, a hamster doubles its weight each week. If, it didn’t stop and continued doubling each week, on its first birthday, you would be looking after a very hungry nine billion-tonne pet hamster. There is of course one thing in nature that grows uncontrollably. It’s called cancer and tends to kill its host. So when those growth figures come out, let’s hope the government scans the results for what they really mean.”

Watch the “Impossible Hamster” video from nef here:

The Impossible Hamster from new economics foundation on Vimeo.

*Subtitle reference to Dr. Strangelove subtitle

Related posts:

1. Beyond Talk: Climate Action Now
2. Climate Change Follow-Up: Wake Up!
3. Uneconomic Growth