There Is No Recovery... It's All Been Just More Debt
There’s plenty for DR readers to disagree with in this newly-released video from the Post Carbon Institute which examines whether or not we’ve entered a “new economic reality.” It’s especially timely given current swings in financial markets… including this morning’s 400-point free fall in the Dow (so far)… and the ongoing correction in the economy.
The thesis of the clip is that economic growth as we know it is over… and when looking at new alternatives it makes sense to note which options are most sustainable.
It’s without a doubt touchy-feely, and it’s also light on detail to support a specific new economic pathway — which makes the whole exercise seem a bit unrealistic — but, it clearly notes that the economic problems we face are grounded in the overwhelmingly consumer- and debt-driven culture. As well as a political worldview that puts GDP growth ahead of almost all else.
Is there another yardstick worth considering? It’s the only reputable one we’ve got now, but perhaps there ought to be.
This is from a recent article by the video’s author Richard Heinberg:
“Although soaring numbers lead to financial euphoria, they can hide social ills like growing inequality; moreover, GDP fails to distinguish between waste, luxury, and the satisfaction of basic human needs. Perversely, GDP often rises during wars or after environmental disasters, due to increased government spending. Despite criticisms, economists and policy makers have stuck with GDP—perhaps because tracking a single number makes their jobs easier.
“But now, the US may have reached its practical GDP limit. The bursting of a once-in-a-lifetime credit bubble, the maxing out of consumer borrowing and spending capacity, and tightening global resource constraints (showing up as stubbornly high oil prices) have caught national economic output in an undertow. Much of the rest of the world is being drawn in, with Greece, Ireland, Portugal, Spain, and Italy swirling ever closer to the drain. During the past two years, Americans bought an anemic recovery—a few hundred billion dollars’ worth of GDP growth—but at the cost of trillions in added government debt.
“Now, as Washington descends deeper into partisan acrimony, efforts to generate further growth with yet more debt have become political orphans that no Republican and few Democrats will claim as their own. If the “recovery” was all smoke and mirrors, we’ve just run out of mirrors.”
And the video:
More on the potential alternatives to GDP that Heinberg considers — including the Genuine Progress Indicator, or GPI, which adjusts GDP for resource depletion, income distribution, crime, leisure, infrastructure lifespan, and so forth — can be found in his Just International post on how GDP is dead.