Category Archives: Economy

Flying Pigs: Reality-Optional Economics and other Cockamamie Stories Infecting the Body Politic by James Howard Kunstler 

It’s a tragic fact of history that sometimes societies lose their bearings.

It’s a tragic fact of history that sometimes societies lose their bearings.

The total tonnage of economic malarkey being shoveled over the American public these days would make the late Dr. Joseph Goebbels (Nazi Minister of “Public Enlightenment and Propaganda”) turn green in his grave with envy. It’s a staggering phenomenon because little about it is conspiratorial; rather, it’s the consensual expression of a public that wants desperately to believe things that are untrue, and an economic leadership equally credulous, unmanned, and avid to furnish the necessary narratives that might preserve their jobs and perks.

By “economic leadership” I mean the consortium of business executives, government officials, academic economists, and media disseminators—and even some bloggers and financial advisers. Some of the latter may be “talking their book,” since they may manage other people’s money and need those other people to believe in the soundness of markets, true or not. And some of the former may be motivated by the fear that even a little erosion of trust in the system could lead to a collapse of the system basted together by little more than blind faith in currencies and dubious “innovative” instruments. But most of these characters are mainly just flat-out delusional.

It’s a tragic fact of history that sometimes societies lose their bearings. They make terrible choices and bad things happen. It doesn’t have to take the form of a conspiracy, but rather a consensus—that is, a simple agreement between people in charge (and the public subject to their rule) about where that society will direct its priorities and make its investments. Proof of this was the behavior of national leaders and the public in the aftermath of the 2008 financial crash.

The system was hugely burdened by the debris of loans gone bad, a lot of it packaged into fraudulent bonds. The biggest banks in the nation were implicated in the creation of these frauds and left holding a lot of their own bad paper when the music stopped. Clearing the debris would have restored structural integrity to the banking system. Prosecuting financial criminals in the executive suites of the banks would have dis-incentivized racketeering and control fraud.

American leadership allowed neither restructuring nor prosecution. Banks (except for Lehman Brothers, the unloved “fall guy”) were not only prevented from failing, they were stuffed with taxpayer bailout money, plugged into a new Federal Reserve carry-trade racket (ZIRP), given a green light on unlimited accounting fraud (FASB 157), and allowed to continue their old rackets in new ways, e.g. the new bundled rental payment bonds, “covenant-lite” junk bonds, and new iterations of shady collateralized loan obligations. And, of course, not one bank executive was prosecuted (not to say jailed) for criminal shenanigans that cost the US economy $22 trillion according to the US General Accounting Office.

The public went along with all this to the degree that few of their political representatives were turned out of office, nor was any effective political resistance mounted besides two movements that proved to be weak and ineffectual: Occupy Wall Street and the Tea Party. (David Brat, who unseated House Majority Leader Eric Cantor in the recent Virginia primary, tried and failed to get backing from the Tea Party.)  President Obama, who first campaigned on “hope and change” in the very moment when Wall Street blew itself up, and did absolutely nothing to change the racket-riddled banking system afterward, was rewarded with re-election in 2012. The obvious conclusion is that America, from top to bottom, didn’t want to restructure anything about our national life—and still doesn’t. It wants to stay stuck where it is in a very perilous moment of history, and it has enlisted a laundry list of fallacious beliefs to support its “do nothing” spirit.

Number One Fallacious Belief: The USA has unmatched exceptional entrepreneurial spirit.

It is in the interest of healthy adults to remain sane, even when the powerful matrix of society is going crazy around them. I don’t think you can overstate the capacity of societies to go crazy. We still marvel at the murderous cruelty of Germany and Russia in the mid-20th century, the sickening slide into industrial barbarism, and the technical proficiency they achieved in pursuit of their lunatic ends. And what provoked those terrible journeys into collective madness? Isn’t it part of the horror that no explanation seems to suffice. They were both losers in the First World War. Boo Hoo. Many societies sober up when they lose a war. Both opted for organized mass murder instead. Joseph Stalin summed up Russia’s collective psyche in that period when he said, “One death is a tragedy; a million deaths is a statistic.” The regime that promoted that particular view of the human condition lasted seventy years and then dissipated like a mere bad dream, an extremely fortunate outcome for Russia, and not so easy to account for, either.

And so what of US in this new century, faced with the gravely serious problems of resource scarcity, ecocide, climate uncertainty, demographic stress (overpopulation), cultural breakdown, and financial bedlam?

We are on the fast track to crisis until we prioritize truth over comfort.

From our friends at Peak Prosperity. For the entire article go to peakprosperity.com. July 9, 2014.

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One Less Car on the Road by Jim Tull

Drivers—and their passengers—drive because the flow of our systems (a torrent really) compels us to drive.

Drivers—and their passengers—drive because the flow of our systems (a torrent really) compels us to drive.

She knew it would fit. And she knew me as well as anyone did. In big letters on the back, the T-shirt read ‘ONE LESS CAR ON THE ROAD’. A crusading environmentalist biking alone past hundreds of motor vehicles stuck in traffic, a moving billboard: ‘ONE LESS CAR ON THE ROAD’. With politeness and gratitude for the thought, I declined the gift.

I passed on the prospect of being hollered and honked at, or worse. Just adds to the peril. Deeper, though, the shirt and message presents a distorted picture of both the problem and the solution in the too-many-cars department. The underlying assumption is that individual behaviors are the problem, and that individual behavioral change is the solution. This assumption is okay, on one level, but of very limited use. Clearly and more specifically, the message implies that the environmental crisis is reducible to:
(a) the ignorance and/or insensitivity of car drivers (the problem); and
(b) “why don’t you park your SUV and get on a bike like me, nooneyhead?” (the solution).

I bike for many reasons. It supports good health, I’m out in the open, freer to experience the environment (sometimes ugly, sometimes beautiful) and wave to friends, who can see me. Parking is convenient. Biking is very energy efficient and very clean. It is also less expensive—or quicker—than car driving, depending on the unit of measurement: time or money. This rationale needs elaboration. I average around 12 miles per hour in the city. On average, a typical, single car owner travels somewhere between 4 and 9 mph on average when all the purchase and maintenance expenses associated with the car are converted to the owner’s time working a job to get the money. Then actually driving the car takes more time (and money and then more time). Pretty slow, all totaled.

And then there’s huge pollution and resource depletion costs, collectively incurred. Car driving isolates people. Roads divide communities, plaster the Earth, allow toxic water to run right into rivers. Over 30,000 Americans die each year from car accidents. Even wars and military preparedness expenses should be factored in (to protect precious oil). Very hazardous. If all car owners had to absorb all the collective costs as well as their personal car expenses, they’d find themselves driving in reverse most of the time. Though a good bicycle is expensive, the cost in money, converted to hours, to support my bike habit doesn’t even slow me down to 11 mph.

Despite all the good reasons to bike rather than drive, it’s wholly inadequate and dangerously beside the point to blame or lecture the drivers (especially since many cyclists like me drive plenty as well!). Our culture relentlessly conditions us to notice and prioritize individuals and institutions and to assume that the isolated behavior of these agents can explain our problems in full. Systems thinking, in contrast, looks between and around individuals, institutions and events for patterns of systemic behavior. Seeing and understanding systems and the power they have to shape and drive what we do can make individual behavior much more understandable and predictable. And also forgivable, if and when forgiveness is necessary or appropriate.

Drivers—and their passengers—drive because the flow of our systems (a torrent really) compels us to drive. Our economic system, structures and patterns require car driving in all but a few places. The shortage of reliable mass transit is part of this pressure, but the incentives to drive run much deeper: government subsidies to oil, infrastructure, and car companies; where we (have to) work; the work we do; the location of houses (especially suburbs) and the location of stores, especially food stores. The forces of globalization, though permitting many to work from home, also lure many to move unbikable distances. In the U.S. in particular, self-contained communities, walkable and bikable, are relics of a slower past.

By all powers, go ahead and bike. It’s better, on balance. The personal and collective benefits of one more cyclist on the road accrue with each convert. Good. But campaigning to get individuals to buck the systemic flow is an insufficient solution to our environmental or social crises. Changing the flow is a more promising alternative. We start with the reality that the vast, vast, vast majority of us more or less do what the other people around us are doing. Nearly every one of us are good at adding our bodies neatly to the end of a line of other lined-up people, even when it just seems to be heading in the direction we want. We herd well, go with the flow. Humans are often chided for our sheepishness. “If only we can break people out of the driving habit (and bike seventeen miles down a highway to work everyday), we’re so lazy!” OK, on one level, we are lazy and, it appears, becoming lazier. But there’s no changing people in this regard in any direct or immediate fashion. Maybe one or two, usually for short time periods. It’s not the laziness we have to account for as much as the conformity.

The brighter side of the conformity coin is that we are all just as likely to adopt positive habits as long as the systemic flow is with us and enough people have adopted. Create systems and structures that make walking and biking (or mass transit) the paths of least resistance for getting round, and ordinary people with the usual mix of virtues and vices will stop driving. Something close to this describes cities like Boston and New York, still choked with car traffic, but also filled with residents who don’t drive, for reasons of convenience more than holiness.

It’s difficult to overstate how disposed the people of our culture are to pick out individuals and institutions to blame for social problems—and also to solve them. The CEO of one of the biggest banks reportedly confessed in the wake of the ’08 crash that he was well aware that his bank’s reckless investment frenzy was pushing the economy to the brink, but that he couldn’t help participating in and thereby reinforcing the frenzy. His competitors were in it full tilt, his bank was raking in the green and anyway he would quickly be replaced if he applied the brakes. No excuse? Yes, on a personal level, no excuse. There is a box within which personal accountability is very real and very meaningful. But outside the box of personal ethics, the CEO—and the rest of us—were pawns of a systemic tragedy. Clearly, our economic system selects for greed, so acquisitive types are rewarded and rise to positions of power and wealth. Our economic system also must grow simply to maintain itself. Put these systemic features together and bubbles such as we experience (bigger these days, and more frequent) are highly predictable. The exponential growth of our money supply begged for all the accumulated dough to get busy somewhere, somehow, anywhere, anyhow. This systemic necessity compelled the invention of impenetrably complex and risky investment tools, lending money to anyone in any manner.

The “too much greed” chorus doesn’t cut very deeply into the crisis, looked at this way. Only slightly more systemic-minded are those who blame lax oversight and regulation. But given the pressure to grow and invest, the laxity itself was predictable. In a system, the parts self-organize, or dance with each other, to serve the aim of the system (like growth), and generally the parts choreograph themselves with remarkably little awareness of the total effect. Certainly, tighter oversight of investment practices and regulating policies would manage the frenzy some. But the fact is, as of this writing, the Federal Reserve is lending 2.8 billion each day of fresh new dollars into the economy to keep a recession from dropping down into depression. This suggests that solving the crisis will require more than policy change and firmer oversight.

****

The world is deeply indebted to Mahatma Gandhi for demonstrating the power of nonviolent resistance in overthrowing British rule in India. But his greater contribution to the social and ecological crises of both his day and ours is arguably his “Constructive Program”—his insistence on creating sustainable, local, very small scale economies. Many thinkers and doers since Gandhi (and before him) have developed theoretical frameworks and practical tools for redirecting the systemic flow that has been flushing us all into greater inequality, insecurity, and ecological ruin on a global level.

Clearly, failure to adequately redirect the current flow could spell the end of humanity in the near term, but the promise of the global ‘relocalization’ movement lies primarily in its systemic orientation. More precisely, this movement is more radical than prior liberation and libertarian movements because of how it contextualizes the essential roles large scale political and economic institutions play in sustaining the global industrial growth system. Yet relocalization is not ideological in any traditional sense. Old-fashioned, ancient, and indigenous wisdom and life skills are being worked into a variety of new experiments in community economics: small groups of people, bound to each other as equals and to their local geography, supporting each other to meet basic needs before selling their ‘comparative advantage’ surplus to the wider community or a network of communities.

For obvious reasons, relocalization is anything but a global, centralized movement. There is, for example, no unified rejection of large institutions or political regimes that might continue in some capacity to serve small communities and networks of communities. But the primary unit is the community, not the state or corporation. It does translate into a dramatic systemic shift in how we structure our lives. It will mean travelling less in general, and travelling shorter distances. And less driving.

Systems scientist Donella Meadows emphasized that the prime mover in systemic change is not the action itself of creating change, but the mindset, or paradigm, that powers and informs it. There is no way around changing minds to change systems. Public policy mandates forcing top down behavioral change that lasts can be effective mostly to the extent to which the coerced behavior becomes habit-forming and changes thinking over time. Upon seizing power in 1949, the communist regime in China outlawed the foot binding of women, among many other cultural practices deemed abusively archaic. Indeed, foot binding has stopped. States in the U.S. mandated recycling. Recycling is now considered de rigueur. Political revolutions and policy reforms change thinking through changing behavior, relying on coercion and good citizenship. Propaganda campaigns that accompany coercion, such as the DUI initiative in the U.S., reflect the need to change thinking to change behavior. It can work, but effective policy can never get too far ahead of popular culture, as the pathetic results of so many legal mandates such as alcohol and drug use prohibition demonstrate (In these instances, a culture of addiction pushes addictive behavior, the reality of personal decision-making and responsibility notwithstanding).

More deeply, the massive shift to relocalize is simply not likely to unfold in this way. And so far it hasn’t. Local government initiatives (notably in cities such as Copenhagen, San Francisco, Curitiba, Brazil, and Ogawamachi, Japan) have shown that government can play a vital role in re-empowering local, sustainable economies. Otherwise, thousands of conversations, starting with two people, have spawned thousands of promising alternatives to globalization worldwide that center on creating local, community-based economies. In my state of Rhode Island, there is a rapidly growing local food production and distribution system. Internationally, small groups of people have created over a thousand ‘Transition Initiatives’ to reclaim their own labor and local resources. In Auroville, India; Faoune, Senegal and many other communities around the world, communitarian eco-villages have experimented with localized alternatives to the global economy.

Relocalizing our personal and economic lives is an example of a systems thinking departure from the tendency to rely on comparatively unrealistic aspirations for either individual betterment at one end and government policy solutions at the other. Learning to see, understand and respect the power of systemic behavioral patterns and traps (once established, systems tend to generate their own behavior) amounts itself to a mindset change that enables structural innovations, including relocalization efforts. Additionally, relocalization recognizes that the global, industrial growth economy now with us is unreliable and unsustainable and must be displaced. Viable alternatives must answer to our deep human need to belong in community and connect to our land base. Our culture’s individualism is a bloated caricature of authentic individuality. Through relocalization we are connected to, not separate from or above, each other and the Earth.

As author Daniel Quinn insists, a change in cultural vision this deep has the power and know-how to transform systems, structures and behavior without programs, as we’ve come to know and rely on them. Still, most adopters of this change can and may grow into the evolving cultural vision as they settle into new living patterns carved out by others. Activists leading change need to recognize and appreciate that there is no shortcut around this deep complexity in building a just and sustainable world, but also that this ‘long haul’ approach may produce surprisingly quick results. In a world addicted to solitary motoring to get around, converting drivers one by one into cyclists will take much more time than we have.

Jim Tull is a teacher and social activist with 37 years of experience in confronting local, national and international social problems. For 15 years, including 12 as co-director, he worked at Amos House, a Catholic Worker-inspired hospitality house offering meals, shelter and social services to the poor and homeless in Providence. Since leaving Amos House in 1995, he has taught courses in Community Service and Social Change, Peace, Environmental and Global Studies and Philosophy at Providence College and the Community College of Rhode Island. He facilitates workshops and retreats on community building, cultural transformation and deep ecology.

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Top 10 Policies for a Steady-State Economy by Herman Daly

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists.

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists.

Let’s get specific. Here are ten policies for ending un-economic growth and moving to a steady-state economy. A steady-state economy is one that develops qualitatively (by improvement in science, technology, and ethics) without growing quantitatively in physical dimensions; it lives on a diet – a constant metabolic flow of resources from depletion to pollution (the entropic throughput) maintained at a level that is both sufficient for a good life and within the assimilative and regenerative capacities of the containing ecosystem.

Ten is an arbitrary number – just a way to get specific and challenge others to suggest improvements. Although the whole package here discussed fits together in the sense that some policies supplement and balance others, most of them could be adopted singly and gradually.

1. Cap-auction-trade systems for basic resources. Caps limit biophysical scale by quotas on depletion or pollution, whichever is more limiting. Auctioning the quotas captures scarcity rents for equitable redistribution. Trade allows efficient allocation to highest uses. This policy has the advantage of transparency. There is a limit to the amount and rate of depletion and pollution that the economy can be allowed to impose on the ecosystem. Caps are physical quotas, limits to the throughput of basic resources, especially fossil fuels. The quota usually should be applied at the input end because depletion is more spatially concentrated than pollution and hence easier to monitor. Also the higher price of basic resources will induce their more economical use at each upstream stage of production, as well as at the final stages of consumption and recycling. Ownership of the quotas is initially public – the government periodically auctions them to individuals and firms. There should be no “grandfathering” of quota rights to previous users, nor “offshoring” of quotas for new fossil fuel power plants in one by place by credits from planting trees somewhere else. Reforestation is a good policy on its own. It is too late for self-canceling half measures – increased carbon sequestration and decreased emissions are both needed. The auction revenues go to the treasury and are used to replace regressive taxes, such as the payroll tax, and to reduce income tax on the lowest incomes. Once purchased at auction the quotas can be freely bought and sold by third parties, just as can the resources whose rate of depletion they limit. The cap serves the goal of sustainable scale; the auction serves the goal of fair distribution; and trading allows efficient allocation – three goals, three policy instruments. Although mainly applied to nonrenewable resources, the same logic works for limiting the off-take from renewable resources, such as fisheries and forests, with the quota level set to approximate a sustainable yield.

2. Ecological tax reform. Shift the tax base from value added (labor and capital) to “that to which value is added,” namely the entropic throughput of resources extracted from nature (depletion), and returned to nature (pollution). Such a tax shift prices the scarce but previously un-priced contribution of nature. Value added to natural resources by labor and capital is something we want to encourage, so stop taxing it. Depletion and pollution are things we want to discourage, so tax them. Payment above necessary supply price is rent, unearned income, and most economists have long advocated taxing it, both for efficiency and equity reasons. Ecological tax reform can be an alternative or a supplement to cap-auction-trade systems.

3. Limit the range of inequality in income distribution with a minimum income and a maximum income. Without aggregate growth poverty reduction requires redistribution. Unlimited inequality is unfair; complete equality is also unfair. Seek fair limits to the range of inequality. The civil service, the military, and the university manage with a range of inequality of a factor of 15 or 20. Corporate America has a range of 500 or more. Many industrial nations are below 25. Could we not limit the range to, say, 100, and see how it works? This might mean a minimum of 20 thousand dollars and a maximum of two million. Is that not more than enough to give incentive for hard work and compensate real differences? People who have reached the limit could either work for nothing at the margin if they enjoy their work, or devote their extra time to hobbies or public service. The demand left unmet by those at the top will be filled by those who are below the maximum. A sense of community, necessary for democracy, is hard to maintain across the vast income differences current in the United States. Rich and poor separated by a factor of 500 have few experiences or interests in common, and are increasingly likely to engage in violent conflict.

4. Free up the length of the working day, week, and year – allow greater option for part-time or personal work. Full-time external employment for all is hard to provide without growth. Other industrial countries have much longer vacations and maternity leaves than the United States. For the classical economists the length of the working day was a key variable by which the worker (self-employed yeoman or artisan) balanced the marginal disutility of labor with the marginal utility of income and of leisure so as to maximize enjoyment of life. Under industrialism the length of the working day became a parameter rather than a variable (and for Karl Marx was the key determinant of the rate of exploitation). We need to make it more of a variable subject to choice by the worker. Milton Friedman wanted “freedom to choose” – OK, here is an important choice most of us are not allowed to make! And we should stop biasing the labor-leisure choice by advertising to stimulate more consumption and more labor to pay for it. At a minimum advertising should no longer be treated as a tax-deductible expense of production.

5. Re-regulate international commerce – move away from free trade, free capital mobility, and globalization. Cap-auction-trade, ecological tax reform, and other national measures that internalize environmental costs will raise prices and put us at a competitive disadvantage in international trade with countries that do not internalize costs. We should adopt compensating tariffs to protect, not inefficient firms, but efficient national policies of cost internalization from standards-lowering competition with foreign firms that are not required to pay the social and environmental costs they inflict. This “new protectionism” is very different from the “old protectionism” that was designed to protect a truly inefficient domestic firm from a more efficient foreign firm. The first rule of efficiency is “count all the costs” – not “free trade,” which coupled with free capital mobility leads to a standards-lowering competition to count as few costs as possible. Tariffs are also a good source of public revenue. This will run afoul of the World Trade Organization/World Bank/International Monetary Fund, so….

6. Downgrade the WTO/WB/IMF. Reform these organizations based on something like Keynes’s original plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances with the union – seek balance on current account, and thereby avoid large foreign debts and capital account transfers. For example, under Keynes’s plan the U.S. would pay a penalty charge to the clearing union for its large deficit with the rest of the world, and China would also pay a similar penalty for its surplus. Both sides of the imbalance would be pressured to balance their current accounts by financial penalties, and if need be by exchange rate adjustments relative to the clearing account unit, called the “bancor” by Keynes. The bancor would also serve as the world reserve currency, a privilege that should not be enjoyed by any national currency, including the U.S. dollar. Reserve currency status for the dollar is a benefit to the U.S. – rather like a truckload of free heroin is a benefit to an addict. The bancor would be like gold under the gold standard, only you would not have to tear up the earth to dig it out. Alternatively a regime of freely fluctuating exchange rates is a viable possibility requiring less international cooperation.

7. Move away from fractional reserve banking toward a system of 100% reserve requirements. This would put control of the money supply and seigniorage (profit made by the issuer of fiat money) in the hands of the government rather than private banks, which would no longer be able to live the alchemist’s dream by creating money out of nothing and lending it at interest. All quasi-bank financial institutions should be brought under this rule, regulated as commercial banks subject to 100% reserve requirements. Banks would earn their profit by financial intermediation only, lending savers’ money for them (charging a loan rate higher than the rate paid to savings or “time-account” depositors) and charging for checking, safekeeping, and other services. With 100% reserves every dollar loaned to a borrower would be a dollar previously saved by a depositor (and not available to him during the period of the loan), thereby re-establishing the classical balance between abstinence and investment. With credit limited by prior saving (abstinence from consumption) there will be less lending and borrowing and it will be done more carefully – no more easy credit to finance the massive purchase of “assets” that are nothing but bets on dodgy debts. To make up for the decline in bank-created, interest-bearing money the government can pay some of its expenses by issuing more non-interest-bearing fiat money. However, it can only do this up to a strict limit imposed by inflation. If the government issues more money than the public voluntarily wants to hold, the public will trade it for goods, driving the price level up. As soon as the price index begins to rise the government must print less and tax more. Thus a policy of maintaining a constant price index would govern the internal value of the dollar. The Treasury would replace the Fed, and the target policy variables would be the money supply and the price index, not the interest rate. The external value of the dollar could be left to freely fluctuating exchange rates (or preferably to the rate against the bancor in Keynes’s clearing union).

8. Stop treating the scarce as if it were free, and the free as if it were scarce. Enclose the remaining open-access commons of rival natural capital (e.g., the atmosphere, the electromagnetic spectrum, and public lands) in public trusts, and price them by cap-auction-trade systems, or by taxes. At the same time, free from private enclosure and prices the non-rival commonwealth of knowledge and information. Knowledge, unlike the resource throughput, is not divided in the sharing, but multiplied. Once knowledge exists, the opportunity cost of sharing it is zero, and its allocative price should be zero. International development aid should more and more take the form of freely and actively shared knowledge, along with small grants, and less and less the form of large interest-bearing loans. Sharing knowledge costs little, does not create un-repayable debts, and increases the productivity of the truly rival and scarce factors of production. Patent monopolies (aka “intellectual property rights”) should be given for fewer “inventions,” and for fewer years. Costs of production of new knowledge should, more and more, be publicly financed and then the knowledge freely shared. Knowledge is a cumulative social product, and we have the discovery of the laws of thermodynamics, the double helix, polio vaccine, etc. without patent monopolies and royalties.

9. Stabilize population. Work toward a balance in which births plus in-migrants equals deaths plus out-migrants. This is controversial and difficult, but as a start contraception should be made available for voluntary use everywhere. And while each nation can debate whether it should accept many or few immigrants, and who should get priority, such a debate is rendered moot if immigration laws are not enforced. We should support voluntary family planning and enforcement of reasonable immigration laws, democratically enacted.

10. Reform national accounts – separate GDP into a cost account and a benefits account. Natural capital consumption and “regrettably necessary defensive expenditures” belong in the cost account. Compare costs and benefits of a growing throughput at the margin, and stop throughput growth when marginal costs equal marginal benefits. In addition to this objective approach, recognize the importance of the subjective studies that show that, beyond a threshold, further GDP growth does not increase self-evaluated happiness. Beyond a level already reached in many countries, GDP growth delivers no more happiness, but continues to generate depletion and pollution. At a minimum we must not just assume that GDP growth is economic growth, but prove that it is not uneconomic growth.

Currently these policies are beyond the pale politically. To the reader who has persevered this far, I thank you for your willing suspension of political disbelief. Only after a significant crash, a painful empirical demonstration of the failure of the growth economy, would this ten-fold program, or anything like it, stand a chance of being enacted.

To be sure, the conceptual change in vision from the norm of a growth economy to that of a steady-state economy is radical. Some of these proposals are rather technical and require more explanation and study. There is no escape from studying economics, even if, as Joan Robinson said, the main reason for it is to avoid being deceived by economists. Nevertheless, the policies required are far from revolutionary, and are subject to gradual application. For example, 100% reserve banking was advocated in the 1930s by the conservative Chicago School and can be approached gradually, the range of distributive inequality can be restricted gradually, caps can be adjusted gradually, etc. More importantly, these measures are based on the impeccably conservative institutions of private property and decentralized market allocation. The policies here advocated simply reaffirm forgotten pillars of those institutions, namely that: (1) private property loses its legitimacy if too unequally distributed; (2) markets lose their legitimacy if prices do not tell the truth about opportunity costs; and as we have more recently learned (3) the macro-economy becomes an absurdity if its scale is required to grow beyond the biophysical limits of the Earth.

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists. The inequality of wealth distribution has canceled out the traditional virtues of private property by bestowing nearly all benefits of growth to the top 1%, while generously sharing the costs of growth with the poor. Gross inequality, plus monopolies, subsidies, tax loopholes, false accounting, cost-externalizing globalization, and financial fraud have made market prices nearly meaningless as measures of opportunity cost. For example, a policy of near zero interest rates (quantitative easing) to push growth and bail out big banks has eliminated the interest rate as a measure of the opportunity cost of capital, thereby crippling the efficiency of investment. Trying to maintain the present growth-based Ponzi system is far more unrealistic than moving to a steady-state economy by something like the policies here outlined. It is probably too late to avoid unrealism’s inevitable consequences. But while we are hunkered down and unemployed, enduring the crash, we might think about the principles that should guide reconstruction.

See: http://steadystate.org/top-10-policies-for-a-steady-state-economy/

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Overpopulation and the Collapse of Civilization By Paul Ehrlich

Perpetual growth is unsustainable and will lead to collapse.  Photo by Chris Wevers.

Perpetual growth is unsustainable and will lead to collapse. Photo by Chris Wevers.

A major shared goal of the Millennium Alliance for Humanity and the Biosphere (MAHB) and Sustainability Central is reducing the odds that the “perfect storm” of environmental problems that threaten humanity will lead to a collapse of civilization. Those threats include climate disruption, loss of biodiversity (and thus ecosystem services), land-use change and resulting degradation, global toxification, ocean acidification, decay of the epidemiological environment, increasing depletion of important resources, and resource wars (which could go nuclear). This is not just a list of problems, it is an interconnected complex resulting from interactions within and between what can be thought of as two gigantic complex adaptive systems: the biosphere system and the human socio-economic system. The manifestations of this interaction are often referred to as “the human predicament.” That predicament is getting continually and rapidly worse, driven by overpopulation, overconsumption among the rich, and the use of environmentally malign technologies and socio-economic-political arrangements to service the consumption. 

All of the interconnected problems are caused in part by overpopulation, in part by overconsumption by the already rich. One would think that most educated people now understand that the larger the size of a human population, ceteris paribus, the more destructive its impact on the environment. The degree of overpopulation is best indicated (conservatively) by ecological footprint analysis, which shows that to support today’s population sustainably at current patterns of consumption would require roughly another half a planet, and to do so at the U.S. level would take four to five more Earths.

The seriousness of the situation can be seen in the prospects of Homo sapiens’ most important activity: producing and procuring food. Today, at least two billion people are hungry or badly in need of better diets, and most analysts think doubling food production would be required to feed a 35% bigger and still growing human population adequately by 2050. For any chance of success, humanity will need to stop expanding land area for agriculture (to preserve ecosystem services); raise yields where possible; increase efficiency in use of fertilizers, water, and energy; become more vegetarian; reduce food wastage; stop wrecking the oceans; significantly increase investment in sustainable agricultural research; and move feeding everyone to the very top of the policy agenda. All of these tasks will require changes in human behavior long recommended but thus far elusive. Perhaps more critical, there may be insurmountable biophysical barriers to increasing yields – indeed, to avoiding reductions in yields – in the face of climate disruption.

Most people fail to realize the urgency of the food situation because they don’t understand the agricultural system and its complex, non-linear connections to the drivers of environmental deterioration. The system itself, for example, is a major emitter of greenhouse gases and thus is an important driver of the climate disruption that seriously threatens food production. More than a millennium of change in temperature and precipitation patterns is now entrained, with the prospect of more crop-threatening severe storms, droughts, heat waves, and floods- all of which are already evident. Thus maintaining – let alone expanding – food production will be ever more difficult in decades ahead.

Furthermore, agriculture is a leading cause of losses of biodiversity and the critical ecosystem services supplied to agriculture itself and other human enterprises, as well as a major source of global toxification, both of which pose additional risks to food production. The threat to food production of climate disruption alone means that humanity’s entire system for mobilizing energy needs to be rapidly transformed in an effort to hold atmospheric warming well below a lethal 5o C rise in global average temperature. It also means we must alter much of our water-handling infrastructure to provide the necessary flexibility to bring water to crops in an environment of constantly changing precipitation patterns.

Food is just the most obvious area where overpopulation tends to darken the human future – virtually every other human problem from air pollution and brute overcrowding to resource shortages and declining democracy is exacerbated by further population growth. And, of course, one of our most serious problems is the failure of leadership on the population issue, in both the United States and Australia. The situation is worst in the U.S. where the government never mentions population because of fear of the Catholic hierarchy specifically and the religious right in general, and the media keep publishing ignorant pro-natalist articles, and in Australia even advertise on prime-time TV to have more kids.

A prime example was a ludicrous 2010 New York Times screed by David Brooks, calling on Americans to cheer up because “Over the next 40 years, the U.S. population will surge by an additional 100 million people, to 400 million.” Equal total ignorance of the population-resource-environment situation was shown in 2012 by an article also in the New York Times by one Ross Douthat “More Babies, Please” and one by a Rick Newman in the USNews “Why a falling birth rate is a big problem,” both additional signs of the utter failure of the US educational system.

A popular movement is needed to correct that failure and direct cultural evolution toward providing the “foresight intelligence” and the agricultural, environmental, and demographic planning that markets cannot supply. Then analysts (and society) might stop treating population growth as a “given” and consider the nutritional and health benefits of humanely ending growth well below 9 billion and starting a slow decline. In my view, the best way to accelerate the move toward such population shrinkage is to give full rights, education, and job opportunities to women everywhere, and provide all sexually active human beings with modern contraception and backup abortion. The degree to which that would reduce fertility rates is controversial, but it would be a win-win for society. Yet the critical importance of increasing the inadequate current action on the demographic driver can be seen in the decades required to change the size of the population humanely and sensibly. In contrast we know from such things as the World War II mobilizations that consumption patterns can be altered dramatically in less than a year, given appropriate incentives.

The movement should also highlight the consequences of such crazy ideas as growing an economy at 3-5% per year over decades (or forever) as most innumerate economists and politicians believe possible. Most “educated” people do not realize that in the real world a short history of exponential growth does not imply a long future of such growth. Developing foresight intelligence and mobilizing civil society for sustainability are central goals of the Millennium Alliance for Humanity and the Biosphere (“the MAHB” – mahb.stanford.edu), goals now also a major mission of the University of Technology, Sydney.

Source: http://mahb.stanford.edu/blog/overpopulation-and-the-collapse-of-civilization/

 

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Don’t Worry–Be Resilient by Charles Hugh Smith

Family fun. Photo by Keith Brofsky/Artville

Family fun. Photo by Keith Brofsky/Artville

At some point, absorbing more information about the unsustainability of modern society yields diminishing returns. It becomes emotionally draining and thus counterproductive. Part of this exhaustion results from recognizing our powerlessness within the Status Quo, where independent thinking and structural innovation are intentionally winnowed out as threats to existing institutions and industries. Another part arises from the burden of knowing that the supposedly permanent Status Quo is far more vulnerable than generally believed.

A related factor that is never publicly discussed is the negative impact on our mental health of all the propaganda that we are force-fed by the Mainstream Media.  When truth is incrementally undermined by massaged data and behind-the-façade manipulation, we lose faith in key State and media institutions and suffer from a propaganda-induced disconnect between what we see and what is reported as fact.

These “burdens of knowing” can diminish the small but real joys of the present: work we like, a home-cooked meal, and time spent with our friends and family. As a result, many smart, well-informed people consciously refuse to dwell on our systemic problems because doing so “is a downer.” These folks hold the perspective that anxiety about the future should not get in the way of the simple pleasures of living.

This attitude can be described as “don’t worry ~ be happy.” And it certainly makes sense when life is still comfortable and enjoyable.

But the philosophy of “thinking about the future is a downer, so I live in the present” ultimately rests on a false confidence that the future will take care of itself, regardless of what happens to the large-scale systems of State, finance, and resources. It overlooks the reality that not all responses to instability or devolution are equally successful. Those who are totally dependent on the Central State and speculation-based markets will have a much more difficult time maintaining their “happy” view if the systems they depend on erode or fail.

Perhaps the wiser response is “don’t worry ~ be resilient.”  The resilient household can be happy not only in the present surplus of energy, entitlements, goods, and services, but can also thrive in a future where the current surplus of cash, credit, and speculative gains has dried up.

Life will out. Photo by RayinLA/Flickr/cc

Life will out. Photo by RayinLA/Flickr/cc

What is Resilience?

What is resilience?  A dictionary definition is “an ability to recover from or adjust easily to misfortune or change.” In other words, it is on the other end of the response spectrum from fragility, brittleness, and vulnerability.

In terms of individual psychology, resilience can be characterized as being able to roll with the punches, maintaining a positive attitude through difficult times, and focusing on developing successful responses to misfortunes and challenges. American culture extols individual resilience, and we are taught to think that the individual can overcome anything and everything with the right attitude. But if the Status Quo is vulnerable to disruption on a systemic level, then it is prudent to think of resilience in a systemic way as well.

One way to describe the difference between systemic vulnerability and resilience is to conduct a thought experiment:

  • What if it didn’t matter to you and your household if the Dow Jones Industrial Average (DJIA on the NY Stock Exchange) was 14,000 or 4,000? Or if gasoline cost $3.50 or $7.50 per gallon?
  • What if it didn’t matter to you and your household if Central State [government] entitlements were slashed by half, or vanished altogether?
  • What if it didn’t matter to you and your household if your land and house were worth $1 million or $100,000?

In other words, what if the machinations of Wall Street, the Federal Reserve, the Central State and, indeed, all of Central Planning’s promises and speculation-boosting had little effect on your life or well-being? Would this make your household more resilient or more vulnerable? Clearly, the less we are dependent on systemically brittle Central Planning systems, the fewer adjustments we will have to make should these large-scale systems devolve or fail.

The important point being made here about resilience is that it does not require a sacrifice of present happiness. Nor does it profit from the devolution or failure of Central Planning. The resilient household is able to enjoy the present surplus of energy, credit, State entitlements, and consumerist abundance, but it doesn’t rely on it.

If the Status Quo is indeed as permanent as it is presented, the resilient household has the same measure of happiness as the household that is totally dependent on Central Planning promises and boundless credit. The difference between fragility and resilience is how much security and happiness will be available to the two households should the Status Quo credit-based consumption and speculative wealth turn out to be decidedly impermanent.

Debt, Fragility and Vulnerability

The easiest way to increase resilience is to reduce fragility and vulnerability. We can understand the dynamics of what we might call anti-resilience—debt, fragility, and vulnerability—with another thought experiment:

Household A’s gross income is $5,000 a month and their net income (less Federal, state and local payroll and income taxes) is $4,200 a month.  The mortgage is $2,000 per month, both wage earners have substantial monthly payments on student loans, and the household also has an auto loan. The household’s healthcare insurance is partly paid by payroll deductions, and the household remains responsible for a percentage of any major medical costs.  Basic living expenses eat up the rest of the net income; the household saves nothing and has minimal savings.

Household A hopes housing valuations keep rising, as they plan to borrow money off this resurgent home equity to fund a vacation, something they haven’t had for four years.

This household’s financial situation is precarious because its expenses equal its income, and most of these expenses are debt-related and cannot be trimmed. This greatly increases their fragility to financial misfortune; any reduction in take-home pay or any increase in expenses will push this household into default.  To increase consumption, they plan to borrow more money once their only collateral—their home equity—increases enough to support more debt.

Household A has a high and inflexible cost-basis. Any significant reduction in income cannot be offset with equivalent cuts in spending.

Household B owns their land and home free and clear; the only housing-related payments are property taxes and property insurance.  (Recall that 30% of all homes are owned free and clear in the U.S., so this is not as unusual as you might imagine.)

One wage-earner paid off her modest student loans within a few years; the other never took on student loans in the first place. They own two older vehicles free and clear. They are debt-free. Their gross income is $4,000 and their net income is $3,200. Since they have no mortgage interest deduction, their income taxes are higher as a percentage of income than Household A. Their living expenses total $1,500 per month, so they save 50% of their net income.  If one of the wage earners loses their job, the household can maintain its current budget without sacrifice. Their substantial savings protect them from unforeseen medical expenses not covered by healthcare insurance, and they can pay for vacations with cash, not credit.

Let’s say that one wage earner in each household loses their job and must take a job that pays 20% less. Household A cannot cover its expenses and must default on one of their debts. Household B’s monthly savings decline, but they are still saving a substantial portion of their income.

Which household is vulnerable to even modest financial misfortune?  Clearly Household A. Will a positive attitude be enough to save the family from insolvency?  It will help it transition into and hopefully through bankruptcy, but a positive attitude alone is no substitute for financial resilience.

Though Keynesian economists argue that nations are not like households, in truth debt/financial fragility is scale-invariant, meaning that rising debt, a high cost basis, and zero savings/investment lead to fragility in households, enterprises, communities, and nations alike.

Conclusion

The United States of America shares a lot in common with Household A: It has a high and inflexible cost-basis, and it is dependent on borrowing to fund future consumption and on speculation to create collateral. It is also tied into spending a significant share of its income-servicing debt. History offers few examples of major nations that prospered by borrowing vast sums for consumption.

Charles Hugh Smith writes the ‘Of Two Minds’ blog <www.oftwominds.com/blog.html> which covers an eclectic range of timely topics: finance, housing, Asia, energy, long term trends, social issues, health/diet/fitness and sustainability. Smith’s books include “Weblogs and New Media: Marketing in Crisis” (2008) and “Survival+: Structuring Prosperity for Yourself and the Nation” (2009). He is currently completing “An Unconventional Guide to Investing in Troubled Times” (June 2011). Published on ‘Peak Prosperity’  <http://www.peakprosperity.com, February 12, 2013. Reprinted with permission.

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U.S. Census Report Finds Increases in Coastal Population Growth Put More People at Risk of Extreme Weather by NOAA & U.S. Census Bureau

Wreckage from Hurricane Sandy. Photo by Spleeness/Flickr/cc

Wreckage from Hurricane Sandy. Photo by Spleeness/Flickr/cc

If current population trends continue, the already crowded U.S. coast will see population grow from 123 million people to nearly 134 million people by 2020, putting more people at increased risk from extreme coastal storms like Sandy and Isaac, which severely damaged infrastructure and property last year. The projection comes from a new report from NOAA, The National Coastal Population Report: Population Trends from 1970 to 2020, issued in partnership with the U.S. Census Bureau.

According to the report, which analyzed data from the 2010 census, 39% of the U.S. population is concentrated in counties directly on the shoreline—less than 10% of the total U.S. land area excluding Alaska.  Also 52% of the total population lives in counties that drain to coastal watersheds, less than 20% of U.S. land area, excluding Alaska. A coastal watershed is an area in which water, sediments, and dissolved material drain to a common coastal outlet, like a bay or the ocean.

“People who live near the shore, and managers of these coastal communities, should be aware of how this population growth may affect their coastal areas over time,” said Holly Bamford, Ph.D., assistant NOAA administrator for the National Ocean Service. “As more people move to the coast, county managers will see a dual challenge—protecting a growing population from coastal hazards, as well as protecting coastal ecosystems from a growing population.”

For the first time, this report offers coastal managers and other users two perspectives on population growth along the U.S. coast:

1) the traditional perspective that looks at status and trends throughout counties that drain to coastal watersheds, called Coastal Watershed Counties, and

2) a newer focus that examines only those counties that directly border the coast, including the Great Lakes.

“Understanding the demographic context of coastal areas is vital for our nation and helps us to meet the challenges of tomorrow. To help inform policymakers and the public through this report, the Census Bureau developed a new measure of coastal populations,” said James Fitzsimmons, assistant chief of the Census Bureau’s population division.

Coastal population statistics in the overall total of 769 ‘Coastal Watershed Counties’ provide context for coastal water quality and coastal ecosystem health-related issues. Data from the 452 of those counties that lie directly on the shoreline, called ‘Coastal Shoreline Counties’, can be used to talk about coastal resilience, coastal hazards, and other ocean resource dependent issues.

“Whether you’re talking about watershed counties or shoreline counties, the coast is substantially more crowded than the U.S. as a whole,” said report editor Kristen Crossett of NOAA’s National Ocean Service. “Population density in shoreline counties is more than six times greater than the corresponding inland counties. And the projected growth in coastal areas will increase population density at a faster rate than the country as a whole.”

The report also found that from 1970 to 2010, Coastal Shoreline Counties population increased by 39%, and Coastal Watershed Counties population increased by 45%.

The report is available on NOAA’s ‘State of the Coast’ website, which provides quick facts and more detailed statistics through interactive maps, case studies, and management success stories that highlight what is known about coastal communities, coastal ecosystems, and the coastal economy and about how climate change might impact the coast.

Source: NOAA press release <http://www.noaanews.noaa.gov/stories2013/20130325_coastalpopulation.html>

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Workers of the World: RELAX! by John de Graaf

How We Can Create a Successful Economy Without Continuous Economic Growth

Relaxing by the fountain. Photo by PolandMFA/Flickr/cc

Relaxing by the fountain. Photo by PolandMFA/Flickr/cc

The late, great environmentalist David Brower used to say that there will be no profits, no corporations, no economic growth, and by implication, no successful economies on a dead planet.

Brower, who made the Sierra Club a powerful force for conservation and founded Friends of the Earth, often delivered what he called his “sermon.” He compressed the age of the Earth, some 4.6 billion years, into the Biblical week of creation.

The Earth forms on Sunday morning, and by Tuesday afternoon, the first life-forms arrive. Over the next few days, they grow larger and more complex. On the last day of the week, at 10 a.m., the dinosaurs show up. They last until 3 p.m., when an asteroid ends their reign. Only three minutes before midnight on the final night, humans arrive. And only in the last tiny fraction of a second before midnight do we get the consumer society that began after World War II.

So perhaps we should be asking a different question: Is continuous growth undercutting our efforts to create a successful economy? I think so.

In that last fraction of a second, we have used more resources than all human beings who ever lived before that time, reduced our soils and fisheries by half, caused the extinction of countless species, and changed the climate. Our leaders believe that what we’ve been doing for that last fraction of a second can continue indefinitely. We consider them normal and reasonable, Brower observed, but actually, they are stark, raving mad.

We can’t grow on like this.

Already, our “ecological footprint” is well in excess of what is sustainable for future generations. And beyond a modest level of income, growth doesn’t make countries happier either. So perhaps we should be asking a different question: Is continuous growth undercutting our efforts to create a successful economy? I think so.

Economic growth, our current indicator of success, is measured by the rise of the gross domestic product (GDP), the market value of the goods and services we produce, the sum total of things bought and sold. It’s commonly agreed that GDP is a blunt instrument; it doesn’t measure valuable activities that are not monetized (e.g., housework) and it counts (as a plus) expenditures that only alleviate things gone wrong (e.g., cancer treatments). Perhaps Bobby Kennedy put it best when he said, “It measures, in short, everything except that which makes life worthwhile.”

By all accounts, the United States’ economy has grown faster than those of Europe over the past two decades, when measured by GDP. We trumpet that fact as indicating the success of our economic model. But Italian economist Stefano Bartolini makes a powerful case for a different view. He says our more rapid growth rate is a symptom of American economic decay, not dynamism. In his new book, Manifesto for Happiness, to be published in English this year by the University of Pennsylvania, Bartolini calls the United States “the example not to follow.”

In short, his argument is this: Growing inequality has left median American hourly incomes flat for a generation while GDP doubled. We were able to purchase the increased volume of consumer goods produced by working longer hours and by taking on excessive personal debt. But more work and more stuff have left us lonelier and less connected with each other, while growing debt has led to calls for slashing taxes, leading to higher prices for public goods such as higher education or access to public parks.

We have been encouraged to counter these losses by purchasing even more private goods (Want friends? Buy a hot car… Want nature? Fly to a tropical paradise…), leading to even heavier debt and workloads. Moreover, our lifestyles, built around private consumption, have created low-density sprawl that makes public transit too expensive and encourages automobile dependence, longer commutes, and even less social connection, while further reducing public space and access to nature. It’s a vicious circle.

Bartolini argues that free or publicly provided and often non-material need-satisfiers have atrophied or been crowded out by costly private consumer goods.

The outcome is poor health (the worst in the rich world), time stress, greater anxiety, and diminished happiness, including a suicide rate that now exceeds that for traffic fatalities. Yet our expenditures to soften these impacts (the highest health care costs in the world, for example) mean our economy grows faster than Europe’s, where people work and consume less and devote more time to social relationships. We are hamsters, turning the wheel faster and faster but never moving forward to better lives.

This result can scarcely be called a “successful” economy. Economic success is better measured the way Bhutan measures it. Since 1972, that tiny Himalayan kingdom has been promoting Gross National Happiness rather than GDP. With Bhutan’s encouragement, the United Nations is now advocating “equitable and sustainable well-being” as the goal of development instead of mere economic growth, while asking member nations to measure their success in pursuing happiness. A better measurement of “success” is the first step toward well-being.

In the United States, an organization called ‘The Happiness Initiative’ has been working with colleges and communities on such a measurement of progress, using a comprehensive but short survey that measures life satisfaction in ten “domains” identified by researchers as essential for happiness: financial security; environmental quality; physical and mental health; education; arts and culture; government; social connection; workplace quality and time balance.

“Time Balance” scores for Americans are uniformly low, leading to my own recipe—supported by Juliet Schor, Gus Speth, and others—for strategically moving towards a successful economy without continuous economic growth: work reduction.

High unemployment is certainly no indication of economic success; indeed, it contributes greatly to unhappiness. As productivity increases, employment must be maintained either by greater production (with attendant environmental costs) or by sharing and shortening work hours through reduced work weeks, longer vacations, liberal family and sick leave policies, and greater opportunities for decently remunerated part-time work with benefits.

Work reduction would provide more economic security and more time for self-chosen activity—exercise, gardening, volunteering, environmental restoration and stewardship, socializing, stress-reducing leisure, personal caregiving. Yet, this obvious answer to the question of how to create a successful economy without continuous growth has been systematically excluded from American politics since the Second World War.

Some argue that it will be very difficult to change the laws that permit work without end.  They forget that it will be far harder to change the laws of physics to permit growth without end. Conrad Schmidt of British Columbia’s Work Less Party, puts the solution in simplest terms: “Workers of the World, Relax!”

John de Graaf is a documentary filmmaker who has produced more than a dozen prime-time national PBS specials and has won more than 100 filmmaking awards. De Graaf is the Executive Director of Take Back Your Time and co-founder of The Happiness Initiative. He is the co-author of the books Affluenza and What’s the Economy for, Anyway?  Source: Center for Humans & Nature,  

 <http://www.humansandnature.org/economy—john-de-graaf-response-68.php>  Reprinted with permission.   The Center for Humans and Nature brings together philosophers, biologists, ecologists, lawyers, political scientists, anthropologists, and economists, among others, to think creatively about how people can make better decisions—in relationship with each other and the rest of nature.

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