Economists, politicians and financial experts are stumped. The world western economy is at a virtual standstill and everybody is waiting until it starts growing again because then apparently everything will be ok. An increase in demand for goods and services will increase demand for raw materials and we’ll all start doing more business, unemployment will fall and profitability will rise; ensuing increases in tax revenues will help governments pay off public debt and everything will be as it was…….. or will it?
Call me a skeptic if you want but I can’t help thinking that something really fundamental has changed in the western economy and it’s taken us a while to work it out, we’ve stopped making things. For too long now our economy has survived on the service sector, especially moving money around and keeping a little bit back for ourselves, but what happens if the money stops moving?
Surely it is not sustainable for economies, companies, profits and national GDP (gross domestic product) to continually grow. Maybe the day will come when our economy does not grow, then what do we do?
If we had zero growth for the next 25 years how would western economies pay back or service their govt debt, what increased strain would an aging population put on our welfare system, would improvements in technology and productivity lead to higher unemployment and advances in medical care leading to people living longer increasing the financial burden for govts paying pension contributions for longer periods.
We have 5 main issues here:-
1) Stagnant/falling GDP (zero growth)
2) Rising unemployment
3) Increased welfare costs for the govt (aging population)
4) Scarcity or raw materials, energy and water leading to ever-increasing prices
5) Increase in world population
1) Zero growth means the cake stays the same size but there are ever more people to be fed leading to a potential fall in living standards, unless we can find a cheaper sustainable way of feeding people. We may change our diet to eat more abundant locally grown produce and use technological improvements to increase food production (e.g. GM foods).
2) Rising unemployment will lead to more job sharing as people reduce the number of hours worked, eventually people will work 3 or 4 days a week and average personal incomes will fall.
3) Increased welfare and pension costs will lead to govts cutting back on other spending such as defence and non-primary social services. People will be encouraged to pay privately for education, training, health, care for the elderly, etc.
4) Scarcity of raw materials such as oil, wood, metals is guaranteed leading to huge rises in many related products such as petroleum, plastics, furniture, etc. Related increases in transport, distribution and supply will have a knock-on effect to all consumer products. At a time of steady or falling income will lead to economic hardship and social unrest. No shortage of water in the world but a massive increase in demand will make it more expensive as we will have to claim it from the sea and de-salinate as opposed to getting it from under the ground. The increased demand for energy will lead to a huge increase in renewables such as wind, solar, wave power, geo-thermal. As oil and gas run out the economic justification for renewables will grow, technological improvements will increase energy productivity and efficiency.
5) Increases in world population will become unsustainable and will only be resolved by some dramatic apocalyptic event (e.g. world war, disease, ice age, etc) that will radically reduce population figures; some kind of controls on numbers such as euthanasia would be required but could not be achieved without some aggressive genocidal policies. Birth control alone will probably not achieve the desired results.
If all this were true what if anything should we be doing now that gives us a chance of surviving or thriving in the new world order:-
1) Buy up any kind of land that is 10 metres above sea level, this will become valuable in years to come as sea levels rise, either for housing or farming or energy production.
2) Invest your pensions in energy and mining companies.
3) Learn a practical trade such as farming, food production, energy production, engineering, tradesman, etc.
4) Move to a place that is safe and abundant in natural resources i.e. sunshine, water, fertile soil, trees, etc.
5) Learn to live on reduced income, lower your expenditure. If you are paying excessive interest on money owed negotiate interest or payment reductions asap so your payments fit within your budget.
6) Become more energy efficient.
7) Make better use of natural resources, grow more things.
What the govt has to do?
1) Start preparing and implementing zero balance budgets (i.e. income and expenditure to balance), any surplus revenues used to pay off national debt and not used to increase spending.
2) Take control of certain key parts of the economy such as energy production, farming, transport (trains), telecommunications, banking either through very tough regulation or outright ownership. Use this monopolistic power to ensure technological innovation and efficiency improvements are implemented as quickly and cheaply as possible. A government bank would ensure economic policy could be pursued without reliance on profitability and bad debt issues.
3) More transparent immigration policies to control and manage movements in and out of the country as well as within the country (this already happens in Switzerland), this will help manage policies or almost other policies such as migration, housing, social care, etc and will help prevent abuse of the welfare system.
4) Policies to get young people into education or unemployment, provision of education should be extended until age of 21 and no-one can claim benefits until after this, payment for unemployed school leavers would only be made if some kind of work or study was aking place. Companies incentivised through tax breaks to employ and train young people.
5) All drugs to be legalised and controlled similar to alcohol and cigarettes are now.
6) All prisoners should have to work unless physically or mentally disabled from doing so, any proceeds offset cost of running the prison service.
7) Stop engaging in expensive things such as wars and make better use of the resources. This could potentially lead to an increase in unemployment in the short term and falling exports.
8) Build lots of cheap accommodation to keep house prices low.
9) Set interest rates for next ten years for mortgages and borrowing to help companies and individuals manage budgets and plan going forward.
10) Have a one-off wealth tax on companies and individuals to pay off govt debt and reduce interest payments by £50bn a year.
This list is not exclusive but just a few things that we need to do to just to maintain the current living standards. Some may seem radical but if we don’t do some of these things things could get a lot worse in the medium to long term.
Any comments/feedback/additions/deletions/corrections welcome