Once again I’ve just been reading Jeremy Warner in today’s Daily Telegraph (link below) where he’s written an article entitled “David Cameron is ‘pure wind’ on the economy”. Mr Warner makes reference to George Orwell who pointed out that, “political language – and with variations this is true of all political parties, from Conservatives to Anarchists – is designed to make lies sound truthful and murder respectable, and to give the appearance of solidity to pure wind”. Reading Mr Warner’s piece got me thinking.
The economic situation is much, much more profound than is generally being aired and discussed by mainstream economists, politicians and central bankers.
The fundamental issue here is that mankind’s brief era of ‘consumerism’ has reached the end of its life. The idea that human beings should work primarily to acquire ‘stuff’ and create as much ‘leisure time’ as possible was a one-off characteristic of the industrial age. We’re not actually supposed to live like this; we’re constrained by the laws of physics, and especially the Second Law of Thermodynamics, which means that we’re not entitled to something-for-nothing ad infinitum.
By ‘something-for-nothing’ I’m referring to mankind having twigged a couple of hundred years ago how to unleash 2 billion years’ worth of accumulated energy (sunlight). This has allowed hundreds of millions of us primarily in the developed world to live like kings of yore for several generations. It has also fostered within us, and within economists in particular, the idea that industrial age rates of economic growth are some form of inalienable, God-given right to mankind, available to us forever.
However, that era – the extended industrial age – is now drawing to a close and it is the symptoms of this that we’re witnessing all about us now. Some of us are arguing that the politico-economic orthodoxy simply cannot handle this concept. For all the time prior to the Industrial Revolution, mankind enjoyed trend economic growth of less than 1.0% per annum.
The situation is profound because unless and until we internalise the notion that we’ve reached the end of the era of industrial age (ie fossil-fuelled) rates of economic growth, then we shall continue to read articles about individuals and organisations being baffled about the absence of economic growth; or “disappointment on growth” to use Mr Warner’s understatement.
The terrible danger is that we’ll go on and on kidding ourselves that industrial age rates of economic growth will somehow (how?) be restored soon … and so governments, in particular, will remain on course for societal bankruptcy. The greatest risk we face over the next quarter-century is civil unease and unrest (or worse) fomented by the proverbial ‘powers that be’ failing to grasp that we’ve reached the end of (industrial age rates) of growth.
Bluntly, our complex society, characterised as it is by staggering levels of debt and unfunded future liabilities, simply cannot function unless it is propped up by a reliable trend rate of economic growth of around 3.0% per annum; some people would argue that even this is inadequate given politicians’ propensity to tax, borrow, print and spend money largely without reference to economic realities, still less to the laws of physics.
I accept that this thesis might be hopelessly wrong. However, I shall stand by it for as long as developed world’s economies skud along at a trend rate of growth of less than 3% per annum, and whilst the oil price in particular sits stubbornly at some four times its 140-year, inflation-adjusted trend price of $25 per barrel.
‘David Cameron is pure wind on the economy’: http://tinyurl.com/d84f3ry
Also posted at the ‘Renegade Economist’: http://tinyurl.com/c7t38rh