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November 19, 2014
The Insatiable Economic God
The blind pursuit of economic growth stokes a cycle of financial crisis, and wrecks our
By George Monbiot
Another crash is coming. We all know it, now even David Cameron acknowledges it
(1). The only questions are what the immediate catalyst will be, and when it begins.
You can take your pick. The Financial Times reports today that China now resembles
the US in 2007(2). Domestic bank loans have risen 40% since 2008, while “the ability
to repay that debt has deteriorated dramatically”. Property prices are falling and the
companies that run China’s shadow banking system provide “virtually no disclosure”
of their liabilities. Just two days ago, the G20 leaders announced that growth in China
“is robust and is becoming more sustainable”(3). You can judge the value of their
assurances for yourself.
Housing bubbles in several countries, including Britain, could pop at any time. A
report in September revealed that total world debt (public and private) has reached
212% of GDP(4). In 2008, when it helped to cause the last crash, it stood at 174%.
The Telegraph notes that this threatens to cause “renewed financial crisis … and
eventual mass default.”(5) Shadow banking has gone beserk, stocks appear to be
wildly overvalued, the Eurozone is bust again. Which will blow first?
Or perhaps it’s inaccurate to describe this as another crash. Perhaps it’s a
continuation of the last one, the latest phase in a permanent cycle of crisis,
exacerbated by the measures (credit bubbles, deregulation, the curtailment of state
spending) which were supposed to deliver uninterrupted growth. The system the world’
s governments have sought to stabilise is inherently unstable, built on debt, fuelled by
speculation, run by sharks.
If it goes down soon, as Cameron fears, in a world of empty coffers and hobbled
public services, it will precipitate an ideological crisis graver than the blow to
Keynesianism in 1970s. The problem that then arises – and which explains the
longevity of the discredited ideology that caused the last crash – is that there is no
alternative policy, accepted by mainstream political parties, with which to replace it.
They will keep making the same mistakes while expecting a different outcome.
To try to stabilise this system, governments behave like soldiers billeted in an ancient
manor, who burn the furniture, the panelling, the paintings and the stairs to keep
themselves warm for a night. They are breaking up the post-war settlement, our public
health services and social safety nets, above all the living world, to produce
ephemeral spurts of growth. Magnificent habitats, the benign and fragile climate in
which we have prospered, species that have lived on earth for millions of years, all
are being stacked onto the fire, their protection characterised as an impediment to
David Cameron boasted on Monday that he will revive the economy by “scrapping red
tape”(6). This “red tape” consists in many cases of the safeguards defending both
people and places from predatory corporations. Today, the Small Business,
Enterprise and Employment Bill is passing through the House of Commons(7),
spinelessly supported, as ever, by Labour. The bill seeks to pull down our protective
rules to “reduce costs for business”, even if that means increasing costs for everyone
else, while threatening our health and happiness. But why? As the government
boasted last week, the UK already has “the least restrictive product market regulation
and the most supportive regulatory and institutional environment for business across
the G20.”(8) And it still doesn’t work. So let’s burn what remains.
This bonfire of regulation is accompanied by a reckless abandonment of democratic
principles, not least of equality before the law. In the House of Commons on Monday,
Cameron spoke for the first time about the Transatlantic Trade and Investment
Partnership(9). If this treaty between the EU and the US goes ahead, it will grant
corporations a separate legal system to which no one else has access, through which
they can sue governments passing laws that might affect their profits. Cameron
insisted that “it does not in any way have to affect our national health service”(10).
(Note those words “have to”.) Pressed to explain this, he cited the former EU trade
commissioner, who claimed that “public services are always exempted”(11).
But I have read the the EU’s negotiating mandate(12), and it contains no such
exemption, just plenty of waffle and ambiguity on this issue. When the Scottish
government asked Cameron’s officials for an “unequivocal assurance” that the NHS
would not be exposed to such litigation, they refused to provide it(13). This treaty
could rip our public services to shreds for the sake of a short and (studies suggest
(14,15)) insignificant fizzle of economic growth.
Is it not time to think again? To stop sacrificing our working lives, our prospects, our
surroundings to an insatiable god(16)? To consider a different economic model, which
does not demand endless pain while generating repeated crises?
Amazingly, this consideration begins on Thursday. For the first time in 170 years,
parliament will debate one aspect of the problem: the creation of money(17). Few
people know that 97% of our money supply is created not by the government (or the
central bank), but by commercial banks in the form of the loans they issue(18). At no
point was a democratic decision made to allow banks to do this. So why do we let it
happen? This, as Martin Wolf has explained in the Financial Times(19), “is the source
of much of the instability of our economies”. The parliamentary debate won’t stop the
practice, but it represents the opening of a long-neglected question.
This, though, is just the beginning. Is it not also time for a government commission on
post-growth economics? Drawing on the work of thinkers like Herman Daly, Tim
Jackson, Peter Victor, Kate Raworth, Rob Dietz and Dan O’Neill, it would investigate
the possibility of moving towards a steady state economy: one that seeks distribution
rather than blind expansion; that does not demand infinite growth on a finite planet. It
would ask the question that never gets asked: why?
Why are we wrecking the natural world and public services to generate growth when
that growth is not delivering contentment, security or even, for most of us, greater
prosperity? Why have we enthroned growth, regardless of its utility, above all over
outcomes? Why, despite failures so great and so frequent, have we not changed the
model? When the next crash comes, these questions will be inescapable.
3. G20, November 2014. Brisbane Action Plan. http://bit.ly/1xk6mLR
4. Luigi Buttiglione et al, September 2014. Deleveraging? What Deleveraging?
Geneva Reports on the World Economy 16. http://www.voxeu.
8. G20, November 2014. Comprehensive Growth Strategy – United Kingdom. http://bit.