Rearranging vs. Reinventing the Global Economy

The US road to recovery runs through Beijing says Asia Times Online, and Thomas Barnett emphatically agrees.  Everyone is talking about how to reorganize the global economy, but mostly the discussion is about how to most efficiently export our recently collapsed model of growth to the developing world.  Better this time around for sure, we say, but not fundamentally different in any way.  The Chinese need (and want, it turns out) more domestic consumption and consumer debt.

But is that really the problem we’re having?  A global dearth of indebtedness and material consumption?  Maybe in the context of the 19th and 20th centuries it was.  In a time and world of as-of-yet unconstrained natural resources, where the primary limitations to economic growth are the productivity of those natural resources – the efficiency with which human and financial capital are employed in the service of liquidating natural capital in order to enable the creation of more human and financial capital (population and money), the answer to slowing growth or economic contraction might very well be (and certainly was, on many occasions) to spur additional liquidation of the pre-existing material wealth of the world.

It cannot be the solution this time around.

In Thomas Friedman’s words, it is manifestly unfair, but the rest of the world cannot take the same path to development that we, the currently industrialized world, did.  Not just, “it would be inadvisable”, but Thou Shalt Not, as a matter of physical laws governing radiative transfer of energy, the spectroscopic properties of atmospheric gasses, and the phase diagrams of some common terrestrial materials, which no legislative body has the power to repeal, no matter how inconvenient it might be.

We designed and built our economies, or perhaps more appropos – they evolved – under a different set of conditions than we now find ourselves in.  We made the once plausible approximation that physical resources were infinite, and that each additional person added some marginal value to our economy.  We made this approximation when North America was forested from the Atlantic to the Mississippi, and there were 100 times as many large fish in the world’s oceans as there are today.  It might have been valid when all the rivers of the world flowed to the salty seas, instead of depositing their dissolved minerals in the vast evaporation pans we today call farms.

We need a new approximation.

Instead of reducing one pool of capital to enrich the others, we need to arrange for a steady state of flow between them.  This does not have to mean the end of growth, but it does mean the nature of growth needs to change.  We cannot use more stuff.  Wealth can no longer be defined as the rate at which you cause raw materials to be transported to landfills.  New wealth has to be defined as new information.  New materials have to come from old materials which replenish themselves using light from the sun – either on their own, or with facilitation from us.  Financial capital (and thus our economy) can be allowed to grow only in proportion to the efficiency with which we utilize our renewable materials and energy.  Human capital can grow only in proportion to the efficiency with which people can wield knowledge.  In both of these realms, there are vast possibilities for growth, and growth which does not pose an existential risk to our species, or to the rest of the Earthlings.

We need to take advantage of this catastrophe – this opportunity – to re-invent our economy, not just to rearrange the roles we play.