Friday, January 30, 2009

A Ponzi scheme that's really global

The more I read about how to jump-start the economy, the more I think most of the ideas (even the Obama administration's) are as unsustainable as the busted economy they're trying to fix.

Here's the problem. Growth that's funded by debt - as US economic growth has been for years now - is, by definition, unsustainable, because there is a limit to how much debt anyone can take on (and pay off). It's my suspicion that one of the reasons the collapse cascaded through the economy so quickly is that in our hearts, all of us knew that we were on shaky ground; that our debt was climbing when our incomes weren't, and that our financial situations were getting more and more precarious. So it didn't take a whole lot of economic bad news to get us to stop in our tracks.

But what we keep hearing now is that we have to get the banks lending again. Really? Do our financial experts really believe that if we can only get the debt spigots open, people will start loading up their credit cards and the economy will come roaring back?

I know lending is important, especially the day-to-day lending that companies need to finance their inventories. But what's really battering the economy is that even people who have money (which, after all, is most of us) are afraid to spend it. And we're afraid, I think, because we have finally grasped the fragility of our own personal financial situations. We're doing, ironically, just what economic advisers and even economists have been urging us to do for decades now: trying to live off current income and - if we can - pay down debt and save for a rainy day.

Isn't it kind of stupid to discourage this new-found financial sanity by trying to get the credit spigot gushing again? Shouldn't we, maybe, be trying to find a way to fuel economic growth by increasing incomes, not spending? And shouldn't we consider the possibility that there really, really are limits to growth?

Years ago, for Sojourners Magazine, I reviewed a TV show called Affluenza. One scene from the show has been in my head a lot lately. You can read the whole review here ("I Shop, Therefore I Am") but here's what makes that bit stick in my head:

"Perhaps the hour's strangest moment is a clip showing Nike employees eagerly participating in a workshop on voluntary simplicity. I couldn't help wondering if any of them had thought about what might happen to their jobs if this movement became widespread. Exactly where did they think they'd be, if teen-agers all over the world started wearing their Nikes until they developed holes? And that, of course, is the rub. Yeah, we'd be better off if we simplified our lives. But we live in a Ponzi-scheme economy where not just corporate fortunes, but peoples' jobs, from the United States to Poland to Thailand, depend on the ever-increasing appetite for things that the advertising industry so skillfully fuels. Getting enough folks off that treadmill to avert the environmental disasters Affluenza threatens is likely to be not the uncomplicated blessing the show promises, but a messy and possibly ugly process."

And so it is. Sadly, so it is.

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