This inquiry started out by asking why societies, once they have achieved affluence, almost inevitably decline? Why, in other words, when life becomes more or less satisfying for a large group of people, does it not continue indefinitely? One answer, of course, is that their lifestyle may exhaust the resources required to sustain it. However affluent societies such as Rome or Egypt or colonial England did not fail from a want of resources. There appears to be something in human nature that cannot tolerate continued affluence. If this is the case, is there something in us that will not abide the continuity of an ample or adequate sustainable society? We have, I believe, tacitly assumed that once a sustainable society is attained it will persist for long periods. My question is whether human nature is consistent with this expectation. If not, how will human nature have to be modified and can that modification be reasonably expected within the time frame it has to take place?
Near the heart of this question is whether human beings are psychologically equipped to live in a sustainable society over the long haul. There is, I think, a proclivity for violence in human nature that is inimical to a persistently sustainable society. We see this sublimated in so many of the sports we are attracted to.
I will use war as a paradigm in examining this question because war is a most grievous example of sustainability destruction. In his book War is a Force That Gives Our Life Meaning Chris Hedges examines why, despite all we know of the horrors of war, do we continue to engage in them? He notes General George S. Patton famously said, "Compared to war all other forms of human endeavor shrink to insignificance. God, I do love it so!" Hedges is concerned in this book to demonstrate the vast range of this sentiment. Thus that vaunted human goal 'meaning in life' can itself be an enemy of mankind. Is it any wonder that we abandon peace, presumably a condition of sustainability, so readily and so frequently?
There is a literature on the psychology of sustainability to be found on the web. An article I found to be particularly useful is Psychology of Sustainability Embodying Cyclic Environmental Processes. It may be found at http://www.laetusinpraesens.org/docs/psychsus.php.
From a sustainability point of view, war has a major impact. Aside from all its other horrors, it consumes monumental amounts of the earth's resources, it destroys vast stretches of the environment, it destroys the ability of humans to cooperate in maintaining the only environment they have. Thus, it is not a trivial ecological matter. If we are to have a sustainable human environment we must find a way to avoid war.
How can we expect a society focused on sustainability to deal with war? One scenario with a good deal of historical precedent is that the restrictions that sustainability may place on society, e.g. greatly reduced consumption, continuously calculated relationships to the natural environment, accompanied by reduced choices, will induce an increasing sense of frustration as masses of humans must live at a consumption level much lower than their predecessors. The Japanese entered World War II not to feed a starving population, but to acquire the resources to become a world power. The United States did not attack Iraq to maintain a sustainable society, but to establish a new imperialism.
While I chose war as a paradigm for discussing sustainability's problem with human nature, there are others, e.g. our untrammeled desire for novelty. We have large portions of our economy built on this desire (lust?). How much of our sense of identity is built on being "better" than others, e.g. keeping up with the Joneses, the latest model car, etc. Again, large portions of our economy are built on this desire.
While I see no resolution to this conflict between sustainability and human nature especially within the time frame it must be achieved, there is, perhaps, some modicum of hope in the observation found in the above-noted article, i.e. "re-defining "sanity" as if the whole world mattered." (My italics) With a sustained, pervasive, focus on the planet as a whole, thus mitigating the differences among us, we may establish our identity as citizens of the earth grateful for our home in the universe and loath to fighting over it. After all, homeland, motherland and fatherland have been powerful sources of allegiance for humans. Why not earthland?
Bob Newhard
Sunday, January 25, 2009
Saturday, January 10, 2009
Debt: The Built In Economic Plague
Debt is an ancient human practice in which the future is used to meet the needs or desires of the present. As such there has always been a risk associated with it because the fugue is unknown and hence counting on it is less than certain. When the debt risk is enhanced by interest an additional amount is put at risk. There was a time when interest on a debt was viewed as immoral under the aegis of the Catholic Church. We all remember the implied condemnation of Shakespeare's Shylock wanting to collect his interest, which in this case was a pound of the debtor's flesh. However, with the rise of commerce following the Dark Ages debt began to play a lager role in everything from mercantile exchange to financing governments and their wars. Notably many commercial efforts of this early period were joint partnership efforts in which the partners put their own money at risk to accomplish the enterprise. To a certain extent they minimized the risk by way of state sanctioned incorporation. Notably debt was still looked upon as a serious risk. The saying "Someday my ship will come in." was a colloquial expression for the merchant's ship financing venture. In 19th and early 20th century populism, debt in the form imposed by the high shipping rates of the railroad barons and the tight money supply imposed by requiring no more currency than could be supported by the nation's accumulated gold was their major political concern. Another evidence of debt's poor reputation was the debtor's prison. As late as the 1830's American's could be imprisoned for unpaid debts. This is still possible for some kinds of specified debts, e.g. unpaid child support.
Debt was also used as a method of social control. The indentured servant in Colonial America was paying off the debt incurred by the cost of his passage from England to The Colonies plus any costs the creditor chose to impose. The share cropper was continually in debt to the land owner in the South because the owner's share was always enough to keep the share cropper on the land. The coal mine owners kept coal minors continually in debt in company-owned towns where the owner set rent cost and the cost of necessities at the company store. Some of you may remember Tennessee Ernie Ford's coal mining song that had the line "I owe my soul to the company store.'" In consequence the ordinary people of those times looked upon debt as a source of great deprivation of freedom and the necessities of life.
Despite this long history of debt condemnation, we now have an economy in which debt is a commodity and, as some argue, creates more money than the federal treasury. It has thus been deemed not only a good, but a necessary good.
How did this happen?
I believe the underlying cause is that the technology of production became so efficient followig the Industrial Revolution that factories began to produce more than society could consume. Technology drove production so much faster than consumption that the purchasing ability required for human consumption could not keep up. Debt, along with all kinds of desire stimulants e.g. fashion, two toned cars, keeping up with the Joneses, be came a major way to keep the capitalist economy functioning, From this we got the "growth is good" mantra from business schools, the local chamber of commerce and the media. In using debt for this purpose we pushed actual consumption further and further into the future and, thus, further and further into the unknown. This is what we now call burdening our children.
Debt becomes a way of life
Being a child of the Great Depression I was not well disposed toward incurring debt. For sometime I had been depositing $300 whenever I needed to rent a car. The time came, however, that the car rental agencies would no longer take a deposit. They would only take a credit card. Of necessity, I reluctantly obtained a credit card. This was one of those points where the economy, I believe initially for efficiency's sake, required that people go in debt in order to function in everyday life. However the credit card made debt so easy to acquire on a day to day basis that it rapidly grew in scope to the point where credit became a marketing tool. People began living with continuous debt, sometimes paying only enough interest to retain the ability to continue to go in debt. Many people became addicted to debt. A whole culture of "shop 'till you drop" grew up around this life of continual debt.
The commodification of debt
Debt became such an ingrained element of everyday life that like "pork bellies" it became a commodity to be bought and sold. When we bought our house in 1997 we needed a bridge mortgage until our house in Torrance was sold. I was aware of the practice of selling mortgages and reached an agreement with our lender that they would not sell our mortgage until a date specific within which I believed our house would sell. I was right, but when I went to pay off the mortgage substantially before the date agreed upon I was told that the mortgage had already been sold. While we were able to have this error corrected, I was impressed by the rapidity which mortgagers put these mortgages on the market. There was obviously a thriving market for them.
Not only was debt commodified, it was atomized, repackaged and sold as securities. Where did this leave the mortgagee? How many different people owned the mortgage?
There is a feudal quality to all of this. In the Middle Ages whole populations were transferred from one monarch to another, for example, as part of a marriage agreement. Here thousands, perhaps millions, of debts were transferred from one owner to other owners with no notification of the mortgagee. Thus we have let ourselves become pawns of the corporate wealthy.
Debt as the creator of money in our economy.
Leaving aside all those other devices of deception, e.g. derivatives and default swaps, which this novice certainly doesn't understand, we come to an interesting characteristic of the banking system. It is a legally sanctioned Ponzi scheme. I first stumbled on this in an article by Ellen Brown who wrote the book Web of Debt.
In an article titled The Wall Street Ponzi Scheme Called Fractional Reserve Banking: Borrowing from Peter to Pay Paul, which may be found at http://www.globalresearch.ca/index.php?context=va&aid=11600. Brown describes how banks, which need keep only 10% of their customer deposits in the bank, can use the other 90% to loan. This means that despite the legally assured option to demand the return of our deposited funds at any time, they, in fact, may not be there. If slightly over 10% of depositors demand their money back at a given time they will be denied. This is the fundamental feature of a Ponzi scheme. To quote from the above referenced article by Brown," Most people are not involved in illegal Ponzi schemes, but we do keep our money in accounts that are tallied on computer screens rather than in stacks of coins or paper bills. How do we know that when we demand our money from our bank or broker that the funds will be there? The fact that banks are subject to “runs” (recall Northern Rock, Indymac and Washington Mutual) suggests that all may not be as it seems on our online screens. Banks themselves are involved in a sort of Ponzi scheme, one that has been perpetuated for hundreds of years. What distinguishes the legal scheme known as “fractional reserve” lending from the illegal schemes of Bernie Madoff and his ilk is that the bankers’ scheme is protected by government charter and backstopped with government funds. At last count, the Federal Reserve and the U.S. Treasury had committed $8.5 trillion to bailing out the banks from their follies.1 By comparison, M2, the largest measure of the money supply now reported by the Federal Reserve, was just under $8 trillion in December 2008.2 The sheer size of the bailout efforts indicates that the banking scheme has reached its mathematical limits and needs to be superseded by something more sustainable."
But how to create the sustainable money supply that would avoid the democracy-destroying impact and over consumption of the growth-driven current system? Ellen Brown's bottom line recommendation is that only government should create money, not the free market of banks and speculation. Others have other suggestions on how to achieve this necessary goal. Thomas H. Greco has a web site titled Reinventing Money http://www.reinventingmoney.com/, which is devoted to this issue. I also found Greco's article The Trouble With Money very interesting. It can be found at http://www.yesmagazine.org/article.asp?ID=883.
In sum, we have created a major industry out of debt. What could not have happened in an age of barter, or perhaps of hard currency has, aided by our technology, created a complex, intricately concatenated, fairyland for desire out of the future. This technology-based complexity reminded me of a warning I read decades ago, namely, that as society becomes more knowledge-dependent those who know will dominate. Our current financial crisis was generated by a minuscule portion of the world's population. Something this powerful was brought to pass with no public awareness. How to bridge the gap between knowledge and democracy is one of the great issues humanity faces and one that seldom finds any social or political focus.
Bob Newhard
Debt was also used as a method of social control. The indentured servant in Colonial America was paying off the debt incurred by the cost of his passage from England to The Colonies plus any costs the creditor chose to impose. The share cropper was continually in debt to the land owner in the South because the owner's share was always enough to keep the share cropper on the land. The coal mine owners kept coal minors continually in debt in company-owned towns where the owner set rent cost and the cost of necessities at the company store. Some of you may remember Tennessee Ernie Ford's coal mining song that had the line "I owe my soul to the company store.'" In consequence the ordinary people of those times looked upon debt as a source of great deprivation of freedom and the necessities of life.
Despite this long history of debt condemnation, we now have an economy in which debt is a commodity and, as some argue, creates more money than the federal treasury. It has thus been deemed not only a good, but a necessary good.
How did this happen?
I believe the underlying cause is that the technology of production became so efficient followig the Industrial Revolution that factories began to produce more than society could consume. Technology drove production so much faster than consumption that the purchasing ability required for human consumption could not keep up. Debt, along with all kinds of desire stimulants e.g. fashion, two toned cars, keeping up with the Joneses, be came a major way to keep the capitalist economy functioning, From this we got the "growth is good" mantra from business schools, the local chamber of commerce and the media. In using debt for this purpose we pushed actual consumption further and further into the future and, thus, further and further into the unknown. This is what we now call burdening our children.
Debt becomes a way of life
Being a child of the Great Depression I was not well disposed toward incurring debt. For sometime I had been depositing $300 whenever I needed to rent a car. The time came, however, that the car rental agencies would no longer take a deposit. They would only take a credit card. Of necessity, I reluctantly obtained a credit card. This was one of those points where the economy, I believe initially for efficiency's sake, required that people go in debt in order to function in everyday life. However the credit card made debt so easy to acquire on a day to day basis that it rapidly grew in scope to the point where credit became a marketing tool. People began living with continuous debt, sometimes paying only enough interest to retain the ability to continue to go in debt. Many people became addicted to debt. A whole culture of "shop 'till you drop" grew up around this life of continual debt.
The commodification of debt
Debt became such an ingrained element of everyday life that like "pork bellies" it became a commodity to be bought and sold. When we bought our house in 1997 we needed a bridge mortgage until our house in Torrance was sold. I was aware of the practice of selling mortgages and reached an agreement with our lender that they would not sell our mortgage until a date specific within which I believed our house would sell. I was right, but when I went to pay off the mortgage substantially before the date agreed upon I was told that the mortgage had already been sold. While we were able to have this error corrected, I was impressed by the rapidity which mortgagers put these mortgages on the market. There was obviously a thriving market for them.
Not only was debt commodified, it was atomized, repackaged and sold as securities. Where did this leave the mortgagee? How many different people owned the mortgage?
There is a feudal quality to all of this. In the Middle Ages whole populations were transferred from one monarch to another, for example, as part of a marriage agreement. Here thousands, perhaps millions, of debts were transferred from one owner to other owners with no notification of the mortgagee. Thus we have let ourselves become pawns of the corporate wealthy.
Debt as the creator of money in our economy.
Leaving aside all those other devices of deception, e.g. derivatives and default swaps, which this novice certainly doesn't understand, we come to an interesting characteristic of the banking system. It is a legally sanctioned Ponzi scheme. I first stumbled on this in an article by Ellen Brown who wrote the book Web of Debt.
In an article titled The Wall Street Ponzi Scheme Called Fractional Reserve Banking: Borrowing from Peter to Pay Paul, which may be found at http://www.globalresearch.ca/index.php?context=va&aid=11600. Brown describes how banks, which need keep only 10% of their customer deposits in the bank, can use the other 90% to loan. This means that despite the legally assured option to demand the return of our deposited funds at any time, they, in fact, may not be there. If slightly over 10% of depositors demand their money back at a given time they will be denied. This is the fundamental feature of a Ponzi scheme. To quote from the above referenced article by Brown," Most people are not involved in illegal Ponzi schemes, but we do keep our money in accounts that are tallied on computer screens rather than in stacks of coins or paper bills. How do we know that when we demand our money from our bank or broker that the funds will be there? The fact that banks are subject to “runs” (recall Northern Rock, Indymac and Washington Mutual) suggests that all may not be as it seems on our online screens. Banks themselves are involved in a sort of Ponzi scheme, one that has been perpetuated for hundreds of years. What distinguishes the legal scheme known as “fractional reserve” lending from the illegal schemes of Bernie Madoff and his ilk is that the bankers’ scheme is protected by government charter and backstopped with government funds. At last count, the Federal Reserve and the U.S. Treasury had committed $8.5 trillion to bailing out the banks from their follies.1 By comparison, M2, the largest measure of the money supply now reported by the Federal Reserve, was just under $8 trillion in December 2008.2 The sheer size of the bailout efforts indicates that the banking scheme has reached its mathematical limits and needs to be superseded by something more sustainable."
But how to create the sustainable money supply that would avoid the democracy-destroying impact and over consumption of the growth-driven current system? Ellen Brown's bottom line recommendation is that only government should create money, not the free market of banks and speculation. Others have other suggestions on how to achieve this necessary goal. Thomas H. Greco has a web site titled Reinventing Money http://www.reinventingmoney.com/, which is devoted to this issue. I also found Greco's article The Trouble With Money very interesting. It can be found at http://www.yesmagazine.org/article.asp?ID=883.
In sum, we have created a major industry out of debt. What could not have happened in an age of barter, or perhaps of hard currency has, aided by our technology, created a complex, intricately concatenated, fairyland for desire out of the future. This technology-based complexity reminded me of a warning I read decades ago, namely, that as society becomes more knowledge-dependent those who know will dominate. Our current financial crisis was generated by a minuscule portion of the world's population. Something this powerful was brought to pass with no public awareness. How to bridge the gap between knowledge and democracy is one of the great issues humanity faces and one that seldom finds any social or political focus.
Bob Newhard
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