New Economic Model?

I attended and economic update last week.  I attend these from time to time, as it is part of my job to understand what is going on in the economy.  This one featured two economists from a large Canadian bank.  As they were talking about the forecast for the price of oil, gold, silver and copper – my mind started wandering.  The price structure of these commodities can help predict the future strength of the economy, the employment rate, interest rates.  The economist told us that the price of silver was irrationally high, and that there should be a correction.

It left me feeling conflicted.  Why will the price of silver come down?  What is the true cost of silver, the true environmental cost?  When I think of silver and gold now, I don’t see it as pretty sparkling piles.  I think of the mine, the vast amounts of earth that must be moved to pull out tiny portions of precious metals.  I think of the forest destroyed, the water used.  I feel heavy.  Why do we need all this silver and gold anyway?  What is it all used for?

Silver Nevada's nickname is the Silver State

Image via Wikipedia

So the price of silver will come down, perhaps.  Prices for gold, oil, copper, gas, food – these will also fluctuate on the global commodity markets.  But all these things came from somewhere, somewhere from our Earth.  Stuff was disturbed, even destroyed, to get them. I feel like I have an emotional investment in these things now.  I cannot just talk about them nonchalant like this economist does, without thinking about where they came from.  As he was talking, I find myself feeling sad.

He went on to say that the US economy will not be able to fuel global demand for consumer goods in the long term.  Household debt is too high.  Unlimited debt fueled spending is not sustainable.  However, to get out of the recession, that is exactly what US consumers need to do.  They need to start spending.

Sigh. 

I don’t know the answers.  Economists measure a healthy economy by growth in GDP.  But what if we have reached our limits to growth?  If the US cannot spend their way out of the recession, who is going to pick up the slack?  Who is going to buy all the gadgets and gizmos that China makes?

Walking out of that session, I wished I had asked that question.  Are there limits to growth – limits to how much consumers can spend, limits to the ability of the Earth to give up resources?

If there are limits to growth, what does the new economy look like? 

What will be the new economic model?

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3 thoughts on “New Economic Model?

  1. It seems pretty clear that our economy is going to have to undergo some major shifts to become sustainable in the long haul. There are lots of different theories on what this will look like — the zero growth economy actually sounds pretty good to me (less work, less stuff, more time — bring it on!), but I’m also supportive of a more service-oriented economy (massages, classes, entertainment instead of stuff). Lately I’ve been thinking about local economies and if they will ever regain prominence over our big global economy. One of the most intriguing ideas I’ve come across is local currency — a complementary currency that can be based on any unit of value (such as an hour of work) and can only be traded within a geographically limited range. It sounds like it could make better use of a community’s total assets and skills, including those of its unemployed.

    I’m definitely no economist, but it will be interesting to see how things shape up!

  2. I have heard of local currencies too, it is an interesting idea that promotes local food and services! Buying locally reconnects us with our vendors, allows us to look them in the eye and have a conversation with them. It enables us to better appreciate the work and effort and resources that went into making our products. For example last weekend I bought a roll of wool yarn that the vendor had hand-carded, hand-died, hand-spun and rolled. I looked at her beautiful colourful selections and was amazed at the effort she put into it. She told me they took about 2 hours each to do, and were $20. Compare this to the wool at Walmart for $2.99. Where does that come from, was it sustainable, how far did it travel, what chemicals were used, what was the environmental cost?

    I agree with the consume less, spend less, so you can earn less, work less. But be happy more! How about reducing our work weeks from 40 hours to 30 hours? That would spread around the jobs a bit more, we would stop feeling so stressed and overworked, and we would stop consuming all these toys and gadgets that we don’t really need and are actually harmful for the planet long term.

    The film “The Economics of Happiness” really resonates with me, as shows that we need to value what is really important – happiness, which is not directly related to GDP. In some cases, there is an inverse relationship, due to the stress, and due to the loss of human and nature connections we suffer as a result of working so hard.

    Something has got to give!

  3. I too don’t see silver and gold as simply shiny metals anymore – seeing them means somewhere, a beautiful land and community is getting destroyed. I don’t think I’ll ever buy a diamond ring either. Maybe recycled silver would work.

    It’s amazing that mass production prices are so cheap. I’ve read it’s because we don’t place any sort of monetary value on natural resources, so it’s basically just another ‘externality’ or operational expense for businesses. Businesses aren’t required to pay for their waste either, the government basically stores toxic wastes in large barrels or ponds, which is paid for using US taxpayer money. I read some really awesome books on sustainable economy. You might be interested in checking them out too: The Ecology of Commerce, by Paul Hawken; Natural Capitalism by Paul Hawkens, Amory Lovins, and Hunter Lovins; Plenitude by Juliet B. Schor. My next such book to read is Bill McKibben’s Deep Economy. Also another really great book on societal change, though not directly about economics: The Great Turning, by David C. Korten, co-founder of Yes! Magazine. I listed all these here: http://lynnfang.com/resources-2/world-changing-reading-list/

    Plenitude is probably the least technical, most easy to read. Next is The Ecology of Commerce. Natural Capitalism is super technical and talks a lot about the technologies that exist today, that could help us move towards sustainable industry. But the beginning is very inspirational, so I sill think it’s worth checking out.

    They all say basically similar things: we need to place monetary value on natural resources and essentially rework the GDP so it doesn’t go up when crime and depression go up too, work for well-being rather than pure economic profit, stop subsidizing pollutive businesses, decentralize production so there is less transportation necessary. Basically, the economy serves us, not the other way around. And so our economy’s health should reflect our community’s health. If crime and depression are up, that probably means productivity is down.

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