[R-G] [BillTottenWeblog] Making the Most of a Global Depression

[Bill Totten]

by Richard Heinberg, Senior Fellow, Post Carbon Institute

HopeDance Magazine (March 18 2008)


It's becoming increasingly likely that 2008 will go down in history as
the year the Second Great Depression began. The unraveling started with
the subprime mortgage fiasco and is spreading fast. The total value of
all US dollar-based mortgage bonds is $10.4 trillion, of which thirty
percent is now expected to be lost in defaults and property devaluation.
That's $3.2 trillion in losses. Trillions more are likely to evaporate
from the related derivatives markets. It's true that the global economy
is pretty big, and a few hundred billion get lost under sofa cushions
from time to time (as happened during the savings and loan crisis of the
1990s), and still, life goes on. But when we're discussing trillions of
dollars (with a "T"), we're talking real money.

Get ready for bank runs, a stock market collapse, and, perhaps, a money
panic.

Such things have happened before (in 1833, 1837, 1857, 1907, 1920, and
1929), but this time it's different. Now the problem is not just
financial mismanagement; there is a deeper instability: the global
economy is based on a fundamentally unsustainable exploitation of
depleting natural resources, and that whole system is teetering. In his
essay, "Barreling into Recession: How Oil Burst the American Bubble",
Michael Klare points out that "The economic bubble that lifted the stock
market to dizzying heights was sustained as much by cheap oil as by
cheap (often fraudulent) mortgages". Veteran geologist Colin Campbell,
in his ASPO Newsletter #86, steps back for an even broader overview:

"The Oil Age opened 150 years ago, releasing a flood of cheap energy,
such that today's production is equivalent in energy terms to 22 billion
slaves working around the clock. The resulting economic prosperity
allowed the banks to lend more than they had on deposit, confident that
Tomorrow's Expansion was collateral for To-day's Debt. It sounds a
rather dubious principle but worked well enough during the First Half of
the Oil Age allowing at least some countries to reap great prosperity.
The Second Half now dawns, and being characterized by falling supply,
effectively removes the Collateral for debt ... Whereas the post-peak
physical decline of oil ... is only gradual ... the perception that past
economic growth must now give way to contraction can come in an instant,
prompting radical changes in the financial world."

So, as the oil drains away, the view is all downhill from here. A
Depression is, well, depressing even to think about, much less to live
through.

But wait a moment. For anyone with an ecological sensibility, the
prospect of economic contraction has a silver lining. In a recent e-mail
message, UBC Professor of Human Ecology Bill Rees summed up our
collective situation this way:

"To raise the human enterprise ever further from thermodynamic
equilibrium, we must degrade and dissipate ever-greater quantities of
available energy and material resources extracted from the ecosphere. We
have passed the point where the ecosphere can provide sustainably all
that we are extracting. Resources are depleted; entropy accumulates. In
effect, techno-industrial society has become pathologically parasitic on
nature."

The implication is clear: if we hope to survive as a species, and if
there is to be hope for millions of other creatures, we need to shrink
the human enterprise. Economic contraction may be bitter medicine, but
it's part of the cure for what ails our planetary home.

However, we can manage this contraction either foolishly or intelligently.

A foolish management of economic contraction would entail burning the
biosphere for alternative fuels; propping up the banks and other
financial institutions that created the mortgage mess, without ever
re-examining the wisdom of growth-based economics; and responding to
human privation and misery with repression and war.

Intelligent management would start with an explicit commitment to
redesign the global economy to run with less. We would assess ecosphere
resources and identify a humane, equitable path toward gradual reduction
in population and total consumption levels. We would focus on those
aspects of life that bring us increasing satisfaction without requiring
more inputs of energy and materials. We would re-acquaint ourselves with
the values and virtues of community, self-sufficiency, and modesty. We
would redesign our cities to eliminate cars, while developing renewable
energy sources and educating a new generation of ecological farmers.

If we handle this well, the medicine of contraction will leave Nature
intact and humanity in a state of greater happiness, equity, and peace.

We don't have much choice regarding whether a Depression will ensue. But
a great deal depends on how we respond. It's not too soon to start that
discussion.

_____

Richard Heinberg is the author of The Party's Over (2005) and Peak
Everything (2007). He is a Senior Fellow of the Post Carbon Institute
and lectures widely on sane responses to fossil fuel depletion.


http://www.hopedance.org/cms/content/view/479/107/

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