It’s to end the automatic use of any successful promise for financially profitable returns to multiply future promises for profitable returns. The problem is that money driven process of multiplying promises for what we can do with the earth, and compelling attempts to deliver them, is naturally destabilizing for physical systems.
There was a recent No-Growth convention, that notably omitted discussion of this most obvious of institutions that causes our impacts on the earth to multiply. My comment on the report, and notes Andy Revkin asked for on the same subject, how to truly stabilize money, are below.
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Comment to NEF blog on - Reporting back from the Steady-State Economy Conference
So, what I don’t understand is why at these things there’s never anyone mentioning the need to end the promise of limitlessly multiplying money, quite the most obvious of all the impossible drivers of growth and our impacts on the earth.
Keynes, in his General Theory, pointed out the one non-disruptive way to end the growth of money, savings and debt as the physical economy reached its physical limits of environmental impacts. People always seemed just run and hide when Ken Boulding or I have raised the subject, though, as if people still live in fear of questioning the right of powerful people and institutions to have their idle money endlessly multiply.
That we try to stabilize it, rather than find a peaceful end to it, is the error. It’s inherently destabilizing of any economy working as a physical system and being driven to its breaking point. We should do what Keynes recommended, turn all investment funds into endowments, so their earnings are spent on more useful things than multiplying our burden on the earth.
See also:
- http://synapse9.com/blog/2010/04/01/keynes-widows-cruse-compulsive-capitalism-v-natural-growth/
And other things in the Natural-Economy group of blog entries:
- http://synapse9.com/blog/category/natural-economy/
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Notes prepared for Andy Revkin on Keynes’ “Widow’s Cruse” concept:
Here are a link from the blog entry on the “Widow’s Cruse” (‘cruse’ means “cup” in the King James Bible) that my comment pointed to a footnote to an essay on natural climax, and a reference to the Wikipedia entry, a couple paragraphs down under the history section.
Anyone new to the subject needs a little guidance around the pitfalls at first. It certainly has been discussed by economists as a “curse”, and they have widely spread misunderstanding of it, except for Ken Boulding it seems. What Keynes was referring to was a magical “inexhaustible cup” of oil that Elijah gave to an old widow to relieve her of the burden of feeding him during his stay with her,.. weird! Hidden in that is the secret formula for making free market financial systems sustainable at the limits to quantitative economic expansion.
In Keynes’ General Theory, chapter 16 heading III and IV, the way he says:
“Thus for a society such as we have supposed, the position of equilibrium [steady state], under conditions of laissez-faire, will be one in which employment is low enough and the general standard of life sufficiently miserable to bring [the rate of] savings to zero.” [i.e. no physical expansion & no net returns to allow financial expansion]
“The only alternative position of equilibrium would be given by a situation in which a stock of [financial] capital sufficiently great to have a marginal efficiency [and savings rate] of zero also represents an amount of [financial] wealth sufficiently great to satiate to the full the aggregate desire on the part of the public make provision for the future [by increasing savings], even with full employment …” [ending savings accumulation because people have “enough money” ]
“For a little reflection will show what enormous social changes would result from a gradual disappearance of a rate of return on accumulated wealth [end of compounding investment returns]. A man would still be free to accumulate his earned income with a view to spending it at a later date. But his accumulation [of wealth without work] would not grow.
It’s really high school math, with the only catch being visualizing the earth as finite. The way to draw the model is with two economies, 1) a goods and services economy in which money circulates internally (a working bucket) and 2) a financial economy (a savings bucket) being used to put surplus money in at selected places in the main economy to stimulate growth, and take a % more than that out. That works fine so long as there is steady growth in the working economy, so putting ever more money in the right places creates enough extra for the finance economy to keep taking a % more out. The savings accumulate exponentially as the returns keep being added to savings, and kept from the working economy unless in exchange for a promise of greater returns.
When attempts to stimulate growth start multiplying conflicts in the economy and environment instead [overinvestment], it creates conditions “sufficiently miserable” that the working economy can’t produce real multiplying returns. Then the whole economy can only be kept stable if the rents provided to the financial economy for the use of money stop being accumulated as savings, at the same time. That’s what obligates anyone at that time to spend their “unearned” financial income to bring an end to the otherwise automatic accumulation of capital extracted from the working economy. It’s in their own interests for preserving their own accumulated capital, in the interests of the system as a whole, and of the right of employees to be able to save for their own needs from their earned income.