The ‘Great Recession’ of the last few years has been fertile soil for the emergence of new economic initiatives. People worldwide have grown weary of the inequalities in our modern societies and many have come to understand that it is our current economic system that actually creates and exacerbatesmany of our problems. This revelation has opened many minds to different ways of thinking and acting in our personal lives and communities. As a result, a significant wave of positive initiatives has taken off and accelerated all over the world. We must use this momentum for a new economy to face our greatest financial challenges, epitomized by the current US debt ceiling crisis.
It’s likely you’ve heard it before, maybe even several times: if the US debt ceiling crisis is not resolved, the US federal government will default on its debt and the consequences will be catastrophic. The Sydney Morning Herald reports that three of the world’s top bankers have acknowledged that a US default would be devastating for the entire global economy. Chief economist of the International Monetary Fund, Olivier Blanchard, has said that if there is a failure to lift the nation’s debt ceiling “what is now a recovery would turn into a recession or even worse”.
Of course, it’s not very difficult to predict what all of the above-mentioned economists and bankers prescribe as the solution to the problem: raise the debt ceiling and focus on driving economic growth. Some people are also talking about the need to reduce government spending in order to create a more reasonable budget, and that’s a praise-worthy goal. But there is something fundamental and systemic that the vast majority of commentators, politicians and citizens are missing.
Feeding the Elephant in the Room
The debt-based money system (see fractional reserve banking for more) is the trunk of the infamous elephant in the room. Interest being earned on the public debt and the money loaned into existence is the elephant’s head. Our addiction to credit, and thus debt, are the ears. The financial, social, political and ecological limits to growth are the legs.
However, this elephant isn’t just resting in the corner of the room, quietly minding its own business. This elephant is growing bigger all the time. Why? Because we’re feeding it. The elephant’s belly, from which all of these issues stem, is our compulsion to keep growing the economy, driven particularly by the maximization of private profit.
Our entire modern economy is built on the foundational concepts of profit maximization and accumulation of private wealth. They are what drive interest rates, one person profiting from another’s debts (including debt-based money), the prioritization of shareholder value over ecological stewardship, as well as our casino culture and addiction to credit when we have no plan for how to repay it.
One doesn’t need an economics degree to know that the more money you borrow, the larger your repayments become. Thus, in the case of the U.S. government’s increasing levels of debt, even more growth is required to pay down the debt. More pressure continues to be placed on a growing fault line. Even more frightening is that every time the debt rises, so too does the devastation that would be associated with systemic collapse. The more promises the U.S. government makes and the more people trust those promises (like buying up government bonds), the greater the severity of the forthcoming crisis, because the losses will be more widespread.
Crisis after crisis will continue to hit until we stop feeding the elephant in the room.
A Not-for-Profit World Can Usher the Elephant Out
By all means, avoiding a U.S. government debt default is the best possible outcome in the short-term. But let’s take this as a sign that it’s time to acknowledge the oversized pet in the living room and put it on a diet. Our common future lies with an economy beyond the accumulation of wealth and, therein, the debt structures that support this accumulation. Our banking methods and the insatiable casino culture, together, have acted like a siphon, sucking wealth from the middle and lower classes and feeding it to the 1%. In the past, societies had debt jubilees and the experience of potlatch (which, in some cases, still happens today) in the wisdom that there are social limits to inequality. In the 21 stcentury, we are rapidly approaching our social limits.
A sustainable way forward lies in the decentralization of wealth and power while building on existing market infrastructures. Beyond some of the immediate steps we can take to usher in such a future, what kind of system would this actually be?
There is great hope for a Not-for-Profit World, in which every business has the fulfillment of social needs as its primary objective, supported by a solid plan for generating its own revenue. For the first time in modern history we have the ingredients and momentum to create a world in which innovative, sustainable economies, with high levels of employment, thrive without the private profit motive. And the more people see that the current system based on greed and self-interest is failing us all, the greater the chance that the winds of change will blow new seeds of creation into the fertile soil of our discontent.
Originally published in October 2013 on the Post Growth institute (PGI) blog. Find out more about the PGI here.