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How to genuinely fix the economy?

· November 5, 2013

Our economy is sick. If we’re to survive as a species, the current economic system must change. What should our priorities be?

Problems

In my recent analysis of our current economic system, I identified two problems. They are:

  1. Limited natural resources. Our natural resources—including the renewable ones—are limited. Therefore, it is not possible to grow our economy forever without putting in danger our very ability to survive on this planet.
  2. Growing unemployment. Advances in productivity—including in technology—are causing the demand for labor to decrease. In the short run, this creates unemployment. In the long run, most (if not all) humans in the production processes will be made redundant.

Solutions

In this post, I’m going to outline priorities for dealing with these two problems.

Priority #1: stop population growth

There is no hope of our survival on Earth without halting the population growth. It is absolutely necessary that the number of people on the planet stabilizes and doesn’t growth any further.

If we don’t stop the population growth, it is certain that we will reach a point when the cumulative needs of the population will exceed the amount of resources available.

Fortunately, this priority is sufficiently recognized by mainstream policy makers throughout the world, both locally and internationally, and there are many programs addressing it.

Priority #2: use natural resources sustainably

Sustainable use of natural resources means that their availability doesn’t diminish in time. In other words, we use only as much resources as can recuperate within a given time period.

This priority is well-recognized among policy makers internationally, however, progress is slow at best. On one hand, advances in productivity help make the use of natural resources more efficient. Furthermore, since productivity gains are seen as the primary source of economic growth, both mainstream policy makers and owners invest heavily into productivity improvements.

On the other hand, equally significant investments are made into artificially inflating the demand for products and services and into increasing the production. These types of investments have a negative effect on the availability of natural resources and usually go hand-in-hand with productivity improvements.

As a result, most actual work is spearheaded by non-governmental, grassroots organizations. Luckily, it seems that more and more people are slowly turning away from consumerism and towards more environmentally friendly approaches.

Priority #3: decouple consumption from jobs and income

Increased productivity causes unemployment. When people lack jobs, their income drops and their ability to satisfy their needs through purchases diminishes. This in turn reduces the overall demand, which negatively affects production. When production decreases, more jobs are lost and the cycle repeats itself in a self-fueled downward spiral.

The only way out of this is a new economic system in which the ability of people to satisfy their needs does not depend on the level of their income. Unfortunately, for some reason, this priority remains completely unrecognized by either the mainstream policy makers or the general public. Even among independent thinkers, there are only very few who are actively concerned with this issue.

Conclusion

The problems outlined in my previous post pose a tremendous challenge to our society. It is clear that the status quo has to change. The only question is, will it happen as a guided, step-by-step process from one system to another (evolution) to the benefit of everybody? Or, will it occur in form of an uncontrolled, radical, disruptive change (revolution) that could potentially endanger our very existence on this planet? I sincerely hope it’s the former.