Out of Expansion Economics

About 500 years of global physical expansion has affected everyone on earth. It is still picking up speed, driven by global financial and marketing systems. These descended from early business systems devised to motivate colonial expansion, followed by industrial expansion.

To most of us, “financial think” seems natural. Ambition to grow permeates government and non-profit activity, not just commercial enterprise. We want our retirement savings to grow. Few question growth’s core assumptions, although many decry those capital market prods, quarterly earnings advisories and earnings reports. Small family-owned businesses’ growth ambitions may be modest, but to investors fixated on short-term growth, shriveling stock caps signify management failure.

Even financial basics used daily, like compound interest and net present value, are growth models.

Economies are expected to grow, measured by GNP, the aggregate of all its net transaction exchange values. If GNP growth stalls, the standard prescription: inject money into the system to restart it. Worked as long as more resources could be obtained, and no disasters befell. The cornucopia this system has conferred on industrial societies has endured so long that merely suggesting flaws is akin to attacking a religion.

But flaws are increasingly obvious. For example if a resource is limited, market theory is that higher prices will induce greater supply. But if no more can be had at any price, a market no longer exists. Increasing labor productivity, more sales per person, assumes that more is better. So we substitute machines and energy for human work (including mental work), but expect everyone to work to buy the output. But if each worker processes more resources, and we use them, at what point do we consume just to give people work and companies profit? If the system degrades into “commodity traps,” all competitors strain to do more on lower wages and skinnier profits. Do these treadmills “make money” without improving our quality of life?

Of course, environmentalists see the major flaw as not valuing the environment’s “services,” like air to breathe. Conventional financial reasoning asks how nature benefits us, not how we benefit it.

Compression economics starts from a different mind set. Compress all resource footprints of work. Define efficiency as using minimum total energy (minimum resource footprint) to do anything necessary for survival or quality of life. Thermodynamic efficiency sounds mysterious. Data is skimpy and we’re not used to doing it yet, but it’s not impossible.

Instead revise and innovate work processes to use less  — no trade offs. This is no pipe dream. “Lean operations” do this now, eliminating waste — anything that need not be done to have the desired outcome. This can be extended to minimize all resource use. More is necessary to address biochemical imbalances. Extending further, if work is to improve quality of life, not increase consumption, the definition of work changes: It’s doing the right things at the right time to assure the desired outcome, quality before quantity. But first we must grasp that ending expansion will not doom quality of life because our historical expansionary system tells us so.

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