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A long recession

December 2nd, 2008

The National Bureau of Economic Research Business Cycle Dating Committee has just announced its judgement that the current US recession began in December 2007. A year old, and the decline is just beginning to accelerate. As these forecasters quoted in the NY Times say, the recession is virtually certain to be the longest since World War II (in fact, since the 1929-33 slump), and quite possibly the deepest as well.

The only silver lining I can see is that we might not hear any more silliness about the “technical definition” of a recession being two quarters of negative growth.

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  1. gerard
    December 2nd, 2008 at 19:16 | #1

    http://www.reuters.com/article/topNews/idUSTRE4B01HI20081201

    Credit-card industry may cut $2 trillion lines: analyst

    (Reuters) – The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

    The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

    “In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”

    Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

    Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults….

  2. Ikonoclast
    December 2nd, 2008 at 19:29 | #2

    Be prepared for a turbulent period in world history, that’s all I can say.

  3. nanks
    December 2nd, 2008 at 19:51 | #3

    my only real fear – above the normal ones of global conflict/environmental disaster etc etc – is hyperinflation. That’s because I’m a saver with no debt who believes the government will do anything to save its core constituency – the wealthy and powerful.

  4. Socrates
    December 2nd, 2008 at 20:20 | #4

    I find this decision bizarre in its timing. I recall questioning six months ago why the US GDP figures didn’t show a contraction in the first quarter of this year. I now think the only thing that prevented the US from recording a recession then was all the fake profits being reported by Wall Street who were not yet admitting the extent of their bad “assetts”.

    So why the change of heart? Yes the real world US economy was in recession then as now, but the “official figures” didn’t show it. So why revise the definition now? Does it mean the National Bureau of Economic Research Business Cycle Dating Committee agree the official GDP figures were rubbish?

    Meanwhile we see a negative market reaction when nothing has changed lately; credit flows are actually improving. Why a negative market reaction to a belated admission of a past fact?

    IMO this whole thing casts both official economic statistics and markets in a poor light. The credit rating agencies just complete the axis of innumeracy.

  5. Hermit
    December 2nd, 2008 at 21:00 | #5

    This time may be fundamentally different to 1929 because we may not be able to ‘grow’ our way out of it. Back then there were mines to dig, forests to cut, rivers to dam, air to pollute and car ownership to popularise. If a recovery is possible it may revolve on using less. Even the pundits (if Steve Keen can be give that title) are saying the economy will revive within a year or two. I’m not sure. Maybe the world has passed peak consumption.

  6. sean
    December 2nd, 2008 at 21:43 | #6

    The Bond market will decide if this is just a recession, a major recession or a depression, it has throughout history and it will now.

    The signs are not good.

  7. observa
    December 3rd, 2008 at 00:19 | #7

    nanks, If you’re a saver with no debt then you’re exactly who our Govts are after. Who do you think has to support their negative real interest rate, spend now pay later programs? Surely not the spend now pay later constituents?

    Socrates, John Williams at Shadowstats has been banging on about corruption of the statistics for ages. These are people who print money and live off the toil of others just like the finance sector. You don’t really expect them to give you the plain unvarnished truth about what they’ve all been up to do you? Besides as is patently obvious now, they couldn’t control it all let alone monitor it. Could you if you had a legal tender printing press in the corner?

    Our ‘money’ is really all tied up in those MBSs and ultimately the price of RE and then it flowed over into securitization of car, student and credit card loans. It’s impossible to unwind without a lot of people losing their shirts and lose them they’ll have to if we’re to cure this credit addiction. If you start bailing out the Freddies and Fannies with RE, as night follows day you’ll have to bail out securitised car, student and consumer credit loans and that’s where they’re at now. As fast as the authorities throw money at the finance sector now, they sock it away to build their reserves or throw it into safe Treasuries. After all there’s no reward for risk with those low world interest rates now and our mob is mee-tooing on that as fast as any last vestige of financial reputation allows.

    What we know now is what Austrians always knew. Monetary expansion fuelled this boom, but it was always those real factors that ended it. In the end no real returns on saved capital could keep all those ravenous appetites in the manner to which they’d become accustomed. It’s just a question of how quickly everyone gets the message now. The fact they’re looking to soft option nosewipers in Govt is not a good sign. The whole MSM in this country is a pack of nodding dogs on deficit spending. Countercyclical fiscal stimulus should only extend to spending our ‘good times’ surplus now. Anything else is just more credit binging. You’ve got to laugh at the way banks are sticking up credit card rates to deter dodgy credit at the same time the Reserve is lowering rates to encourage it. It’s all about that real underlying savings and investment now.

  8. BilB
    December 3rd, 2008 at 04:41 | #8

    Hermit,

    This time ’round there is an environment and a climate to fix. A deep US recession may be the best method for weaning Americans off their massive vehicles and into more modest motive means. Peak oil did not arrive soon enough to drive that nail home properly, though. There will almost certainly be a resurgence of more local manufacturing, causing China to become cheaper again, and turn their productive capacity more towards their domestic market.

  9. John Quiggin
    December 3rd, 2008 at 05:16 | #9

    #4 Socrates, the cycle dating committee tends to be concerned more with historical accuracy than with providing a current assessment of the economy. So their assessments tend to come after the event.

  10. conrad
    December 3rd, 2008 at 05:46 | #10

    “Maybe the world has passed peak consumption.”

    Perhaps some places have peaked, but if you go to China or India I think you’ll find this is a far way off.

  11. Socrates
    December 3rd, 2008 at 08:45 | #11

    JQ

    Thanks I didn’t know that about the committee. I still find the incongruity between their view (which I agree with) and the national accounts glaring.

  12. Ian Gould
    December 3rd, 2008 at 08:58 | #12

    During every boom, pundits insist that “this time it’s different” and the boom will last forever.

    Currently, we’re seeing the same thing said about the current recession.

    In the case of booms, when those claims get most fervent, you know a turning point is near.

    I suspect the same is true now.

  13. Hal9000
    December 3rd, 2008 at 08:59 | #13

    The ‘technical definition’ stuff is one of the half dozen or so standard media narratives, others being ‘leadership challenge’, and ‘youth violence’. We have news media that certainly meet the technical definition of intellectual bankruptcy.

  14. plaasmatron
    December 3rd, 2008 at 09:15 | #14

    Think housing in Aus is safe (as houses)? Personally, when the price of a condo in NYC gets below that in Bondi I won’t be stumping up for a cockroach infested flat at the end of car park called Bondi road. A lot of talk about the difference between house prices in Australia and the US/UK is on the lack of supply in Australia propping up the prices. For renters and first home buyers this problem is excacerbated by immigration levels. No one seems to advocate spending some of the surplus/deficit on public housing and giving people the opportunity to opt out of the home-ownership debt nighmare. I guess when one could leverage their abode it made sense to have a house worth millions, but who is going to give you the money today? “It would, indeed, be more sensible to build houses and the like.” JM Keynes

  15. carbonsink
    December 3rd, 2008 at 09:42 | #15

    Any exporter selling into the US could have told you the US economy hit the wall towards the end of 2007, but its taken 12 months for the NBER to figure that out.

    nanks @ 3: I’m a saver with no debt as well. I’m sitting tight for the moment because I reckon we’re in for a (hopefully brief) period of deflation, so the buying power of your cash is growing even though the RBA is madly slashing rates. With so much money being pumped into the global economy by “Helicopter Ben” and Hank “Mr Consistency” Paulson, there’s certainly potential for a lot of inflation further down the track.

    An incredible statistic:

    The Baltic Dry Index which according to wiki provides “an accurate barometer of the volume of global trade” is down 94% since May.

  16. Michael of Summer Hill
    December 3rd, 2008 at 11:58 | #16

    John, if I may reply to Hermit by saying don’t be so pessimistic, think positive of progress and where society is heading, think of renewable energy and the associated technologies and the ongoing millions of new jobs created annually, think clean and think green.

  17. Tony G
    December 3rd, 2008 at 13:47 | #17

    Re 12,

    Normally, I do not agree with you Ian, but in this case you are probably right.

    It always seems darkest just before dawn.

    Who has the balls to venture into selected oversold equities and properties. Some good business franchises are selling with double digit yields. Some are selling at a fraction of the sum of the future cash flows expected to be returned from such investments; future depression factored into the equation or not.

  18. Tony G
    December 3rd, 2008 at 13:57 | #18

    plaasmatron;

    The problem with new housing in Sydney is that for the average $500K new house $150k is tax. The average mortgage is $300k, half to pay the tax bill. It is crazy that a first home buyer has to borrow to pay a $150k tax bill.

  19. Nick K
    December 3rd, 2008 at 14:42 | #19

    Plasmatron says “No one seems to advocate spending some of the surplus/deficit on public housing and giving people the opportunity to opt out of the home-ownership debt nighmare.”

    The problem with that is that if governments spent vast sums of money on building new public housing, not only would it involve a large cost to the budget but it would also ensure a more rapid fall in the value of existing homes.

    It would deliver more affordable housing, but it would do enormous damage to the rest of the economy. Governments would be left with the bills to pay for the budget deficits used to finance it. But the collapsing property prices would do more economic damage elsewhere, such as leading to more bankruptcies, negative equity etc.

    If house prices are overvalued, it is inevitable that they will fall sooner or later, thereby creating more affordable housing. So why waste taxpayers money in helping to burst a bubble that is likely to burst anyway?

    This is a solution that is worse than the disease.

    The other problem is that for people who have sacrificed and worked hard to get into the housing market and pay their mortgages, it would be very unfair to then find that other people are being given a free ride through more cheap public housing. While their property values would be taking a hit, and their taxes would be funding this.

  20. rog
    December 3rd, 2008 at 15:14 | #20

    ‘Who has the balls to venture into selected oversold equities and properties. ‘

    I’ve started nibbling away, naysayers be damned

  21. TerjeP (say tay-a)
    December 3rd, 2008 at 16:51 | #21

    Maybe the recession finished a few years ago and the data hasn’t caught up yet. ;-)

  22. nanks
    December 3rd, 2008 at 17:37 | #22

    @ observa and carbonsink – I guess I’ll keep a weather-eye out for the hyperinflation and then spend spend spend as though my savings depend on it :)

    @ tony G and the good opportunities – don’t be coy now, which ones are you putting your money into? I must admit I had the s&p/asx200 at 3800 as the time to really start considering shares, but I have revised down on that now – maybe even 3000.
    Getting back on topic – for the tiny worth it has, I think the recession will be longer rather than shorter. But I don’t think the idea of recession really captures the upcoming changes. There is an ‘opportunity’ for the distribution of wealth to spread more evenly across the globe and I don’t think that opportunity will be missed. One aspect of that is the impact of resource availability on building new productive industries. There doesn’t seem to be any particular longish term advantage for that in the older established economies.

    However, I am very optimistic on biotech and new ‘green’ technologies (except ‘clean’ coal, which is just a method for buying the coal industry time as far as I can see).

  23. rog
    December 3rd, 2008 at 17:41 | #23

    #21 I think so Terje, data is always after the event

  24. rog
    December 3rd, 2008 at 17:43 | #24

    On second thoughts maybe not years ago but the stimulus is sure to clean the tubes for some time.

    long term – no idea

  25. plaasmatron
    December 3rd, 2008 at 18:11 | #25

    #19 “This is a solution that is worse than the disease.”

    Some countries in Europe (and formerly the US I believe) have caps on rent which give people the option of renting their whole lives and avoiding borrowing 300k (of which 150k is apparently tax). This keeps housing at an affordable level and gives people the option to not become home owners. Now that would be a free market.

    I agree with Nick K that building houses will excacerbate a drop in house prices, but building when prices have already dropped back to affordable levels and unemployment is up will provide housing and employment to used-to-be-working-families. Better than sending cheques to spend on plasma and pokies.

    If unemployment rises, driving up foreclosures, there will be a lot of people living on the streets who will need public housing (while waiting for rents to drop accordingly).

    Sorry to those first home buyers who bought at the peak and those almost retirees who leveraged a million on their homes to drop into their super fund last year.

  26. gerard
    December 3rd, 2008 at 19:03 | #26

    on Dailykos I found a rather cool image comparing the movement in S&P index from 1825 til now, look where 2008 is:

    http://images2.dailykos.com/images/user/363/SP_from_1825.JPG

  27. Ernestine Gross
    December 3rd, 2008 at 20:10 | #27

    gerard at #26, Nice frequency distribution. Do you happen to know whether the years are financial years or calendar years? I am asking because I am surprised to find the year 1987 in the [0,10] positive change range. There was a non-trivial crash in October 1987.

  28. Tony G
    December 3rd, 2008 at 20:38 | #28

    Bear markets;

    Worst
    1 June 1932
    2 Apr 1942
    3 Oct 1974
    4 This one (If its over?)

    See Here New York Times Graph for comparing bear markets

    For people interested in studying history so they don’t repeat it
    Read this chapter of Ben Graham’s book.

    Taking note of this time series

    Conclusion it is a bad bear market. It is hard to predict the bottom, but it is safe to say we are closer to the bottom than the top and we should be able to profit from knowing that. Good Luck!

  29. Ikonoclast
    December 3rd, 2008 at 22:54 | #29

    Hermit at #5 is right. The economy is based on real physical inputs of useable materials and useable energy. A great deal (half at least) of the easy-to-exploit “global physical capital” has been chewed up. Since we are still growing exponentially the second half will be chewed up very fast, in about 50 years. The crunch will hit sooner, sometime in the period from 2010 to 2020 seems most likely.

    Ninety-nine percent of the world’s population is either unaware that the world has limits or they subscribe to economics in a quasi-religious manner believing that the economy is free standing without the need for an environment or resources and can go on expanding and producing for ever, creating goods ex nihilo from pure human ingenuity. I find it bizarre that what is so patently clear (the material limits) seems so obscure to even educated people.

  30. December 3rd, 2008 at 23:12 | #30

    Ikonoclast,
    If that is so, you should be able to profit from it royally. Unfortunately, those who have bet on Malthus in the past have ended up distinctly poorer than the average. Was it not you that said “…[f]rom here on oil prices will double about every 4 years. Food prices ditto.”
    Well, oil has halved – no, more than halved. Food has not moved by much, and may actually drop. Oops – I will not be agreeing with you yet.

  31. observa
    December 3rd, 2008 at 23:55 | #31

    Anyone who thinks this current malaise is easily overcome or is anywhere near the bottom is going to do their undies as well as their shirt. The nature of the global mailinvestments to be unwound now, should make that a no-brainer. Essentially the developed countries are broke from having gorged themselves on debt and the developing tigers who geared up to supply them have nowhere to sell that level of goods any longer. That Baltic Dry Index says it all(so that’s why the scrap yards have closed early this year-no containers!), if not unemployed Chinese beginning to drain out of cities and back to their rural roots again. (sayonara to their RE prices). China is just a whopping big version of the dilemma presented by the GMs and GEs now. If your dealers and customers are as broke as your financial arms, your real production isn’t going anywhere. Still there’s always the ‘Nothing to pay for 10 years’ approach perhaps.

  32. TerjeP
    December 4th, 2008 at 05:07 | #32

    Andrew – it is a bit unfair to hold people to account by quoting them in that way. The key point Ikonoclast was making in that original comment is that we’re all doomed. ;-)

  33. nanks
    December 4th, 2008 at 06:46 | #33

    Gosh Andrew – if that decline keeps up they’ll be paying us to take the stuff in a few years :)

    I think it unlikely we will see the long term real value of resources, like oil, decline. Upward is more likely over the next 5 – 10 and beyond. The only change I see to that scenario is in replacement technologies changing resource demand – unlikely over the 10 year time frame.

  34. carbonsink
    December 4th, 2008 at 07:58 | #34

    observa @ 31: I tend to agree, but US and Australian stockmarkets appear delusional at the moment, trending upwards despite universally awful economic news.

    Here is more bad news out of China…
    Bloomberg: China Property Slump Threatens Global Economy as Growth Slows

    Walker, voted best regional economist in an Asiamoney magazine brokers’ poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 percent next year, with a 30 percent chance of a contraction


    Exports and property together have contributed about half of the expansion in China’s GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley’s chief Asia economist.

    “That growth is gone,” he said. “Can the government make it up with something else? It’s going to be tough.”

    Rather than this being the darkest hour before the dawn, I believe Australia is yet to feel the full impact of the economic tsunami heading towards our shores.

  35. Donald Oats
    December 4th, 2008 at 08:18 | #35

    Billabong reporting…retailers cancelling orders…will this be the Xmas that never was?

  36. Ian Gould
    December 4th, 2008 at 09:32 | #36

    The effect of exports on the Chinese economy is probably much less than widely assumed – because many Chinese exports consist of goods assembled from imported components with minimal value added.

    A fall in Chinese exports will likely mostly effect the source countries of those components – i.e. Japan, Taiwan and South Korea,

  37. Ubiquity
    December 4th, 2008 at 10:04 | #37

    After the initial shock of the subprime crisis, the demise of the financial markets, food shortages and rising energy costs etc.. the world governments, media and citizenry began to go through a classic emotional condition called the DENIAL STAGE. The classic symptoms are as follows

    “After the initial shock has worn off, the next stage is usually one of classic denial, where they pretend that the news has not been given. They effectively close their eyes to any evidence and pretend that nothing has happened.”

    “Typically, they will continue their life as if nothing has happened. In the workplace, they will carry on doing their job even if that job is no longer required.”

    “A classic behavior here is a ‘flight into health’, where previously-perceived problems are suddenly seen as having miraculously fixed themselves.”

    The treatment is as follows

    “You can move a person out of denial by deliberately provoking them to anger. Hold up the future (sympathetically) so they cannot avoid or deny it. Tell them that it is not fair. Show anger yourself (thus legitimizing that they get angry).”

    “This, to some extent, is done on daytime TV shows where people in precarious situations are prodded into emotional explosions that make good TV and (where sympathetically done) may even be good for them.”

    Just recently, as JQ pointed, out the US has announced it has been in a Recession since 2007.
    That may be the case but JQ did they say a LOOONNNG Recession (Depression).

    My diagnosis is they remain in the DENIAL STAGE. This may be a bit of political maneuvering. My question is whose going to adminster the treatment that provides the reality check that we are headed for the longest recession (may be even a depression) in history.

  38. Ian Gould
    December 4th, 2008 at 11:05 | #38

    “The Baltic Dry Index has fallen 94%” – yes from a massively inflated level.

    Supply of shipping is inelastic because of lag times of two years or more in production. Relatively small shifts in demand, in either direction, can lead to drastic shifts in the index.

    Additionally much of the current oversupply in shipping capacity is attributable not to falling demand but to difficulties in shippers obtaining letters of credit to finance shipping.

    But let’s not let the facts get in the way of our shift to a brave new economy based on dogfood and shotgun ammo.

  39. gerard
    December 4th, 2008 at 11:19 | #39

    a China property slump? that’s great news for young Chinese – they’re enduring a worse housing affordability crisis than we are. Plus the Chinese population isn’t generally mortgaged up to their eyeballs like we are, so it won’t hurt them like a bust here would hurt us. of course I think we deserve a bust anyway. or even better – price controls!!!

  40. carbonsink
    December 4th, 2008 at 11:30 | #40

    Ian Gould: Your analysis of the Baltic Dry Index plunge is reasonable. I don’t disagree.

    However, your comment that a huge slump in exports will not have much effect on the Chinese economy borders on the delusional.

  41. nanks
    December 4th, 2008 at 11:56 | #41

    @Ian Gould #38. Ian, if international trade as represented by shipping falls back to the levels shown in the Baltic Dry Index from 1985-2001 what impact do you think that will have? or do you see a bounce back to some higher level (albeit not the recent heights)?

  42. December 4th, 2008 at 12:19 | #42

    carbonsink,
    A lot of the demand in China is domestic in any case. Yes, a drop in exports will hurt – growth may drop from 10% to 8% or even (horrors) 6%. It is difficult to know whether to believe Chinese statistics in any case.
    As gerard said – they have low levels of debt. I would add that, in the main, they also have low levels of consumption. They still have a lot left to buy before they catch up to us.
    The only thing that really scares me about China is their government – I believe it will collapse within my lifetime. That will be truly scary if it is quick.

  43. carbonsink
    December 4th, 2008 at 13:41 | #43

    Andrew Reynolds,

    Economists have been back-pedalling their growth forecasts for China all year. First it was “decoupling” (i.e. no effect) then growth would drop back to 10%, then 8%, then 6%, and now this Jim Walker guy is talking 0%-4% with a 30% chance of contraction! Walker also says “China is now at the heart of the global slowdown”.

    From what I’ve heard China needs 7%+ to maintain “social cohesion”.

    I also noticed Chris Richardson on the 7:30 report last night said “the news out of China just gets worse and worse”.

  44. carbonsink
    December 4th, 2008 at 13:43 | #44

    http://www.abc.net.au/7.30/content/2008/s2437152.htm

    CHRIS RICHARDSON, ACCESS ECONOMICS: Every day, the news out of China gets worse. And that’s the key to Australia’s outlook. It’s not America and financial markets, it’s China and commodity markets. And that combination brilliantly protected us in recent years, gave us a lot of money; but not anymore. For 2009, things are looking pretty tough.

  45. Ian Gould
    December 4th, 2008 at 15:12 | #45

    Guys, it’s not a huge drop in DEMAND, it’s a huge drop in PRICE.

    The price rose to unsustainable levels over the past couple of years and has now collapsed – because there’s been a modest decline in volumes.

    Look at it this way – a ship-owner has to pay maintenance, interest on borrowings and wages while tied up in harbor. Ao if there’s even a small oversupply of capacity the price will rapidly convergence on their marginal operating cost.

  46. Ian Gould
    December 4th, 2008 at 15:45 | #46

    A more reliable measure of the shift in global demand is the US trade account.

    http://www.census.gov/foreign-trade/Press-Release/current_press_release/exh2.txt

    The three moving moving average of exports peaked in August at $118 billion and declined to $115 billion in September.

    US imports (a critical figure for Australia both because of our our exports to the US and because of our economic dependence on China) peaked in August at $225 billion and declined to $221 billion in September.

    So in both cases as of September we’re talking about a decline of 2-3%.

    September 2008 shows an increase of approximately 10% in imports and 15% in exports over September 2007.

    Given the lag times in export orders translating into deliveries it’ll likely be several more months before we see the full impact of the economic crisis, But so far we aren’t seeing a catastrophic fall in demand.

  47. Ian Gould
    December 4th, 2008 at 16:44 | #47

    “However, your comment that a huge slump in exports will not have much effect on the Chinese economy borders on the delusional.”

    http://www.bloomberg.com/apps/news?pid=20601068&sid=abM29KiepBow&refer=home

    Chinese domestic spending is rising 22% year on year.

    Chinese consumers currently save ca. 50% of their salary so they have the capacity to significantly increase their consumption spending and much of the current Chinese stimulus package is designed to encourage exactly that (e.g. sales tax cuts).

    Exports are generally believed to contribute around 3% to Chinese annual GDP so unless sales actually decline significantly the impact on the economy will probably be minimal.

    The 8% GDP growth target for “social stability” isn’t based on any particularly precise calculation – it was on off-the-cuff comment by Deng Xiaoping 20 years ago.

    Demographic changes since then (the one child policy has reduced labor force growth; rural incomes have risen) have reduced whatever merit that figure ever had.

  48. Ian Gould
    December 4th, 2008 at 17:00 | #48

    Australia records a record trade surplus:

    http://au.biz.yahoo.com/081204/33/22otb.html

  49. Ikonoclast
    December 4th, 2008 at 18:01 | #49

    Andrew Reynolds at #30. Your field of focus is too narrow. You are seeing a few spikes (and troughs) but you are not seeing the broader… picture… trend… graph. Pick your own word.

    I am 100% certain that the world is about to run short of resources. “About” in this context (an historical one) means by about 2050. However, the shortages will begin much earlier. It’s a case of an exponential growth curve cutting across a plumetting resource availability curve.

    If we had begun to respond intelligently by about 1975 we may have averted this situation. However, there is 0% chance of the mass of humans reacting in an enlightened or intelligent manner to this kind of problem.

    We are clever at handling local and immediate problems where selfishness and “swarm” intelligence are effective. Apparently, (the evidence is just about in) we are not clever at handling global problems. And we have a poor understanding of the fact that we have used up half of the world’s physical capital.

    Half of the oil is gone, along with probably half of the top soil and the good arable land, more than half of the forests, much more than half of the wild fish, about half of the climate system’s capacity to absorb extra CO2 and maintain a relatively benign climate for humans, and finally we are in the middle of one of the greatest extinction events the world has ever seen (in other words half of the macro species may well be gone already.

    But oh gee, everything is hunky dory because in the shopping malls the tinsel goes up once again and the aircon floods the halls soughs of folly. Another year of largesse proves it will last for ever, right? LOL.

  50. December 4th, 2008 at 18:15 | #50

    Ikonoclast,
    Have you read Malthus at all? I have the feeling you would have agreed with page after page of his writings and believed they are fully correct – until you read that he wrote it 200 years ago. By rights, we should have all starved then. It has not happened yet…
    But of course, we are all still doomed and ignorant of the fact. Only wise old Ikonoclast, and his fellow doom merchants, were wise enough to see it. I bow before your complete inability to understand that humans have a capacity for invention and technological progress.

  51. carbonsink
    December 4th, 2008 at 19:12 | #51

    Ian Gould @ 47:

    Exports are generally believed to contribute around 3% to Chinese annual GDP

    China GDP (2007) $3.4 trillion USD
    China Exports (2007) $1.2 trillion USD

    Chinese domestic spending is rising 22% year on year.

    I’ll bet my house it won’t grow by that much in 2009. Besides, even if Chinese domestic spending was growing at 100%, that wouldn’t come close to making up for the collapse in demand in the US, Europe, Japan etc

    Most Chinese are natural savers. When times are tough they’ll save even more. You watch.

  52. December 4th, 2008 at 19:17 | #52

    carbonsink,
    Now subtract the imports from the exports to get their trade balance and see what it actually contributes. In any case, do you seriously believe the Chinese government statistics?

  53. December 4th, 2008 at 19:24 | #53

    AR, have you taken on board what Malthus actually wrote, or only vulgarisations? He never denied that progress could defer the constraints he foresaw, he only supposed it couldn’t do so indefinitely (for pretty much the reasons Ikonoclast gave, about different rates of change of the different processes involved). His theory has poor predictive power, because short of hitting those constraints it cannot be said to have been tested – but it might still turn out to be correct. You cannot take lack of falsifiability as proof of falsity, you can only say it’s not a fruitful area to look at. Things could well still go wrong, and by then you would know.

  54. Ian Gould
    December 4th, 2008 at 19:36 | #54

    Carbon Sink the value of Chinese exports is equivalent to roughly 33% of their GDP – but their contribution to Chinese economic growth is sufficiently lower than than that because:

    a. domestic Chinese demand is growing faster than exports and has been for yesrs and

    b. as I already pointed out, the value of Chinese exports is inflated because it includes the value of the imported components that go into making Chinese goods for export. As an even more extreme example, consider Singapore where exports are several times the size of the island’s total GDP because it’s a major trans-shipping hub.

    Consider, a Taiwanese company ships components worth $10 to China, they put them in a locally paid case that costs a dollar to make; pay the assembly works 50 cents and ship them on the US as a DVD player work $12 wholssale. Who’s likely to be hurt more if the US buys fewer DVD players? China or Taiwan?

  55. nanks
    December 4th, 2008 at 19:46 | #55

    @Andrew – like you I am optimistic with regard to our capacity for innovation. Whilst I am more familiar with neuroscience I have colleagues and friends involved in other areas of research (eg biotech) and have had a keen interest in technological innovation for many years. However there is a lag between idea, proof of concept and commercial realisation – and most ideas probably have no commercial or widespread value even if true.
    My concern is that we are about to enter into a period of high cost whilst resources decline for existing technologies yet new technologes have not reached commercial scale production. In the long term this is fine, but in the short to medium (next decade or two) life might be more difficult or worse for many people.
    An important issue for developed nations into the next few decades is that there is no geographical necessity for the location of the innovations that will underpin the new technological base.
    Lip service to ‘smart states’ or ‘creative nations’ won’t cut it. So even though we – as a world population – might innovate our way forward to a bright future, there is no particular reason that bright future will be brightest here in Australia.

  56. carbonsink
    December 4th, 2008 at 20:06 | #56

    Ian Gould @ 54:

    I’d love to share your optimism. I’ve read in several places that the Chinese consumer really needs to “step up to the plate” if we’re going to get ourselves out of this mess. Unfortunately, much of what I’ve read suggests its not happening, and its unlikely to happen, at least in the short term.

    But I hope you’re right.

  57. Salient Green
    December 4th, 2008 at 20:13 | #57

    Andrew Reynolds #50, your offensive denigration of Ike only diminishes yourself.
    Humanity’s capacity for invention and progress will of course save us from extinction but at what cost. The invention and progress we need to avoid catastrophic environmental damage and consequent misery and death of large numbers of humans is quite different to what is generally being supported at this moment.

    Do we continue with the ‘growth fetish’ which is plainly stupid, or do we encourage a new regime of frugality of procreation, consumption and environmental exploitation?

  58. gerard
    December 4th, 2008 at 20:15 | #58

    everybody knows that humans have a capacity for invention and technological progress. but that doesn’t mean that civilizations cannot fail – they have before. the question is will this invention and technological progress continue at the necessary exponential pace to keep up with population and economic growth, an especially pertinant question considering that this century is witnessing an industrial revolution in Asia that dwarfs the one that took place 200 years ago in Britain, when a whole world empire was available for exploitation.

    Malthus was right in one regard – that population growth cannot increase exponentially. His solution was “moral restraint” – having less babies. In the twentieth century, contraceptive technology and the liberation of women have achieved this in the developed world – it is the developing world, where population growth is explosive at present, where measures must be taken to empower women and introduce family planning. unfortunately the Right has blocked these efforts at every turn.

    now speaking of the developing world – remember that the largest country on Earth has, for the past twenty odd years – imposed a strict one child policy. this has contributed a large measure to China’s ability to raise living standards dramatically. imagine if over the past two generations every Chinese family could have had three to six kids instead of one. what would China look like today? what would be the impact on the wider world? You might not take Malthus seriosly, but the government of the world’s largest nation takes it seriously enough to impose extreme limits on reproductive freedom.

    it’s easy to be sarcastic and entrust everything to inevitable exponential increase of invention and technological progress. it’s harder to be specific – how will the fertilizer be produced as topsoil is depleted and hydrocarbons become more expensive – how will water supplies be maintained at a reasonable cost – how will energy be produced in a manner that will not cause irreversible climate change, or if irreversible climate change is already underway, how will we adapt to it without drastically reducing our standards of living.

    it’s not enough to entrust all these things to an invisible hand as if that’s the end of the story. they are real technical questions requiring technical answers. So it’s very easy for an economist to address the questions by waving invisible hands around – it’s a bit harder for the engineers and scientists who actually have to work out the solutions.

  59. Ian Gould
    December 4th, 2008 at 20:32 | #59

    “I’d love to share your optimism. I’ve read in several places that the Chinese consumer really needs to “step up to the plate” if we’re going to get ourselves out of this mess. Unfortunately, much of what I’ve read suggests its not happening, and its unlikely to happen, at least in the short term.”

    I’m optimistic only in the sense that so far I think the evidence is there for a moderately severe recession in the US and a somewhat less serious recession in Australia.

    As far as I can see, the evidence for a depression simply isn’t there.

    Maybe when US unemployment doubles (putting at roughly half the peak reached during the 1930′s) I’ll start taking the depression claims seriously.

  60. gerard
    December 4th, 2008 at 20:41 | #60

    Chinese domestic consumption is limited by China’s Dickensian social system. Chinese people have to save in case of medical emergency (China’s healthcare system is utterly evil, it makes the US looks decent), and for their kids education, which is becoming ever more expensive.

    if the Chinese government wants to increase consumer spending they could do something about the abysmal state of public health and education there.

  61. Ian Gould
    December 4th, 2008 at 20:57 | #61

    Actually Gerard the Chinese announced a major reform of the medical system about six months ago and pledged tens of billions od US$ in additional spending onrural medical services.

  62. plaasmatron
    December 4th, 2008 at 21:11 | #62

    In response to Obama’s new “green stimulus” package, the neocons are now saying that $100b is too much to spend on programs which create jobs and fight climate change, as opposed to borrowing $8t to bail out defunct car makers and banks…

    NYT, 4/12/08

    “Now they’re talking about some large amount of money — what, $100 billion? — and spending it on windmills, job training, whatever,” said David Kreutzer, who studies energy economics and climate change at the Heritage Foundation, a conservative research group. “But where do you get the $100 billion in the first place? Are you going to take $100 billion from some other part of the economy, are you going to tax some people to pay for it? Are you just going to print it or borrow it? The money has to come from somewhere.”

  63. Ikonoclast
    December 4th, 2008 at 21:15 | #63

    There are not enough resources left in the world for India and China to complete their modernisation and create 2 billion more middle class consumers.

    Ironically, when the global crash comes, peasant communities and peasant societies (as large parts of India and China still are) may well cope better than Europe, Nth America and Australia. The peasant superpowers may yet dominate the world.

    If one were a (Machievellian) Chinese leader this is exactly what one would be planning; a tiny elite, 300 million middle class and a billion peasants. Mind you, the way the world is headed it cannot sustain even the current 1 billion or so middle class lifestyles around the world.

  64. Tony G
    December 4th, 2008 at 21:44 | #64

    Ikonoclast @ 63 said ;

    “There are not enough resources left in the world for India and China to complete their modernisation and create 2 billion more middle class consumers..”

    Singapore has a population density of 6,489 people per square kilometre and is a bearable density to live in.

    South Australia has a land area of 1,043,514 square kilometres.

    The worlds population of about 6.7 billion people could fit comfortably into an urban area with the equivalent density of Singapore and only take up a land area the equivalent of South Australia, “About” 0.72% of the worlds total land area of 148,940,000 km²

    Maybe I am missing something, but I fail to see how we are close to wearing out our welcome on this planet, let alone the universe which is infinite.

  65. nanks
    December 4th, 2008 at 21:52 | #65

    @Tony #64 ecological footprint is the measure you are missing Tony.
    http://en.wikipedia.org/wiki/Ecological_footprint

  66. gerard
    December 4th, 2008 at 21:56 | #66

    Yes Ian, I heard about that reform – part of Hu and Wen’s “New Socialist Countryside”. But I’ll believe it when I see it – what fraction of the promised money that is actually raised by the government will probably go primarily into graft. and if any journalist wants to investigate they’ll probably end up with a horse’s head being delivered to their front door by the local government/mafia.

    Anyway I think that the emphasis on spending on rural health just goes to show that the government thinks that health is a rural problem – but it’s not. The difference between urban and rural China is that the urban Chinese have to fork out huge amounts of money out of their modest incomes to pay for “healthcare” (which in many cases is just an opportunity for “doctors” and “pharmacists” to cheat whatever money they can get out of their patient , wheras the rural folk simply go without altogether. I’m sure that rural health in China must be dreadful beyond my imagination, but the healthcare system in China’s cities is still a complete abomination, and the government doesn’t give a rat’s @ss.

    Sometimes I think that the Chinese government’s attitude toward healthcare is part of their overall plan to limit the population. Just let the poor die, the place is too crowded already.

  67. gerard
    December 4th, 2008 at 22:04 | #67

    also rural health is not really what I’m talking about when I say that the Chinese have to save in case of a medical situation. I’m talking about the urban Chinese here – the rural Chinese are basically living at subsistance level and can’t save anything.

  68. gerard
    December 4th, 2008 at 22:06 | #68

    Tony, instead of dividing the world’s total land area by population, try dividing the world’s total topsoil and freshwater by population. I think you are missing the fact that humans do more than simply inhabit space. They also eat food and drink water, among other activities. As for the infinite universe, perhaps you could go and try eking an existence off another planet (preferably exosolar), or even better, out of the intergalactic vacuum. let us know how it turns out.

  69. Tony G
    December 4th, 2008 at 22:16 | #69

    “They also eat food and drink water”

    The water cycle dictates that freshwater is only limited by the suns energy, which in human terms is nearly infinite.

    If mankind chose to live in an urban environment the density of Singapore, that would leave 99.28% of the worlds landmass to scratch out enough food.
    0.72% is a pretty small footprint.

  70. December 5th, 2008 at 07:35 | #70

    Ikonoclast,
    Another bald statement, without even any attempt to provide evidence or argument. Thanks for that.
    .
    gerard, others,
    The only real limit for just about everything is energy. With sufficient energy you can desalinate (for example) enough water to give everyone on the planet more water than you can possibly need. With sufficient energy you can re-cycle everything that is used into new items to use. You can break down the carbon dioxide in the atmosphere into carbon and oxygen etc. etc. etc.
    Even on this planet there are more than enough resources to support an enormously increased population if we use resources in this way.
    The only question is where does the energy come from?
    We have been answering this question for the last century or two by the use of fossil fuels. This has been cheap and convenient, but these will (eventually) deplete. I am personally confident that there are enough possible alternative sources out there (including several that are currently being used) to replace fossils as they deplete. As Tony G points out we do not actually require much land to live on.
    If you want to imagine that humanity is not capable of working out how to use the alternatives, fine – but I do not share your sad view of the future.

  71. Salient Green
    December 5th, 2008 at 08:11 | #71

    Cornucopians make me angry. I see them as a threat to my children. It also frustrates me that otherwise intelligent people could be so utterly lacking in wisdom.

    Tony G and Andrew Reynolds, how can you seriously suggest that where Humans dwell is the only ecological footprint we have on this planet? How can you miss the news that major fisheries are collapsing around the world? How can you not know that more Humans equals less other species, or if you do, why is it acceptable to you for Humans to contimue to extinguish other species.

    Neither of you bothered to read the link nanks posted, did you? Why do you want more Humans over-running this planet? Can’t you see the beauty in the natural world?

    If you cornucopians want a challenge, why not apply yourselves to an economic system which doesn’t require the growth fetish. Use your ‘invention and progress’ to create a more egalitarian and sustainable world.

    If you think most of humanity likes being jammed together in an artificial environment you are wrong, witness the exodus from cities on weekends.

  72. gerard
    December 5th, 2008 at 08:20 | #72

    so the people of the Sahel will buy their water from nuclear powered desalinization plants? at a reasonable price I’m sure.

    it may be a happy view to be personally confident, but it’s not a sad view to be worried about the specifics.

  73. December 5th, 2008 at 08:41 | #73

    Salient Green,
    Please stop using labels.
    Fisheries are collapsing due to incorrect use of the resource, not because fish are incapable of reproduction. Fix the system and there will be enough fish. Tragedy of the Commons every time.
    On the “more humans” bit – you seem to believe that there will always be more and more humans. This is not backed up by evidence. The evidence is that population growth tops out as the level of wealth increases, so development actually reduces the total growth in numbers. In the wealthy countries this is actually in reverse, with the best example being Japan.
    .
    gerard,
    It is a sad view to be so worried that it clouds your ability to deal with those specifics.
    The people of the Sahel have been using solar powered desalination of their well water for decades. Australians have been using wind-powered methods to raise water from the artesian basins for over a century. No nuclear power in either place – just good innovation and applied knowledge. No reason why either one cannot be extended. OTOH, if you want to build the nuclear plant to crack a nut, go ahead.

  74. gerard
    December 5th, 2008 at 11:35 | #74

    I’m not cracking a nut here. Desertification in the Sahel is causing extreme distress which is likely to worsen, and even a first world country like Australia is finding it difficult to deal with the collapse of its major river systems that has been the result of our course so far. There are many books on the specifics of resource depletion and how expensive the transition is likely to be considering the low EROEI of most of the available alternatives – it’s not ‘sad’ to be worried, it’s perfectly rational. Especially if you live in the 3rd world where the pain is likely to be concentrated.

    A world civilization that urgently needs to restructure its industrial systems inside out is not going to get there easily by concentrating all of its energy on generating immediate-term profits, which is what it has been doing.

  75. Salient Green
    December 5th, 2008 at 12:48 | #75

    Andrew Reynolds, you don’t listen to anyone else here so I have no reason to listen to your request to ‘stop using labels’.

    It has already been said in this thread that the planet does not have the resources to bring the entire population up to a class where they would voluntarily reduce population.

    It has also been said in this thread that the Earth’s resources are over-exploited, and I added the point that the oceans too were so. Therefore, fixing one system will only lead to more pressure on the other.

    Population decline in developed countries is good and needs to be encouraged while assisting the developing world to do the same and raise their standard of living.

  76. December 5th, 2008 at 13:40 | #76

    SG,
    Where have I not listened? I may have not agreed, but they are clearly not the same thing. If you like an echo chamber, then I suggest using a wheat silo. If you only want agreement then talk about your opinions alone in that wheat silo. If you comment on a blog then, subject always to the wishes of the host, you can expect some disagreement.
    Glad you agree with the “raise their standard of living” bit, though.

  77. Tony G
    December 5th, 2008 at 13:44 | #77

    Salient Green@ 71 said

    “Why do you want more Humans over-running this planet?”

    Salient, as I stated above humanity is only a minor infliction in the scheme of things with an achievable actual footprint of 0.72% of the worlds land mass. Considering the surface area of the world has another 70% that is water, humanity is even more insignificant.

    The latest population projections put the total fertility rates (TFRs) below 2.1 , the replacement rate from 2028 see XLS HERE

    “The probability that growth in the world’s population will end during this century is 88%, somewhat higher than previously assessed”

    In their most recent research the IIASA are saying the most likely scenario is the world population will peak at 9 billion in 2070 and start declining from there. That’s right declining n.b. the first steps toward extinction not overpopulation.

    There is heaps of room and heaps of resources. It is not a question of over exploitation, more one of mismanagement and equitable distribution of those resources.

  78. nanks
    December 5th, 2008 at 14:09 | #78

    @TonyG – I don’t think the physical space people occupy is a particularly useful measure of footprint. Let’s say everyone is squeezed into a big mob – how does the food get produced, how does it get transported etc etc. The footprint should include the resources used to maintain that mob.
    This is where the ecological footprint provides a useful measure.

  79. Tony G
    December 5th, 2008 at 16:15 | #79

    nanks.

    I hear what you are saying, I just do not agree with you.

    A “physical” footprint can be measured and touched and is in fact real. For that reason it is useful.

    An “ecological footprint” is just a conceptual view of reality. Its usefulness is yet to be proved in the real world.

  80. nanks
    December 5th, 2008 at 16:28 | #80

    Tony G – a road takes up space, any transport system does. Food must be grown – even if in a vat – that takes up space. They are physical things, as physical as a person’s body. You can model all these things realistically and they certainly exist in the world we actually inhabit.
    You can estimate upper bounds of productivity of waterways and oceans and so forth. No more a fiction than modelling people as stationary units of a certain volume.

  81. Salient Green
    December 5th, 2008 at 16:53 | #81

    Andrew Reynolds, I see the problem. Ike and nanks and gerard have stated opinions and supported them with facts which you have also treated as opinions. I could suggest some good sites to broaden your knowledge about the state of the natural world but they wouldn’t fit your ideology.

    It would be good if you answered my other questions.

  82. December 5th, 2008 at 22:37 | #82

    SG,
    They have presented opinions as facts. Where I have stated an opinion I have made it obvious (I hope) that it is an opinion. Where it is a fact I have, again I hope, presented it as such.
    If you regard something as an obvious fact, I must apologise if I ask for some verification of it.
    Perhaps you could point me to a specific question I have missed, or something I have presented as a fact which you regard as an opinion. Either will do.
    .
    gerard,
    Apologies, I missed your #74. You presented desalination from nuclear as a possible solution – perhaps employing a little bit of straw man there. I have not advocated nuclear power under those circumstances. Personally, I would regard using a nuclear plant as overkill where a big plastic sheet and some salty water would more than do.
    In any case, desertification in the Sahel is at least partially and IMHO almost entirely due to the sorts of policies that concentrate power in the governments of the region, with short-term thinking the almost inevitable result of the greed and cariciousness of their governments. You will forgive me, I hope, if I do not see more government action as being a solution.

  83. December 5th, 2008 at 22:54 | #83

    These, for example, are opinions presented as facts:

    It has also been said in this thread that the Earth’s resources are over-exploited, and I added the point that the oceans too were so. Therefore, fixing one system will only lead to more pressure on the other.

    Two opinions with something I accept as a fact in the middle – but the fact is not going to be solved by more government intervention (IMHO) as it is the government that have ignored the tragedy of the commons in the first place, too busy helping their own people to actually realise that the root cause has not been dealt with.

    Population decline in developed countries is good and needs to be encouraged while assisting the developing world to do the same and raise their standard of living.

    Value judgement followed by opinion.

    A world civilization that urgently needs to restructure its industrial systems inside out is not going to get there easily by concentrating all of its energy on generating immediate-term profits, which is what it has been doing.

    At least two opinions, neither backed up with, say, evidence.

    There are not enough resources left in the world for India and China to complete their modernisation and create 2 billion more middle class consumers.

    Another opinion. Any evidence? Not on this thread unless I missed it.
    Can you point to any facts you and the others you mentioned have actually brought up that were both non-trivial and have not been answered? Just one would be good. Any one.

  84. MH
    December 6th, 2008 at 09:12 | #84

    Seems you just cannot escape the 2nd law of thermodynamics in any system, entropy and disorder.

  85. Salient Green
    December 6th, 2008 at 09:23 | #85

    AR, do your own research or stay delusional. Try The Oil Drum, Oceana, RealClimate, Green Car Congress, Treehugger.
    http://dotearth.blogs.nytimes.com/2008/10/13/growth-economics-on-a-finite-planet/
    http://www.treehugger.com/files/2008/09/september-23-2008-ecological-debt-day.php
    http://www.treehugger.com/files/2008/08/china-eco-footprint-is-growing.php

    Any day now AR and Tony G are going to fire up that ole fuson reactor and everything will be business as usual. All our meat and fish will come from intensive farms where the polluting wastes will be filtered and recycled. Even the anti-biotics will be filtered out with all that cheap energy. Anti-biotics did you say? Those over-used things that don’t work so good anymore which are necessary for intensive farming? We’ll just slip down to the Amazon and find a few more. Whats that, you destroyed it all for beef cattle and biodiesel?

    Current world population growth is about 1%. Thats about 67million more mouths to feed every year. 67million more cars, mobile phones, computers, TVs. 3x Australias population every year polluting and trampling on the ever barer grass. Better get cracking on that fusion power boys. Any day now.

  86. gerard
    December 6th, 2008 at 09:49 | #86

    SG, clearly fusion power is overkill, plastic sheets and salty water will suffice for our civilization’s water needs (if it’s good enough for the people of the Sahel it must be pretty effective). The Australian government is wasting its time trying to deal with the Murray-Darling collapse, since the free-market will take good care of our water requirements just like it’s been doing so well all this time. But if you want fusion power, just leave it to the invisible hand, and it will eventuate just in the nick of time. Just make sure you don’t let any governments get involved in its development – that might distort the fusion power market.

  87. December 6th, 2008 at 10:42 | #87

    Salient Green, you may be interested in the article “Fusion Illusions” by particle physicist Michael Dittmar in The Final Energy Crisis (2nd edition) Pluto Press (2008) (RRP AU$44.95) edited by Sheila Newman. His description of the staggering technical and logistic problems that need to be overcome if nuclear fusion is ever to work should confirm to anyone that the hope held out that nuclear fusion will become a source unlimited energy is a pipe dream.

    Andrew Reynolds refusal to contemplate the basic mathematics entailed in giving hundreds of millions of Chinese and Indians the same material living standards enjoyed by the middle classes in the first world is yet further confirmation that the ideology of economic neo-liberalism that he upholds is in no way scientific or in any way based on an understanding of the material world in which we live.

    That the destiny of so many countries across the planet is still in the hands of similarly seemingly deluded people should be of grave concern to us all.

    To those interested in considering the mathematics, I commend the article “The Chinese Car Bomb” by Andrew McKillop also in the abovementioned The Final Energy Crisis.

  88. gerard
    December 6th, 2008 at 11:56 | #88

    it’s not a matter of refusing to consider the mathematical impossibility of giving hundreds of millions of 3rd world people a 1st world living standard. it’s more a philosophy that regards the poor as superfluous garbage who don’t deserve any more than the market will provide to them (plastic sheets and salty water).

  89. conrad
    December 6th, 2008 at 12:18 | #89

    “the basic mathematics entailed in giving hundreds of millions of Chinese and Indians the same material living standards enjoyed by the middle classes in the first world is”

    I don’t think you should think of this in terms of “giving”. There’s no entitlement to being rich in this world — you sound like a patronizing Westerner. The world is a competitive place, and I don’t see why the average Chinese citizen is somehow going to be worth a tenth of the average Australian or American in the future, especially given the trajectories of their education system and infrastructure development. If there really are such finite resources, an alternative is that China becomes comparatively richer by being smarter and more industrious than other places, and thus other rich countries comparatively poorer. That’s not giving — it’s taking.

  90. nanks
    December 6th, 2008 at 12:38 | #90

    I don’t want to attack Andrew over his views – at least he enters into a public debate. But I would like to put this question to him.

    Assume infinite energy resources.

    How would you place the current protein consumption levels onto a sustainable basis? That is, all inputs (outside of energy) are recovered. This is the sort of possibility I’m interpreting your previous posts as indicating is possible either now or in the next few years – given existing technology and the will to achieve such a program.

  91. December 6th, 2008 at 13:10 | #91

    gerard, you are, of course right. The selfish greedy elites now in control of our destiny do, indeed, regard the poor, both in the First World and the Third World as superfluous garbage. However, you still appear to be side-stepping on of the most critical questions of our age.

    It serves the interests of those wealthy elites to pretend that it is possible for this planet to provide such material prosperity and that they, in fact, intend to spread to all the people of our planet (or, at least, all those with sufficient drive and determination) the material prosperity of First World middle class living standards. Listen, for example, to Rupert Murdoch rant in “The global middle class roars”, the fifth of his propaganda broadcasts to his Australian subjects, otherwise known as the “Boyer Lectures”:

    What those who invoked the spaceship Earth model never pointed out was that the same astronaut produced more than 85% of those resources. The rest were producing almost nothing. If these astronauts would become as productive as the other, the world would grow fantastically richer and everyone would be better off.

    And that’s exactly what has been happening. China, for example, is one of these astronauts, and by every measure—diet, education, life expectancy—Chinese today are better off than their parents or grandparents. That’s because after decades of punishing wealth and suppressing human capital, the Chinese have been liberated.

    Of course, whilst elsewhere paying token lip service to the global ecological crisis we all face, Murdoch makes no mention of how our natural capital, both renewable and non-renewable, has been destroyed in order to raise the material consumption levels of some in those countries (and he ignores how misleading measures such as the GDP have both exaggerated the prosperity of many and concealed actual decline in the living standards of most others). Instead, he would apparently have us belief that all this wealth has been conjured up at no ecological cost whatsoever.

    We have a serious problem of population overshoot. The only way we can hope to fix this is by without delay implementing steps to prevent further population growth and by ending the profligate consumption of the wealthy both in the First and the Third World starting with the likes of Rupert Murdoch himself.

    Of course, most of use will also have to be prepared to accept materially more modest standards of living if we are to hope to pull through this crisis.

    If we had heeded the timely warnings of Paul Ehrlich and the Club of Rome in the 1970′s the task before us now would not be nearly as difficult.

  92. gerard
    December 6th, 2008 at 13:12 | #92

    conrad, maybe the Chinese will want to get rich the same way that the West got rich – by going out and conquering the rest of the world. Maybe they can make some money by addicting the British to opium at gunpoint.

  93. December 6th, 2008 at 13:50 | #93

    conrad, whether or not the wealth of the world should be more equitably shared the fact remains that for many decades the Australian public were told that China’s economic growth would increase everyone’s living standards, when common sense and intuition should have warned us that a growing Chinese economy would draw upon the same non-renewable natural resources that our own economy also depends and that ordinary Australians would be forced to compete with slave labour working conditions in China.

    I think it’s time that the globalisation propagandists acknowledged their past deceit and its time that those who have the most obscenely wasteful lifestyles in the First World led the way by sharing their wealth with the people of the Third World before expecting poor people from the First World to do the same.

  94. conrad
    December 6th, 2008 at 14:10 | #94

    “globalisation propagandists acknowledged their past deceit”

    What deceit? Hundreds of millions of people have come out of poverty at very little expense to the average Australian, and if China gets rich enough, we won’t be competing with slave wages in any case. If Australia happens to have wasted the huge amounts of money that came from selling all those resources, then who’s to blame anyway ? This is hardly the fault of people that think globalisation is good — it has made billions for Australia. You are better off blaming the people who fritter money away on useless things in Australia.

    It seems to me the main lesson for those that think resources are extremely finite is that it would be a good time to start trying to think of technology that is mutually beneficial or admit that some things like nuclear power are better than the current alternatives. I’m sure the average Chinese citizen would just love to have some nice sources of cheap clean power — and since they’re going to have it whether people in Australia happen to like it or not (being dirty and rich is better than clean and poor), the main mitigation for all these problems is going to be better technology.

  95. December 6th, 2008 at 15:22 | #95

    I see my points about the ecological carnage in China, the unsustainable levels of consumption of the world’s finite non-renewable natural resources, and unsuitable indexes of prosperity such as the GDP, upon which conrad’s claims are based, have gone right over his head.

    Conrad asks “what deceit?”

    The deceit was manifold.

    One of the lies was that everyone’s material prosperity would rise as a consequence of globalisation, when, in fact, the objective material living standards (if we disregard the nonsensical GDP and measures of inflation) of most have fallen.

    Another was the (racist) promise that only the dreary boring work would go the Third World, when, in fact, much of the skilled middle class livelihoods have also been off-shored.

    If the globalisation proponents had believed this outcome to be fair and reasonable, then, at least they should have told us so at the outset.

    conrad wrote “… it would be a good time to start trying to think of technology that is mutually beneficial …”

    The Final Energy Crisis edited by Sheila Newman does precisely that. It neither rules out nor uncritically endorses a number of technologies (with the exception of bio-fuels, and nucler fusion) – nuclear fision, geothermal, wind, solar, tidal, hydrelectric, etc.

    But it does make the point that all technoligies, whether ‘renewable’ or more established, incur considerable ecological costs and that we can’t expect any to support the ever greater levels of material consumption for ever larger numbers of people that so many economists still insist is possible.

  96. conrad
    December 6th, 2008 at 15:46 | #96

    “the objective material living standards (if we disregard the nonsensical GDP and measures of inflation) of most have fallen”

    Are you living in the same world as me? For whom have material living standards gone down since, say, 1970 (excluding places in Africa)? In places like Australia, the majority of the population has better education, healthcare, housing, and cheaper disposable goods. Life expectancies have also gone up. Ditto for most of Asia. You can complain about other things all you want, but life as an individual is surely better for most.

    “unsuitable indexes of prosperity such as the GDP, upon which conrad’s claims are based, have gone right over his head.”

    You can make up whatever index you want, but in the end being dirty and rich is better than being clean an poor (not that this second one exists — things like sanitation etc. cost money). You might not want to admit that, but most people in China will. I also think it works like a U-shaped curve. The traditional method to become rich and clean has been to be dirty first.

  97. December 6th, 2008 at 16:44 | #97

    conrad,

    Simon Kuznets, who devised the GDP measure in the 1930′s for different purpose than what it is used for today warned against it being misused in the way that it has been by economists (see Page 5 of Economia by Geoff Davies).

    It’s a ridiculous measure of prosperity, because it counts all economic activity, including, for example, fixing up the damage caused by fires, floods, earthquakes, civil unrest etc, as contributing towards prosperity.

    Yes, levels of consumption have increased, but does this equate to greater prosperity?

    Also, have all increases in the cost of living been taken into account in inflation?

    The most glaring omission is the cost of housing which had driven many into poverty. What about car parking charges, toll charges, etc. How many people own cars, mobile phones, computers etc out of necessity and not choice, because their livelihoods now depend upon them?

    Have you noticed that most are forced to work longer hours these days? How man ordinary households can hope to survive on one income?

    Have you noticed how complicated life is these days? How congested our traffic is, etc, etc?

    Where are these factors measured?

    I wrote of this in the Online Opinion article “Living standards and our material prosperity” (at this moment off-line) of 6 Sep 2007. Most contibutors to the discussion agreed with my arguments.

    Also, the GDP fails to measure many activities to which monetary values are not assigned, particularly in 3rd world agricultural societies. The idiocy of using the GDP to measure Third World prosperity and to compare the performance of countries that have undergone globalisation with those who have not, is shown up in “Dr. Jeffrey Sachs’ The End of Poverty: A Political Review” of 18 Jul 2005 by George Caffentzis:

    Why is Dr. Sachs so sure he understands the poverty that he claims his plan can end? Should we trust that he and his “Live8” colleagues will, at least, do no harm? A reason for doubt are the two different, non-synonymous definitions of “extreme poverty” he offers: (a) “extreme poverty means that house holds cannot meet basic needs,” and (b) extreme poverty means an “income of $1 per day per person, measured at purchasing power parity.”
    Many an African or South American villager can testify on the basis of his/her own experience that these definitions do not have the same meaning. There are many villages where “basic needs” of their residents as they conceive them are satisfied, but whose collective income is less than $365 a year per person. Are these villagers extremely poor and, if so, in what way?

    Technically, (a) is a “use value” definition while (b) is an “exchange value” definition. Such definitions, however, are systematically non-synonymous (as the famous “water/diamonds” parable has illustrated since Adam Smith’s day, although now, with the privatization of water, it has become less salient!). For example, in many villages in Africa adults (including, in certain areas, women) have access to (although not ownership of) land that they can use for subsistence. This is an enormous wealth (“use value”) that cannot be alienated and hence does not have an “exchange value.” But if each adult has land accessible to satisfy his/her basic needs, is that person poor even though, e.g., access to similar land in other part of the country might be “worth” a few hundred dollars? Is the imputed value of the common land, divided by the number of commoners, part of the annual income of the villagers? Similar points can be made about children. In many parts of Africa, children are “shared” by villages or extended families and their actual income is below $1 a day per person. These children often have their “basic needs” satisfied in a collective manner. Are these children extremely poor, even though the caring hands they pass through on their way to adulthood satisfy their basic needs? Though they get water to drink, not diamonds to wear, is that extreme poverty?

    After all, what does the “exchange value” measure of extreme poverty — the quantity $1 a day measure when considered from the point of view of purchasing power parity (PPP) — come to? The definition of PPP Sachs and the World Bank use is “the number of units of a country’s currency needed to buy in the country the same amount of goods and services as, say, one US dollar could buy in the U.S.” Consequently, according to the definition, an extremely poor person is someone who “lives” on the “goods and services” that one can buy for $1 a day in the US. It is clear that definition (b) implies definition (a), in that surely one cannot satisfy one’s basic needs on a dollar a day in the US alone, but even that statement is too weak, for according to the common understanding of what can be bought in the US for $1 a day, the people that fall under this definition ought all to be dead. …

  98. December 6th, 2008 at 17:36 | #98

    ‘extreme poverty means an “income of $1 per day per person, measured at purchasing power parity.”‘ is an inadequate description in another way. I recently posted the following at the Mises blog, which illustrates how it is inadequate:-

    For what it’s worth, wages are low in those countries because they are at an uncomfortable middle phase, where there are still enough subsistence resources around that most people don’t have to earn a very big top up cash wage, but they do have to earn it because there aren’t enough subsistence resources around to do without. The “Iron Law of Wages” produces a race to the bottom, with labour-intensive activity getting a non-cash subsidy from the subsistence resources (it’s a nonsense to say that people there live on a dollar a day, but they really do need that dollar).

    The historical early phase was were people didn’t need cash wages, so high cash wages had to be offered to get any significant take up; there was low employment, high wages, and low unemployment because the rest of the people were still in subsistence activity. The middle phase has high employment, low wages, and low unemployment because there is only a little subsistence activity but people can afford to price themselves into work on the back of what subsistence activity there is. The late phase which developed countries are now in has less high employment because not everybody can afford to price themselves into work, high wages (because people can’t afford to settle for less), and higher unemployment with effectively no subsistence activity to fall back on or be subsidised by. People who only know the developed world are unfamiliar with that non-cash activity and its significance.

  99. Tony G
    December 6th, 2008 at 17:36 | #99

    gerard Said:

    “clearly fusion power is overkill, plastic sheets and salty water will suffice for our civilization’s water needs”

    Maybe you could piss in this and have a perpetual supply of potable water.

  100. gerard
    December 6th, 2008 at 19:43 | #100

    interesting contraption Tony G. do you think it could convert your comments into something useful?

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