The grand unified theory of economics.....

The grand unified theory of economics..... well at least I've been thinking.....

Why is western economics so aggressive? Why in Tom Lehrer's words does everyone hate the Jews?

The history of the Western banking system goes something like:

the Law of Moses forbids usury - so Jews, Christians and Muslims didn't practice it amongst their own people. But where there is a law someone will find a loophole..... so lending money for interest was possible between people of different religions.... and became an option because Jews in Europe were forbidden to carry on other forms of business. So a banking system evolved that was independent of both the dominant Church and State. And borrowing for investment became the norm. And money became an object in itself rather than merely representing the goods and services that could be traded for it. So far as I can see a huge amount of social evil can arise from these things: boom/bust cycles and investment bubbles, dangerously deregulated markets and the need for endless growth.

Growth is a two edged sword – it's brought us really cool stuff – including hospitals and railways and clean water and mobile phones and the Internet.... and International travel and yummy foreign cuisine. But on a finite planet you can't maintain population growth and material-consumption-per-capita growth indefinitely. So is it growth we are after or evolution? Evolution allows for altruism, ethics, culture and non material trade and consumption.

How can we break the growth dependency? How do we stop Western economics being so predatory?

I think there's two things we can do that can trigger a paradigm shift towards social and economic evolution:

• borrowing and lending interest rates should be set at the inflation rate – so if you are saving for something then your money doesn't lose while you are accumulating – if you borrow you don't end up owing more than you own unless things go really pear shaped.
• The value of shares in enterprise should be set by a quarterly audit so that we don't have this testosterone fuelled auction mentality driving trading to ridiculous levels.

Can you imagine the pain if we actually implemented this? The end of the profitable banking system as we know it, the calming of the stock exchange to a mill pond of tranquillity.... and you couldn't pay tax on interest then – it's only keeping pace of the real value of goods and services. It needs a paradigm shift to make it work. Would we try it?? My mum said communism, like Christianity may be a pretty good system – we don't know because neither of them have been tried.

But if we want evolution rather than uncontrollable growth then it's worth thinking about how to achieve it and how we value it.

The bottom fell out?

So we live in a contracting economy? Not the first bubble to burst but this could be one of those crashes that they warn us about in the Limits to Growth... followed by oscillations until we reach some sort of stability. If it were not so obvious that humans only respond to crises then we could plan for an orderly contraction to a reasonable level of consumption and production so that we had a pleasant life without over stretching the environment.

You could start by saying that for mortgages the ratio of equity to the total price will remain fixed - except for repayments - so that as the value of the house drops the size of the mortgage drops - the bank absorbing the pain just as the home owner does.... not so silly really - just a spreading of the risk and it would mean that people on a mortgage won't be so pressed to use their stimulus package money for debt reduction. They'll know that their house will always be worth more than they owe on it.

And of course when (if) the economy picks up again the ratio will be preserved up to the point it was at in 2007. So for someone who just sits tight and spends their money they will be in the same position (and so will the bank) at the end as at the start. So you can spend the stimulus package money on a solar hot water service, or buying green power, or a bike....

If you know that things are going to contract why not do it sensibly and work out what we want to achieve - it is like moving to a smaller house - it is a blessed relief to throw out/sell/recycle/give away all those things that you don't really want and that are not contributing to your happiness. Much of our wealth is a burden - why are we so obliged to run the rat race? There has to be a better way.

The Fall from Grace

Thinking about ideas in the Limits to Growth.. the authors were talking about the two revolutions: the agrarian where we stopped being hunter gatherers and became farmers and the industrial where most people work in or for factories. And now we need a sustainability revolution... 

The trouble is that the Fall from the Garden of Eden was the agrarian revolution - we never wanted to stop living in the Garden of Eden as hunter gatherers - the only reason we did so was because of population pressures. Just as we look at the more technologically simple time of our youth with nostalgia so we regard the past as a golden age. When we despise those living in poorer, simpler circumstances.... is it jealousy? Are we really tough on the aboriginals because they had so recently what we have lost long ago. Is this why we destroy them with all the forbidden fruit that modern man can throw?

But maybe we need to find a better way - to recover that which was lost and to enhance our relationship with the earth. Can technology do that too?