The Economy

Useful articles:

Quick facts:

  • The economy is contained within society, which is contained within the physical environment. It should be the servant of society and environment, not their master.
  • Wealth is only one dimension of human wellbeing, although it is an important one.
  • Wealth is a “per person” thing. An economy that is bigger simply because it has more people, is not richer.
  • Natural resources are very important to wealth. Economic models which ignore natural resources, and their dilution by population growth, give false answers. One such false model is the “3 Ps” theory (promoted in the Australian treasurer’s Intergenerational Reports), that Economy = Population x Participation x Productivity.
  • Crowding of our natural assets and/or our built assets reduces productivity, and also reduces wellbeing by generating stress and increasing vulnerability to adverse events (natural disasters / system failures).
  • Regardless of how crowded we are (or are not), the rate of population growth carries a high economic burden. Every 1% per annum of population growth requires around 7% of GDP just to create the extra infrastructure and equipment needed by the additional people. The extra production and taxes those extra people generate can’t pay for it – it can only be paid by withdrawing spending from other people (now, or via debt, in the future).
  • Population growth causes housing to get more expensive, and this is a bad thing, even for home-owners. The property industry and banks promote population growth because they profit from it, but they do so at everyone else’s expense. Their wealth is measured in the size of our mortgages.
  • Population growth can increase GDP in the same way that bushfires can increase GDP: they make us spend more in order to build more, just to regain what we already had before. That can increase employment, but it doesn’t increase our external income, so the money can only come from cutting other spending, either in the present (austerity measures) or in the future (increased debt repayments and/or insurance premiums).
  • More debt increases GDP. Expanding debt is the main way that we have maintained the illusion of economic growth over the past decade. The finance industry wants more people, so that they can carry more debt, and so that they compete with each other strongly enough to be coerced into accepting bigger debts.
  • Ageing is not a problem for the economy, and even if it were, population growth does not fix it. Ageing mostly results from increasing life expectancy: it is a symptom of our success. It doesn’t mean fewer workers – only fewer people unemployed or under-employed.
  • A stable population spends less on running-to-stand-still (building ever more infrastructure), so it can spend more on quality of life. While a growing population dilutes and erodes each generation’s inheritance, a stable populations has the capacity to build on the betterment each generation achieves.