Economic policy

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Ad Nauseum: Addressing America’s Advertising Problem

Published by Anonymous (not verified) on Fri, 24/06/2022 - 12:41am in
by Haley Mullins

One of the biggest roadblocks to achieving a steady state economy is advertising. While seemingly innovative solutions to consume conscientiously are becoming more prevalent, most people aren’t Marie Kondo-ing their way through each purchase, stopping to question whether the item in their shopping cart will “spark joy.” But how much blame can we really assign consumers when they’ve been dropped onto a hamster wheel of coupons, cash-back credit cards, and “consumer confidence” indicators?

We live in the age of the internet, where we can purchase anything with one click on Amazon. Websites track our movements and preferences as we surf the web, offering us personalized advertisements so we can discover and buy more of what interests us. To put into perspective how expansive advertising is in the USA, China is the second-largest advertising market in the world, yet its ad expenditures are estimated at less than half the amount calculated for the USA.

Advertising and Growth

Super Bowl promotions in a grocery store, featuring doritos advertising.

Super Bowl Sunday might be better named National Advertising Day. (CC BY 2.0, JeepersMedia)

In 1941, right before a baseball game between the Brooklyn Dodgers and Philadelphia Phillies, the first legal TV commercial aired in the USA. It was just ten seconds long and only cost the company nine dollars. Forty years later, the standard for prime-time TV was 9.5 minutes of ads per hour; today, it’s up to 14–17 minutes per hour. The cost of advertising has skyrocketed, too, but marketers are still willing to pay big bucks to make buyers aware of the “Next Big Thing.” In 2020, advertisers spent an average of $5.6 million for a 30-second spot in Super Bowl 54.

Firms advertise to create demand and promote consumption. (I don’t know about you, but I didn’t want socks with my cat’s face on them until I saw a Facebook ad for it.) While firms compete against each other for our business, they rally around the goal of GDP growth. Wall Street and Madison Avenue aren’t far apart—figuratively or politically—and both have skin in the growth game.

Americans have a love-hate relationship with ads though. A typical American might understand the role of advertising in economic growth, yet—apart from Super Bowl Sunday—we detest ads and go to great lengths to avoid them. By 2021, 27 percent of U.S. internet users used ad blockers on their connected devices. Younger generations are particularly put off; 48 percent of Gen Z consumers and 46 percent of Millennials prefer to pay a premium than watch advertisements on streaming video services.

First Things First

Steady staters have some significant hurdles to overcome in the degrowth of the American ad industry, the first of which is the First Amendment.

Advertising falls under the First Amendment right to free speech and free press, the most cherished of our constitutional rights. However, even the sanctity of the First Amendment doesn’t guarantee the freedom to say anything. The circumstances are important, too. Reasonable restrictions of free speech are imposed most notably when public safety is concerned. The classic example of unprotected speech is yelling “Fire!” at the movie theater when no fire exists, as the welfare of people supersedes your right to yell “Fire!”

While advertising isn’t as directly harmful as in this example, the prevalence and effects of advertising—unnecessary consumption, growth, and environmental impact—have become increasingly harmful to public welfare. Advertising restrictions already in place substantiate our cultural awareness of advertising as a danger to the public. Under the law, claims in advertisements must be truthful, and cannot be deceptive or unfair. Additionally, there are restrictions on promoting harmful products like tobacco and alcohol, as well as advertising to children, who can’t interpret ads with a critical lens.

Society understands the power of advertising and the dangers it poses when used manipulatively. Thus, it’s poor reasoning to use the First Amendment as an excuse for “anything goes” in the advertising industry. So, what policies could we enact to moderate advertising, slow consumption, and (in the process) improve wellbeing?

Ad-equate Policies

Defenders of advertising argue the importance of the practice in aiding competition, a fundamental facet of a capitalist system to keep prices low and fair. As American economist Lester Telser once described, “If sellers must identify themselves in order to remain in business, then formally unless they spend a certain minimum amount on advertising their rate of sales will be zero. Regardless of price, buyers would not know of sellers’ existence unless the sellers make themselves known by incurring these advertising outlays.”

1960 Budweiser advertisement with four Black men holding beers and chatting in a kitchen.

Advertising: framing the consumption of market goods as raising one’s quality of life. (CC BY-NC 2.0, ChowKaiDeng)

Touché, Telser. Eliminating the practice of advertising isn’t practical, as people would struggle to discover necessary goods and services. But billions of dollars are spent annually on advertising, far surpassing the optimal scale of the industry. In 2020, U.S. firms spent $240 billion on advertising; all of it tax deductible, as it’s considered a necessary business expense to generate or keep customers. Herman Daly and Joshua Farley argue for advertising taxes in Ecological Economics (Second Edition), declaring it appropriate to tax advertising as a public bad because production should meet existing demand rather than create new demands for whatever gets produced.

But if we’re truly to curb overconsumption of market goods, merely reducing the quantity of advertising will only do so much in the aggregate. To change consumer habits, an alternative to market goods must be introduced. Thus, in addition to taxation, Daly and Farley suggest making media information flows more symmetric so that the public is equally exposed to nonmarket goods as they are to market goods. Essentially, we need a sort of nonprofit advertising to balance out the advertising of firms.

Nonmarket goods, things that are neither bought nor sold directly, do not have a readily quantifiable monetary value. Some examples include visiting the beach, birdwatching, or going for a walk. Perhaps, with more attention given to nonmarket goods, consumer culture might shift to better appreciate our planet and better understand the true cost of frivolously consuming market goods that come from the Earth and return to the Earth as waste. Our resources might then be reallocated to the preservation of invaluable nonmarket goods, a shift that may aid in transitioning to a steady state.

Redefining Ethical Advertising

Cartons of cigarettes with several different warning labels making it clear that smoking is hazardous to people's health.

Full disclosure: unchecked consumption kills people and planet. (CC BY 2.0, kadavy)

The U.S. Federal Trade Commission (FTC) defines “ethical advertising” as “truthful, not deceptive, backed by evidence, and fair.” The FTC assesses the adherence of these principles through the lens of a “reasonable consumer” to determine whether an ad meets the requirements. However, some argue that the FTC has a responsibility to protect the ignorant consumer to the same extent as the reasonable one.

If the last several decades of celebrated economic growth are considered, I’d say the vast majority of consumers fall into the ignorant category—ignorant to limits to growth, at least. Is it not within the scope of ethics, then, to make the true cost of consumption for advertised market goods evident? Is it not deceptive for ads to display a price tag that fails to factor in the environmental costs of production? We have warning labels on tobacco and alcohol products that consumption may lead to adverse effects, so why aren’t we warning buyers of the consequences of consuming other goods?

If we don’t restrict the amount or reach of advertising, the least we can do is demand full-disclosure advertisements that detail the environmental cost of producing and purchasing the product. This would, at minimum, include estimated life-cycle emissions, quantity of natural resources extracted, and the energy required to produce each unit. Such disclosures would, over time, raise awareness of limits to growth and could, perhaps, be the catalyst that converts our culture of conspicuous consumption to one of careful conservation.

Haley Mullins, managing editor for CASSEHaley Mullins is the managing editor at CASSE.

The post Ad Nauseum: Addressing America’s Advertising Problem appeared first on Center for the Advancement of the Steady State Economy.

LISTEN: The Fed Is Trying To Crush You

Published by Anonymous (not verified) on Thu, 16/06/2022 - 6:08am in

 The Fed Is Trying To Crush You

On this week’s Lever Time, host David Sirota is joined by The Lever’s Julia Rock and Roosevelt Institute economist JW Mason for a deep dive into the Federal Reserve’s move to address inflation by trying to crush workers’ wages. Mason argues that such a decision isn’t dispassionate, but instead a highly ideological move that sides with the wealthy and corporations. He also reviews alternative ways to combat inflation that would shield workers from the most acute pain.  

Listen to the podcast here.


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Powell Lets Wall Street Pay Skyrocket While Targeting Workers’ Wages

Published by Anonymous (not verified) on Tue, 14/06/2022 - 8:31pm in

Powell Lets Wall Street Pay Skyrocket While Targeting Workers’ Wages

While former private equity executive and Federal Reserve Bank Chair Jerome Powell takes aim at workers with a pledge to “get wages down” to combat inflation, he has declined to implement a law to reduce the skyrocketing paychecks of his former colleagues on Wall Street. He has also approved and financed a merger wave that critics say has inflated the cost of consumer financial services.

The 2010 Dodd-Frank financial reform law mandated the creation of a rule to rein in Wall Street bonuses. The rule is supposed to be developed and implemented by six regulatory agencies, including the Federal Reserve that Powell runs.

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But as he has sounded the alarm about inflation and wages, Powell has so far has done nothing to help create that rule, even as Wall Street bonuses just hit an all-time record at $45 billion in a single year.

The Fed did not respond to a request for comment from The Lever.

“Excessive Compensation, Fees, Or Benefits”

Dodd-Frank mandates that a Wall Street compensation rule require banks to ensure that their executive compensation packages do not incentivize risky behavior, such as risky lending to hedge funds like Archegos Capital Management, which collapsed in March 2021 under the weight of hundreds of millions of dollars in loans from major banks like Goldman Sachs.

The law said the Fed and other agencies must craft a rule requiring banks to limit “inappropriate risks” that come with providing executives with “excessive compensation, fees, or benefits.”

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In 2016, five years after it was supposed to be completed, the Obama administration finally proposed such a rule — but the proposal was quickly blocked by the Trump administration.

At the time, Wall Street let its opposition to a robust rule be known. Before President Donald Trump deep-sixed it in 2017, Marc Trevino, a partner at Wall Street law firm Sullivan & Cromwell, told the Wall Street Journal that an expansive version of the rule would be “unfortunate and counterproductive.”

This past February, Sarah Bloom Raskin, President Joe Biden’s nominee to be the Fed’s vice chair for supervision, promised “to implement the law.”

Bloom Raskin withdrew her nomination amid opposition from corporatist Sen. Joe Manchin (D-W.Va.) and every Republican senator.

Powell’s Focus On A Painful Path

In response to rising inflation, Powell could crack down on Wall Street bonuses, call for the repeal of Trump tax cuts for the wealthy, demand the closure of the private equity tax loophole, or use the Fed’s power to block bank mergers.

Instead, Powell’s anti-inflation campaign has focused on raising interest rates to reduce the money supply — a policy that tends to increase unemployment and put downward pressure on rank-and-file workers’ wages.

The result is a much higher degree of misery for ordinary Americans, while the overall purchasing power of the country is reduced.

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Powell and the senior Fed leadership have little connection to that suffering.

Powell was a senior executive at the Carlyle Group for much of his career, and his financial disclosures show an enormous investment portfolio worth up to $55 million.

For much of last year, the Fed was consumed with a scandal in which Powell’s vice chair, as well as the heads of the Dallas and Boston Federal Reserve banks, were found to have engaged in insider trading.

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Sell Your Stocks and Enjoy the Slide

Published by Anonymous (not verified) on Fri, 27/05/2022 - 2:37am in
by Brian Czech

I’m sorry if you’re one of the 145 million Americans invested in the stock market, but I actually find it gratifying to see the market sliding. Why shouldn’t I? As a steady stater, I’m firmly against GDP growth in the 21st century. A perpetually growing stock market presupposes a perpetually growing economy. If the market has to decline along with GDP, I’m all for it.

Conversely, it’s safe to say that anyone hoping for an ever-growing stock market is no steady stater. They’re not on the side of people and planet; not really. They’re on the side of their short-term selves, and maybe their immediate families, but not the rest of us, and not the grandkids.

A serious steady stater would probably possess no stocks whatsoever. Yes, arguments get made for “green stocks” such as wind or hydrogen, but ultimately the steady state economy means a stabilized size of economy, whether it’s run on wind, hydrogen, or cow power. If you have disposable income, you can surely think of some steady-state expenditures that don’t reek of pro-growth hypocrisy. Better yet, you can save!

What’s in a Stock Market?

Robert Reich holding a finger up at a podium.

Robert Reich: “Repeat after me, the stock market is not the economy.”
Except it kind of is. (CC BY 2.0, ATIS547)

As Robert Reich would have us repeat, “The stock market is not the economy.” He avers that jobs, wages, and general standards of living have little connection to the market. In terms of its ownership, too, the stock market is hardly representative of the citizenry. While 145 million Americans—56 percent of adults—seems like a lot of investors, most of the “investment” is in the form of retirement accounts containing mutual funds. Only about 14 percent of American families actually invest directly in individual stocks. And, the wealthiest 10 percent own more than 80 percent of the shares.

Shareholding is skewed even more than the general distribution of wealth (including real estate), and far more than the distribution of income. So, Reich’s point is well taken. If the economy is supposed to reflect society at large—rich, poor, and middle-class—then the stock market is not the economy.

On the other hand, let’s not get carried away with nostalgia for Reich or our own wishful thinking. If we’re concerned about people and planet, we have to think twice about the relationship between the stock market and the economy. We’d be way wrong to rationalize, for example, “OK, if the stock market is not the economy, I can invest in it without worrying about my ecological footprint. Limits to growth might apply to the economy, but not to the stock market, which is after all just a measure of expectations, not economic activity per se.”

While the stock market may not be the economy, it certainly represents a lot of our economic activity. Consider the 30 stocks comprising the Dow Jones Industrial Average, the long-serving index of the New York Stock Exchange:

Dow-Jones Component
Sector (vernacular)
NAICS Best-Fitting Sector*

3M
Chemicals
Manufacturing

American Express
Financial services
Finance and Insurance

Amgen
Pharmaceutical
Manufacturing

Apple
Information
Information

Boeing
Aircraft
Manufacturing

Caterpillar
Heavy Equipment
Manufacturing

Chevron
Energy
Mining, Quarrying, and Oil and Gas Extraction

Cisco Systems
Technology
Manufacturing

Coca-Cola
Beverage
Manufacturing

Disney
Entertainment
Information

Dow
Chemicals
Manufacturing

Goldman Sachs
Banking
Finance and Insurance

Home Depot
Retail
Retail Trade

Honeywell
Equipment
Manufacturing

IBM
Technology
Information

Intelligent
Technology
Manufacturing

Johnson & Johnson
Pharmaceutical
Manufacturing

JP Morgan Chase
Banking
Finance and Insurance

McDonalds
Food services
Accommodation and Food Services

Merck
Pharmaceutical
Manufacturing

Microsoft
Information
Information

Nike
Footwear
Manufacturing

Proctor & Gamble
Personal care (products)
Wholesale Trade

Salesforce
Software
Information

Travelers
Insurance
Finance and Insurance

UnitedHealth
Health Insurance
Finance and Insurance

Verizon
Telecommunications
Information

Visa
Financial services
Finance and Insurance

Walgreens
Retail
Retail Trade

Walmart
Retail
Retail Trade

*NAICS is the North America Industry Classification System, maintained by the U.S. Census Bureau.

 

 

 

 

 

 

Taken one by one or in the aggregate, does anything look sustainable about this who’s who of Wall Street? If anything, it’s a conglomerate with a glaring and growing ecological footprint, with Caterpillar bulldozing the way for the rest of these bellwether corporations. Yet when we study the list, we also find something glaring in its absence.

The absence should be glaring for steady staters, at least, if not for Robert Reich (a progressive but nevertheless neoclassical economist). Can you spot it?

Here’s a hint: How are any of the 30 CEOs, their boards, and their strategists going to eat, and thus continue their plundering growthmanship? Yes, McDonalds is in their midst, but once that last McDouble comes off the McGriddle, they’re in McTrouble, and more than McLittle. They’ve got no farmers, fishers, or growers to keep food on the table!

In this non-Reichian sense, then, the stock market is profoundly not the economy. The real economy starts with agriculture—agriculture and extraction, but most notably agriculture—before anyone goes to work at Apple, Amgen, or American Express. The real economy starts, succeeds, and persists only with enough agricultural surplus to free the people for a division of labor, allowing for the existence of IBM, 3M, and McDonald’s itself. Without that agricultural surplus, the entire economy collapses; real and monetary sectors alike.

So, if we think of “the stock market” as the Dow, it most certainly is not the economy. It’s not the economy for the “Reich reason” (not representing the American public) and it’s not the economy for the structural reason (lacking an agricultural and extractive base). But hang on; there’s more to the story. The verdict isn’t quite in yet on how closely the stock market resembles, reflects, or represents the real economy.

The Dow is Not the Stock Market

The Dow is not “the” stock market, but rather a stock market index. It’s the leading index, but not the only index. Unless you’re comatose, you can’t get through a week in the USA without hearing about the Nasdaq and S&P 500, too. The Nasdaq represents the technology sector especially, while the S&P 500 is supposed to represent the stock market at large.

The New York Stock Exchange Trading Floor

All that time and attention spent on mind-numbing, money-grubbing minutiae.

Thank goodness we don’t have to hear about the rest of the approximately 5,000 indices. We have almost as many indices in the USA as there are publicly traded stocks, perhaps even more if we leave out the OTC equities (that is, stocks traded purely over the counter and not via stock exchange).

Globally there are well over 3 million stock indexes, or 70 times the number of publicly traded companies! I’ll opine about the proliferation of such indexes below, but only after we settle this matter of the stock market representing (or not) the real economy.

If we took all the publicly traded corporations in the world—roughly 43,000—and assembled them like pieces of an ecological puzzle, they’d start looking more like the real global economy; that is, the triangular economy building upon the agricultural and extractive sectors at the base. Similarly at the national level, we could use the Wilshire 5000 for a fuller picture of the U.S. economy than we get from the Dow, Nasdaq, or S&P 500. We have agricultural and extractive sectors at the base, heavy manufacturing sectors in the middle, and light manufacturing at the top, with service sectors intertwined throughout, serving the agricultural, extractive, and manufacturing industries in addition to household consumers.

Reich’s particular point about the representation of citizens would still stand, because while Del Monte, Perdue, and Cargill might be there, pumping out the produce and poultry like insults at a political rally, not a single family farm would be in sight, or in mind. Nevertheless, the full suite of NAICS sectors would be represented. In that sense, we might hearken back to another Clintonian confidant, James Carville, and say of the stock market, “It’s the economy, stupid.”

Which brings us back to the incompatibility of stock market investment and serious steady statesmanship.

What Happens When You Purchase Stock

When you purchase stock through an initial public offering, you’re either helping yet another corporation take root, or an existing one expand its operations. It’s that simple. That might have been fine in the early 20th century, but by now, any addition to the bloated economy is like feeding Fat Albert French fries. It’s not healthy—literally—for people or planet.

While the effect isn’t as direct, you encourage the corporation to expand its operations when you purchase “seasoned” (non-initial) shares at the stock exchange, too. Corporations view their share price as a barometer for when to initiate more capital outlay. On the ground, that means more factory floor, offices, utilities, energy consumption, and pollution. Less green space, quietude, biodiversity, resources, clean air, climate stability…all the things we need most at this point in history.

Please don’t cop a plea with the lukewarm alibi, “I’ll do good with my money by investing in sustainable industries.” Steady staters know that sustainability is first and foremost about the size of the economy. The hydrogen French fries may not be as fattening, but Fat Albert needs less fries, period.

Furthermore, the economy grows as an integrated whole, and so does the stock market. If you’re helping one sector, you’re essentially helping them all. You may not be assisting every business competitor when you purchase a particular stock, but you are helping to expand a sector, and therefore the economy at large.

Every stock purchase is an opportunity cost, too. Think of all the bona fide good that could have been done with the trillion dollars poured into stock markets in 2021. Things like infrastructure repair, debt relief, healthcare coverage, and education. It almost makes you want higher taxes—especially capital gains taxes. That’s assuming our elected politicians have meritorious priorities. And there you go: meritorious political campaigns could have been supported instead of more pipelines, power plants, and parking lots.

Stock Market Indices Are Social Indicators, Too

In 1975, global market capitalization (the market value of publicly traded shares) comprised roughly 27 percent of global GDP. It first exceeded GDP in 1999, and by 2020 was 135 percent of GDP, or almost $94 trillion. In the USA alone it was nearly $41 trillion; well over double the American GDP. What does that tell us about American priorities?

Two adults happily sliding down a double playground slide.

Sell your stocks and enjoy the slide! (CC BY-NC-SA 2.0, blanchardjeremy)

Revisiting the proliferation of stock indices and funds, one gets the impression that just about any combination or permutation of stocks could constitute this or that “index,” with more of them arising by the business day. Many if not most of these indices double as investment vehicles in their own right, scarcely distinguishable from mutual funds and exchange-traded funds (ETFs). These “index funds” can only be purchased outside of trading hours though, so in today’s hyperactive markets, ETFs have become all the rage, as they can be traded throughout the day. In the first quarter of 2022, 73 more were added to the New York Stock Exchange alone (one of 60 stock exchanges in the world).

This proliferation of funds, indices, and market cap speaks to the salesmanship and ambition of financial operators, brokerage firms, and (most likely) second comings of Bernie Madoff. It’s also an embarrassment for Homo sapiens, with so many of its members occupying their precious time on such mind-numbing money-grubbing.

Don’t we have better things to do with our time and money than analyzing the markets to death and trying to suck even more money out of an inflated market and money supply?

If you own stock, why not sell it now? Use it to help an ailing loved one, or even an ailing stranger. Boost the campaign of a steady stater. Put it in a trust fund for your kids’ tuition. Protect some land, help Ukraine, and put some smiles on poor kids’ faces. Who knows the benefits you might impart?

One thing is certain: When you sell your stocks, you’ll be helping us all—people and planet—with desperately needed degrowth toward a steady state economy. Then you can stop worrying about the Dow, the Nasdaq, and the rest of the 5,000 boring indices.

Brian Czech, Executive Director of CASSEBrian Czech is the executive director of CASSE.

The post Sell Your Stocks and Enjoy the Slide appeared first on Center for the Advancement of the Steady State Economy.

Morality in the Womb: More than Meets the Mass’s Eye

Published by Anonymous (not verified) on Fri, 13/05/2022 - 1:12am in
by Max Kummerow

With the recent leaking of the draft decision by the U.S. Supreme Court to overturn Roe v. Wade, the heated controversy over a woman’s right to abort—or voluntarily terminate—a pregnancy is again at the forefront of democratic discourse. At the heart of this debate are issues of morality and theology. Self-identified Christians make up 63 percent of the U.S. population, with Evangelical Protestants and Catholics representing an overwhelming portion of the “pro-life” camp.

The question of when moral and legal obligations to protect a new life should begin has been pivotal to abortion politics and policy. Throughout history, four primary theories have been proposed to mark the commencement of a new human life:

  1. Moment of Conception

The moment of conception refers to when the egg and sperm unite to create a zygote with a unique genetic code. Those who hold that this is when life begins may argue for the prohibition of voluntary terminations or contraceptives used after conception, such as IUDs and hormonal methods that prevent pregnancy; that is, the implantation of a fertilized egg to the uterine wall.

  1. Quickening

The mother’s first sensation of the fetus moving—known as quickeningtypically occurs between 16 and 20 weeks after the last menstrual period, or roughly the middle of the pregnancy. “Animus, soul, or life enters the body of the unborn infant when it first moves or stirs in the womb,” said the great 11th century theologian Thomas Aquinas. Aquinas and the Roman Catholic Church viewed the animation of the fetus in the womb as evidence of ensoulment, or the moment when a physical body has been joined with a human soul.

  1. Viability

The age of viability refers to the time during pregnancy when a fetus could be born with a reasonable chance of survival. The time at which a pregnancy becomes viable is typically around 24 weeks; however, babies born around this time have an increased risk of disability and other complications. Most delivered before the age of viability do not survive because the lungs and other vital organs aren’t sufficiently developed.

In Roe v. Wade, the Court divided pregnancies into trimesters. During the first trimester, the woman has sole discretion to terminate the pregnancy. During the second trimester, states can regulate—but not outlaw—voluntary terminations for the sake of the mother’s health. The fetus becomes viable at the start of the third trimester, at which time states can regulate or outlaw terminations in the interest of the potential life, except when termination is necessary to preserve the life of the mother.

  1. Breath of Life

The breath-of-life theory is that a new life begins at the baby’s first breath. This theory reflects the Christian creation story in Genesis 2:7, “And the LORD God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul.” This theory makes the most sense to me. When, as a child, I helped my uncle pull calves, some died and some lived. To live, they had to breathe. My uncle himself died eventually, precisely when his breathing stopped.

Even birth and breathing haven’t always granted an individual protection under the law. Infanticide was common throughout the Roman Empire and many other parts of the ancient world, and has been documented in 27 countries. For instance, China’s one-child policy, implemented between 1980 and 2016, resulted in a wave of female infanticide. Scholars who have extensively studied infanticide have found a positive relationship between income inequality and female infanticide. These researchers concluded that societies with extreme poverty may use infanticide to conserve resources, reduce financial strain, or improve the family’s quality of life.

A purple bus with a large banner covering the back with a smiley face reading "We're pro-life."

What does it really mean to be “pro-life?” (CC BY-SA 2.0, infomatique)

While there are some denominational differences amongst Christians regarding ensoulment and the beginning of life, we can safely assume that those against a woman’s right to choose believe this divine moment occurs sometime in the womb. Scripture, however, provides no guidance on voluntary terminations.

The closest The Bible comes to the topic is in Exodus 21:22-23, where Moses writes, “If two men are fighting, and in the process hurt a pregnant woman so that she has a miscarriage, but she lives, then the man who injured her shall be fined whatever amount the woman’s husband shall demand, and as the judges approve. But if any harm comes to the woman and she dies, he shall be executed.” If the embryo or fetus was ensouled, wouldn’t the men have received a more severe punishment according to the “eye for an eye” doctrine? Such is the case if the men kill the living, breathing woman. In other words, Scripture clearly implies that the fetus does not have a right to life equal to that of a breathing person.

The Science of Reproduction

Galileo begged the Inquisition to “look through the telescope” to see the truth about the solar system. Those against abortion services should look through a microscope to observe the lengthy, complex processes of conception and gestation. The authors of The Bible did not have the benefit of microscopy, and accordingly wrote nothing on the science of reproduction. To reconcile theology with science though, we must understand the biological facts of conception, fetal development, and birth.

First, the terms “moment of conception” and “beginning of life” are misleading, as these processes don’t occur in an instant. The actual beginning of life took place circa 4 billion years ago when DNA (or possibly even simple RNA, ribonucleic acid) first replicated. Some of the earliest “experiments” may have blinked out, but for several billion years—while innumerable organisms have died and species have gone extinct—life has continued with no interruption.

Nor is conception a “moment,” but rather a multi-step process—prefaced by episodes of meiosis and the production of male and female gametes—taking several hours for a sperm cell (male gamete) to penetrate an egg’s (female gamete) cell wall, stimulate the zona pellucida to deploy (preventing other sperm from entering), shed its axial filament (the “tail”), burrow into the egg, and redeploy genetic material until the collective 46 chromosomes have been linked into 23 pairs. By then, a fertilized egg (zygote) exists, ready for mitosis and another very gradual process of fetal development, but precisely when did the fertilization transpire? And is that unclear moment equivalent to “conception?” Or would conception be more appropriately consigned to the first mitotic division of the zygote?

One thing we do know is that only a relative handful of the quadrillions of potential combinations of DNA win the lottery, manifesting in zygotes and ultimately children. People across the political spectrum can agree that life is sacred, but even in the absence of abortion, most potential humans—even after conception—never experience the breath of life. While often tragic for aspiring mothers, stillbirths and infant mortality are nonetheless common features of human biology. In 2019, the U.S. infant mortality rate was 5.6 deaths per 1,000 live births. In poorer parts of the world, infant mortality is in the hundreds per 1,000 born.

Even with the advancements in medical technology, maternal mortality is still a risk everywhere. In the USA, the risk of death associated with childbirth is roughly fourteen times higher than that with legal abortion, making responsibly provided abortion significantly safer than childbirth. This is a point worth pondering for those who oppose abortion because they value human life, especially considering the Exodus distinction between the value of an adult woman relative to a fetus.

The Odds of Life

Charles Darwin discovered not only how species evolve via natural selection, but explained why organisms produce so many more than can survive. All species have an innate propensity to multiply. More specimens are born than can survive to adulthood; far more in the case of most species.

Meanwhile, the way organisms interact with and adapt to their environment determines their survival and reproduction. In this way, the most “fit” organisms (given the environmental conditions) begin to overtake less fit organisms, passing along more of their genetic code for traits ranging from eye color to blood type and even cognitive ability (which is influenced by genetic and non-genetic variables). The species evolves, in other words, and—assuming moderate rates of environmental change—becomes ever more fit or “successful.” One of the prerequisites of this progressive process is a surplus of specimens, from which the most fit are naturally selected.

Ensouled or otherwise, Homo sapiens is no exception. In the process of ovulation, an egg is released from the human’s ovary each month for roughly 30 to 35 years of fertility. This amounts to 350 to 400 chances of pregnancy. Of the roughly 300,000,000 sperm ejaculated during coitus, only around 200 reach the fertilization site in the oviduct. Even when one lucky sperm fertilizes an egg in the fallopian tube, half of fertilized eggs fail to implant in the uterus, becoming lost after conception and before pregnancy.

Table 1 reflects the reality of surplus reproduction from conception onward. Even given the substantial “drawdown” of zygotes and fetuses in 2020, there were 140 million births and only 59 million deaths, resulting in 81 million more people on Earth.

Table 1. Global Conception, Pregnancy, and Fetal Drawdown, 2020

Total in Millions
% of Conceptions

Conceptions
475
100%

Pregnancies
238
50%

(Unintended Pregnancies)
107
45%

Involuntary Termination
47
10%

Voluntary Termination
50
10%

Births
140
30%

To the best of my knowledge, no woman has ever experienced 350 or 400 pregnancies. Cases such as the Octomom (fourteen children) and the Radford family (16 children) are famous because of how extreme they are (although a Russian woman supposedly produced 69 babies in the 18th century). What if all women could have fourteen to 16 pregnancies during their 30 to 35 years of fertility? Should that be the goal of a pro-life movement?

No society, even those with early marriages and lack of contraception, has averaged more than a dozen births per woman. Contraceptives and other family planning services have allowed most societies to reduce births per woman to more manageable levels. It would seem eminently logical that maximizing the number of human lives is neither desirable nor moral compared with moderating reproduction for purposes of healthy, happy, and sustainable lives.

Choosing Life

One of the cornerstones of steady-state economics is democratically stabilizing population; another is achieving fairness and quality of life. For these purposes, access to contraceptives, comprehensive sexual education, and family planning services are needed.

Abortion rights protest with signs reading "Pro-choice is Pro-life"

Considering the wellbeing of all life forms—or all God’s creatures—pro-choice is  congruent with pro-life. (CC BY 2.0, Debra Sweet)

Better contraceptives and family planning services have already proven to reduce unintended pregnancies and abortions. In countries that restrict abortion, the percentage of unintended pregnancies ending in abortion has ironically increased from 36 percent to 50 percent over the past 30 years. In the end, if preventing the frequency of abortions is truly the goal, then widening access to sex education, contraceptives, and other forms of reproductive healthcare—even abortion itself—is the most effective course of action.

Ending abortions altogether, were it possible, would increase the number of children born each year by at least 50 million globally. These children would be born to families that, in many and probably the vast majority of cases, couldn’t afford them or are otherwise not prepared to assume the responsibilities of parenthood. Banning abortion would also increase maternal mortality and the presence of negative health effects in mothers and children.

In my opinion, an abortion should be considered a responsible parenting decision to the degree the pregnancy is unwanted. Unintended teen pregnancies are one of the leading circumstances for abortions in the USA. Among teens 15 to 19, 75 percent of pregnancies are unintended. Teenagers have many other chances (about 350 to 400) to be a mother when they are more prepared for the responsibility. An abortion allows the teenager to choose a better time to have a child who will grow up better cared for.

For a woman already with children, a decision to terminate an unwanted pregnancy lessens her family’s financial and psychological strain, and leaves more resources to be shared by her pre-existing children. In other words, terminating an unwanted pregnancy can reduce the burden on the mother, on society, and on the planet, or the fullness of God’s Creation for the faithful among us. In that sense, abortion too has a pro-life element.

Max Kummerow portraitMax Kummerow is a population activist and researcher, and author of the forthcoming book, Too Many People.

The post Morality in the Womb: More than Meets the Mass’s Eye appeared first on Center for the Advancement of the Steady State Economy.

Icebreakers in the Arctic: An Overlooked Environmental Concern

Published by Anonymous (not verified) on Fri, 15/04/2022 - 12:17am in
by Johanna Cohn

Global heating has a greater impact on the Arctic than the rest of the planet. In fact, the Arctic is warming at a rate almost twice the global average. This is due to Arctic ice’s high albedo, meaning the ice reflects a tremendous amount of sunlight into the atmosphere. As the ice melts, the sea water absorbs more sunlight than it reflects. The resulting water subsequently warms and evaporates, becoming a powerful greenhouse gas. A positive feedback loop ensues as warmer waters melt more ice, and more water vapor adds to Earth’s greenhouse effect.

Arctic nations—the USA, Russia, Canada, Norway, Sweden, Denmark, Finland, and Iceland—view the thawing Arctic as an asset for tourism, fishing, and trade. Never mind the risks that come with shipping across waters that may contain icebergs, thanks to large ships called “icebreakers.”

The USA has two icebreakers in its fleet, and at least three more on the way. Russia, on the other hand, has at least 50. These nations recognize the value of holding power in the Arctic, and having icebreakers is a means to power. Nations that effectively use icebreakers in their Arctic fleets can grow their economies faster, improve the safety and efficacy of Arctic travel, and conduct scientific exploration. But at what cost?

Why Are Icebreakers So Loved?

image of a researcher exploring an Arctic pool, with an icebreaker ship in the background, cutting through Arctic ice.

Icebreakers allow researchers to explore areas once considered unreachable, but at what cost? (CC BY 2.0, NOAA Photo Library)

The USCGC Healy, one of the USA’s two icebreakers, is primarily used for scientific research and is famous for its advanced technology. In recent years, scientists aboard the Healy have accomplished two notable feats. The first was the identification of a species previously unknown to science called ctenophores—organisms similar to jellyfish—distinguished by the groups of cilia they use for swimming (commonly known as “combs”). The second was the discovery of Chukchi pockmarks during the exploration of the Chukchi Plateau. Despite encountering treacherous winds and waters, the size and stability of the Healy allowed researchers to continue mapping and studying the pockmarked area.

Another important asset of the Arctic is the Northern Sea Route, which lies east of Novaya Zemlya, Russia, and runs along the Russian Arctic coast by Siberia to the Bering Strait. As Arctic ice continues to melt, this route becomes more alluring for transporting goods across the North Pole. With the help of icebreakers cutting through remaining ice that could impede travel, the route reduces transportation time and costs, making it the most efficient route.

Icebreakers are also invaluable in Arctic search and rescue missions. The Arctic Council (an intergovernmental forum that addresses issues faced by Arctic governments and indigenous Arctic people) has taken action to allocate search and rescue resources on an international level. All eight Arctic nations signed the Arctic Search and Rescue Agreement in May 2011, making it the first legally binding agreement negotiated under the auspices of the Arctic Council.

Cold War Races in the Arctic

During the Cold War, the USA and the Soviet Union raced to pioneer new technology and discoveries, while competing for the greatest GDP. The Arctic was one arena for Cold War competition; whichever nation had the greatest presence in the Arctic would be better positioned to exploit Arctic resources and gain a significant advantage in climbing the GDP ladder.

Between the 1960s and the early 1980s, the Soviet Union launched Project 97, which added 32 new icebreakers into the Soviet fleet. These were a series of diesel-electric icebreakers, several of which are still operated by Russia today. The Soviets had plans to revive military bases on islands in the Arctic Sea, a move that would prevent the U.S. Navy from deploying into the Arctic.

During this time the USA also introduced a new class of icebreakers into its fleet, known as the Polar class. These two Polar class ships were designed to support science and research, provide resupply to remote stations, launch search and rescue missions, escort ships, protect the environment, and enforce laws and treaties in places other ships cannot reach.

In 2020, President Trump released a memo calling for a new fleet of icebreakers in the Arctic. This, in part, reveals the Trump administration’s concern about Russian and Chinese presence in the Arctic, a concern reflected throughout the U.S. population. When Americans were asked to rate their feelings toward Russia on a zero-to-100 scale, Americans averaged at 29, the lowest reading since 1982. The USA’s attitude towards China in 2020 was similarly negative, with 73 percent of people surveyed claiming an unfavorable view of China.

Since national sentiments towards Russia and China were overwhelmingly negative, President Trump produced a memo to address concerns. Trump announced his administration would create a plan within 60 days of the memo release to construct at least three heavy icebreakers by 2029 to compete with the growing Russian and Chinese presence in the Arctic. The Biden Administration has yet to retract this plan, so these icebreakers are still under construction.

What’s Missing from the Conversation?

Little information is available about the environmental concerns that icebreakers pose. Literature highlights the perceived “positives”—scientific exploration, search and rescue, trade and shipping, and competition amongst nations—as being more important than considering environmental degradation. However, here’s what we know.

Icebreakers break ice. As the broken ice melts, sunlight is absorbed, leading to increased temperatures, and thus more ice melting. An icebreaker cruising through the ice for 1,000 kilometers (620 miles), leaving an ice-free wake of ten meters (33 feet), would open an area of water ten square kilometers (3.9 square miles) over the entire cruise. Although the Arctic Sea covers about 4,000 kilometers (2500 miles), any amount of ice breaking harms the environment. With the continual use of icebreaker ships, the Arctic will continue to look more like ice cubes melting in a glass of water.

Birds-eye shot of an icebreaker ship in the Arctic, with patches of cracked ice floating atop the sea.

The Arctic: melting ice cubes bobbing in a glass of water.

As melting endures, we will continue to see environmental effects around the world. Changes in the Arctic Sea ice pattern leads to a rise in sea levels globally. Low-lying developed areas in the Gulf Coast and the mid-Atlantic regions are especially at risk from sea-level rise. The recent growth of coastal areas has resulted in larger populations and more valuable coastal property being at risk from sea-level rise. Major physical impacts of a rise in sea level include erosion of beaches, inundation of deltas as well as flooding and loss of many marshes and wetlands. Increased salinity will likely become a problem in coastal aquifers and estuarine systems because of saltwater intrusion.

Changes in Arctic ice patterns are also leading to more frequent extreme weather. In the past few years, such extreme weather has been seen particularly across the east coast of the USA, western Europe, and central Asia. These regions will continue to experience more extreme weather because of Arctic amplification, the enhanced sensitivity of high latitudes to global heating. Arctic ice melt has also been shown to distort the flow of and weaken the jet stream, resulting in more frequent periods of intense heat and ferocious cold.

There’s also evidence that the sound emitted from icebreakers is detrimental to marine animals, particularly whales and other large mammals. The sound interferes with their ability to communicate with their pods. Additionally, sound pollution likely has long-term effects that are difficult to predict.

Most of the Russian icebreaker fleet is nuclear-based due to the fuel costs of running an icebreaker. On average, an icebreaker working in regions with three-meter-thick ice uses more than 100 tons of fuel per day. However, nuclear icebreakers have obvious concerns as well. In fact, should an accident occur, the consequence would be as severe as the Chernobyl disaster and the Deepwater Horizon oil spill combined: devastating.

What Should Be Done?


Russian nuclear-powered icebreakers save on fuel costs, but flirt with disaster. (CC BY-NC-SA 2.0, GRIDArendal)

There is indeed much more research in support of the use of icebreakers than documented concern for the ships’ environmental impacts. Beneath the bias of growth, it’s clear that icebreakers are largely detrimental. By continuing to add more icebreakers into the Arctic and simultaneously ignoring the environmental consequences, we are making yet another mistake that could be avoided.

The best way to limit the use of icebreakers is by having Arctic nations sign a treaty. One of the main reasons for such large numbers of icebreakers is competition amongst the nations for control over the Arctic. This can be addressed in a treaty eliminating or significantly reducing the use of icebreakers. We’ve seen successful use of treaties in the Arctic through the Search and Rescue Agreement, so there’s no reason to suggest another one can’t be instated.

A potential treaty could manifest in many ways. One option is to divide the Arctic Sea into zones and designate certain zones as “no break zones,” where icebreaking would be illegal. This would allow nations to continue using icebreakers to a lesser extent while the international community monitors the environmental effects. With this option, zones could shift and change depending on weather and ice patterns.

An alternative could be a plan to phase out icebreaker ships over many years. This would allow nations to find other ways to accomplish important tasks that icebreakers achieve in the Arctic, such as search and rescue missions and scientific research.

However, before an anti-icebreaker treaty can be successful, there needs to be an international agreement on environmental protection in the Arctic. A common goal amongst Arctic nations must be concern for the environment, or we risk edging closer to a world in which the Arctic Sea looks like the Atlantic Ocean. Arctic nations must understand the impending doom that comes with breaking and melting Arctic ice. Once these nations take responsibility for protecting the Arctic environment, then an anti-icebreaker treaty can be developed and signed, and we can take one crucial step towards protecting the Arctic.

portrait of Johanna Cohn, environmental studies intern during spring 2022 at CASSE.Johanna Cohn is a spring 2022 environmental studies intern at CASSE, and a junior at American University majoring in environmental studies and political science.

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The Trophic Theory of Money, with Apologies to Peter Victor

Published by Anonymous (not verified) on Fri, 08/04/2022 - 4:22am in
by Brian Czech

In my critical review of Peter Victor’s biography, Herman Daly’s Economics for a Full World, I focused on two major and several lesser weaknesses of the book. The two major weaknesses, in my opinion, are the confusion over GDP as an indicator of environmental impact, and the absence of CASSE in a book that, in many ways, CASSE helped make possible or at least more marketable. These two weaknesses turn out to be interrelated, as I’ll explain.

Portrait of Peter Victor

Peter Victor. (CCA)

But first, I must extend a sincere apology to Peter Victor. While I was left incredulous over the omission of CASSE, I overstepped the bounds of civility by speculating on a “fishy smell emanating from this biographic smorgasbord…[that] might emanate from a funding source, a competitive urge, a legacy-building strategy, or just a mere personal problem.” While I found myself fishing for reasons for the shocking omission of CASSE, it was irresponsible to invoke fish of such foul lineage. I ended up catching nothing for the effort but a bad case of flak. More importantly, the fishing expedition impugned Peter Victor’s character, and I regret doing that.

While “funding sources, competitive urges,” etc. do cause issues in the halls of academia, I have little reason to believe that such factors tainted the biography, especially after discussing the matter at some length with Victor. Rather, I have to acknowledge his explanation that he simply overlooked CASSE’s role in advancing and defending the work of Herman Daly. He knows the omission of CASSE was a mistake, lessening the quality of the biography and effectively damaging the reputation of CASSE. It happens to be an ironic mistake, to the extent that the biography was intended to advance the ideas of Herman Daly, particularly the steady state economy.

Steady State Economics: Bigger than Any Author

The phrase and concept of “steady state economy” is associated first and foremost with Herman Daly. I believe it always will be, and should be. What Adam Smith was to classical economics, or Alfred Marshall to neoclassical economics, Daly will be to steady-state economics. I, for one, will continue singing the praises of Daly, as I did in my chapter (“May There Be Dalyists”) of the Herman Daly festschrift.

It would be a grave mistake, however, to think everything written by Daly comprises the whole of steady-state economics, or that steady-state economics redounds exclusively to the writings of Daly. If such were the case, we could hardly expect the field to grow, much less flourish into a body of ever-evolving literature replete with timely political and policy relevance. What we need is not only Beyond Growth in the libraries, but “Beyond Daly” in the curriculum, politics, and policy. We need a supra-Dalyist steady-state economics that makes sense to all with an open mind and a sufficient conceptual toolkit.

In some ways, the world has passed us by in this endeavor (“us” referring to steady staters, starting with Daly). The linguistically efficient and rhetorically powerful “degrowth” has seemingly eclipsed “steady state economy” in the hearts and minds of sustainability-minded reformers. The eclipse has its technical merits; we need degrowth in the wealthy countries before a steady state economy can be sustainably settled into.

An image of binary planets coming into focus.

Degrowth and steady-state economics: binary planets coming into focus. (CC BY 4.0, International Gemini Observatory)

It needn’t be a total eclipse of the steady-state sun, however. A more virtuous metaphor would be that of binary planets, with degrowth and steady-state economics revolving around the existential gravity of limits to growth. The unifying slogan, then, would be “degrowth toward a steady state economy.”

Unfortunately, many European degrowthers seem to have developed something approaching disdain for the Dalyist vision of steady-state economics. They’ve thrown shade, exacerbating the eclipsing effect of the political Degrowth movement instead of brightening it with complementary steady statesmanship.

No doubt the aversive attitude is unwarranted—misplaced and unjust—and the perpetrators have been misleading with their portrayals of Daly. They’ve attempted to frame Daly as some apologist for capitalism, simply because he has recognized the market as a reasonable mechanism for the allocation of (rival and excludable) goods.

I learned a lesson with my ill-advised speculation over the possible motives of Peter Victor, so I’ll stop short of impugning the integrity or motives of the Daly critics in Europe. Perhaps in their idealistic zeal for social justice and economic reform, they spoke and wrote (in some of their cases) a bit too soon. It’s easy to empathize with that. That said, the Dalyist tradition of steady-state economics can’t be digested from a handful of tweets or a handful of papers. I’m not even sure it can be digested from a handful of years, unless those years are spent in focused steady-state economics, as in a graduate degree program uncensored by neoclassical faculty.

Cover of ecological economics second edition by herman daly and joshua farley.

Top choice for the Dalyist vision of steady-state economics. (Island Press)

The single best way to get started on a Dalyist education in steady-state economics is to carefully read Ecological Economics: Principles and Applications. It’s readily digestible by reasonably intelligent readers, including those without an economics background. It is a textbook, though, and if you can’t find the time, Beyond Growth is still a good bet. If you can’t squeeze that in, at least get the flavor of Daly’s writing and his thoughts on some of the biggest issues with Best of The Daly News: Selected Essays from the Leading Blog in Steady State Economics, 2010-2018. (The latter was the first book off the Steady State Press, CASSE’s imprint and a source for Dalyist and supra-Dalyist literature, hopefully for decades to come.) If you prefer listening to reading, you can hear what Daly thinks in his own words, on The Steady Stater podcast, about markets, capitalism, degrowth and the like. Getting it from the horse’s mouth is always preferable to secondhand accounts.

While it is important to clarify and defend the real Herman Daly—as CASSE has time and time again—the point remains that steady-state economics is not just Daly. Furthermore, while many of us (myself included) view Daly as an intellectual hero, hero worship is not a strategy for policy reform. Conceptually and politically, we need a supra-Dalyist program in steady-state economics, a program embracing the slogan “degrowth toward a steady state economy” as well as other contributions.

A Tragedy of the Uncommon

Just because steady-state economics should encompass more than Daly’s writings doesn’t mean much ground has yet been covered. Some of the usual suspects (for example, Phillip Lawn and Dan O’Neill) have provided perspectives and analyses clearly classifiable as steady-state economics. The contributions of European Degrowth Movement principals such as Giorgos Kallis and Timothée Parrique also ought to be considered so, even if they’ve largely eschewed the linguistics of “steady state economy.” As with any taxonomy, there are more ways than one of categorizing the literature and policy efforts of those addressing limits to growth. Parrique demonstrates this profusely in his Ph.D. dissertation, The Political Economy of Degrowth.

Peter Victor notes in Daly’s Economics some examples of scholarship that complement the steady-state writings of Daly. Unfortunately, given his overlooking of CASSE, he seems to also overlook certain CASSE activities and findings; quite a few of them, in my opinion. One of the most unfortunate results is that Victor leaves readers hanging about the relationship between GDP and environmental impact. This undermines the entire program of steady-state economics.

If we—steady staters, degrowthers, post-growthers at large—don’t recognize GDP as a reliable indicator of environmental impact, what separates us from the neoclassical economists we criticize? Sure, we might identify more negative externalities than they do. We might not buy into the “rising tide lifts all boats” metaphor. We might talk about the economy as a subset of the ecosystem. Yet, on the one crucial subject of how to manage GDP, the mother of all economic indicators, we find ourselves in the same conceptual and political place as the neoclassical growth economist! Our message becomes, without much twisting, “Don’t worry about GDP. We can figure out how to grow GDP while we protect the environment.”

Daly, Victor, and others have hedged their bets—our bets to the degree they would represent the field of steady-state economics—with the clever repartee, “OK, neoclassical policy maker, you think you can grow GDP without impacting the environment? Then let’s protect the environment, and you can grow the GDP all you want.” It’s a bit like the American Cancer Society attempting to rebuke the Seven Dwarves by telling the 103rd Congress, “OK, you think smoking isn’t cancerous? Then let’s protect against cancer, and you can allow all the smoking you want.”

As found in the context of Daly’s body of work, the “go for it” approach to GDP always seemed tongue in cheek, saving it from condemnation as a non sequitur per se, but it’s also been as useful as a rhino horn on a baby buggy. Furthermore, based on Victor’s assessment, there is little indeed in the writings of Daly to definitively establish the fact that GDP cannot be reconciled with environmental protection.

But there is in the supra-Dalyist steady-state literature, because that’s where we find the trophic theory of money (TTOM).

The Trophic Theory of Money and CASSE

I was shocked to hear, in the wake of my review of Daly’s Economics, the opinion of a colleague who thought the trophic theory of money “has not been a part of CASSE.” Aside from the irrelevance of such an opinion to the validity of the TTOM, any rumors of the apartness of the TTOM from CASSE would be greatly exaggerated. As the author of the TTOM and the founder of CASSE, presumably I should know!

One approach to the rumor would be to ignore it, but the rumoring colleague happens to be a significant presence in steady-state economics, so I take the rumor to be of some import. If it mattered to this colleague, I’m guessing it’s more relevant (albeit not to the validity of the TTOM) than I’d have guessed. So let’s take a trip down memory lane.

Screenshot of Google searchfor Seneca Sawmills

Seneca Sawmill scenes: generating money from the trophic base, perhaps unsustainably. (Notice the prominence of manufactured capital and lack of forest.)

The story of CASSE is largely a story of the trophic theory of money, the roots of which were set on the San Carlos Apache Reservation (east-central Arizona) in 1992. I tell the story in Supply Shock, how we (San Carlos Recreation and Wildlife Department) negotiated the sale of three elk tags for $43,000 apiece; a sale made possible because the reservation was known for the biggest elk antlers in the world. Two of the tags were purchased by the late Aaron Jones, who developed and owned Seneca Sawmill, one of the largest old-growth sawmills in the Pacific Northwest at the time. Two tags, in other words, fetched the tribe $86,000, unheard of even in the world of extreme trophy hunting.

For the current purposes, though, the take-home message isn’t that elk were “generating” money for the San Carlos Apache Tribe. Rather, it was the liquidation of old-growth stands of Douglas fir, western redcedar, and Sitka spruce that generated the money for Aaron Jones, who flew down to the reservation in a Learjet piloted by “the other John Glenn,” Seneca Sawmill’s chief pilot. I guided Jones for part of his hunt, and the whole spectacle made an impression I’d never forget. None of it was more instructional, though, than the origin of all that money.

It struck me as an ecologist that the money originated at the trophic base of an ecosystem; namely the coastal forest of the Pacific Northwest. Ecologically, we were robbing Peter (not to be confused with Peter Victor) to pay Paul, a conundrum I discussed at length with John Stevens, a San Carlos Recreation and Wildlife commissioner who, as one of the most successful peridot miners in the USA and a member of the San Carlos Cattle Association, was continually active at the trophic base of the San Carlos economy. With the revenue from the elk tags, we bought out a cattle association grazing lease on the reservation, fencing out the cattle and devoting 6,200 acres to elk production, but only at the expense of Oregonian old-growth forest, spotted owls, marbled murrelets, etc. This observation—centered on trophic principles from ecology—helped lead me to the study of ecological economics (and my “discovery” of Herman Daly) during the latter stages of my Ph.D. research later that decade.

The trophic theory of money starts taking shape in Shoveling Fuel for a Runaway Train, a postdoctoral project of mine that was published by the University of California Press in 2000, shortly after I signed on as conservation biologist at the U.S. Fish and Wildlife Service headquarters in Arlington, Virginia. In 2001 I received my first gag order, prohibiting me from speaking about the conflict between economic growth and biodiversity conservation, including the trophic origins of money (which so clearly illuminate the conflict).

Pyramid illustrating the trophic structure of the economy.

Trophic structure of the human economy.

In 2003, frustrated by the gag order, I established CASSE, which allowed me to take leave from the government and wear a different professional hat at conferences, colleges, and universities. I was intent on touting the steady state economy and the name of Herman Daly, along with the nascent trophic theory of money. I drafted the CASSE position on economic growth (which was vetted by Daly and others) and began an aggressive campaign of signature gathering along with soliciting parallel positions by professional, scientific conservation societies such as The Wildlife Society, American Fisheries Society, Society for Conservation Biology, etc. The strategy was published in Bioscience.

Although the linguistic and conceptual progression from the “trophic structure of the human economy” (with the focus on the real sector) to the “trophic origins of money” (moving into the monetary sector) to the “trophic theory of money” (with the focus on GDP and money supplies as indicators of environmental impact) isn’t neatly demarcated, by 2009 CASSE featured an online briefing statement called “The Trophic Theory of the Economy,” and by early 2010 I published the first Daly News article on the “trophic theory of money” per se.

Since then, the TTOM has been a fixture at CASSE, in CASSE research projects, and in CASSE communications including presentations, books, the Daly News, Steady State Herald, The Steady Stater podcast, and social media, including YouTube. It’s as much a part of CASSE as the laws of thermodynamics or the concept of throughput. In fact, it builds upon said laws and concept, adding value such that a clear linkage between GDP growth and the growing ecological footprint can be clearly envisioned and diagrammed.

One critic has suggested that the TTOM, while correct, applies only to the evolutionary roots of money, but is irrelevant for thinking about modern monetary policy. My response is to invoke recapitulation theory from evolutionary ecology, summarized succinctly with the phrase “ontogeny recapitulates phylogeny.” Just as the development of a fetus in a placental mammal roughly mirrors an evolutionary pathway from a single-celled organism to the full-blown species, so does the trophic origin of money (that is, agricultural and extractive surplus) “authorize” the existence of real (meaning adjusted for inflation) money today. It’s not a perfect analogy, but metaphorically we might say, “Monetary ontogeny recapitulates monetary phylogeny.” The biggest difference is that recapitulation theory is shaky; not so with the TTOM.

You can judge for yourself, but I’ll conclude with a story—a lesson in epistemology no less—and challenge you to put yourself therein. You’re seated in a packed symposium on economic growth and fish conservation at the 2005 conference of the American Fisheries Society (AFS) in Anchorage, Alaska. A position on economic growth (modeled after the CASSE position) is being proposed for adoption by AFS. The speaker presents the position in a very deliberate manner, with one slide devoted to each of the 16 clauses. After each slide, he asks the audience if there is any disagreement. No disagreement adheres to the seven “whereas” clauses, so the presenter continues with the nine “therefore” clauses, including the “fundamental conflict between economic growth and fish conservation” clause. Again, no disagreement.

Next, in the discussion about AFS adopting the position—not a single clause of which has been disagreed with—three neoclassical economists complain vociferously that there must be something wrong, because there is no conflict between economic growth and fish conservation! You put on your psychotherapist hat and ponder the particular form of cognitive dissonance so bluntly displayed. End of story.

Now it’s true that a collection of phenomena can sometimes produce emergent properties; that is, subsequent, more sweeping phenomena that aren’t necessarily indicated by the “sum” of the lesser phenomena. Usually, though, any mystery is solved by the addition of lesser phenomena left out of the original collection. Wisdom might just boil down to parsimonious collecting of the relevant facts, as opposed to sophistic parceling of epicycles and equants designed to support a predetermined conclusion.

I’ll conclude with a challenge: Study the trophic theory of money as laid out most recently and see if you can find an invalid assumption or an unsound conclusion. If so, is it a fatal flaw, or something to be corrected conceptually? What is in most need of empirical corroboration? Does the TTOM supersede or counter any existing theories or concepts?

If the theory is sound, as I’ve diligently concluded, then we’re onto something. We have a contribution to a supra-Dalyist steady-state economics, one that gets us past the “Seven Dwarves Hump” of public policy futility. We can go straight to the policy table and call not only for “stabilizing throughput” (which might get us a wink and a prayer), but for stabilizing GDP itself, which will get us closer to stabilizing throughput than we’ve been in centuries.

That’s the mother lode of steady statesmanship.

Brian Czech, Executive Director of CASSEBrian Czech is the executive director of CASSE.

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Houston, We Have a Credit Problem

by Neil Tracey

In 2021, China had around 30 million homes sitting vacant for extended periods. There’s enough unused housing in China to house around 80 million people, roughly the population of Germany. This isn’t “slack” in the market; there is little hope that these homes will someday find an occupant. These homes are bound to remain empty.

Pile of credit cards

Our growth-obsessed economy requires credit to “succeed,” leaving millions in debt in a bloated economy. (CC BY 2.0, Sean MacEntee)

Indeed, most of these homes are simply held as financial assets; people who already own one home buy another and hang on to it, expecting it to appreciate. Even more peculiarly, Chinese property developers continue to build more homes. The absurdity of this market made headlines late last year with the story of Evergrande, a Chinese property developer that had accumulated over $350 billion in debt, then defaulted on large sums. Now, months after Evergrande first threatened to default, it has slipped from the headlines. However, it’s worth revisiting the story of Evergrande to understand just how it came to be. Why was a developer building more homes in a country that already had available housing for another 80 million people?

The answer lies in credit. Credit is driven by, and in turn reinforces, expectations for the future. By driving expectations for the future, credit steals democratic control over the future from citizens and gives it to market forces. We’ll explore this issue by looking at Houston, Texas and how the credit market drove its growth. Then we will address what credit may look like in a steady state economy and how steady-state economics may return control of their futures to citizens.

Extreme Growth and Houston: The “Limitless City”

Visiting Houston, one thing stands out: it’s a BIG city. With a population of over 5 million and a metropolitan area of over 9,000 square miles, Houston is the only American city without formal zoning restrictions. In his book, Ages of American Capitalism, Jonathan Levy explains that Houston is culturally, economically, and geographically defined by its cycle of credit-driven growth.

In Houston, there was an expectation that the city would expand. This expectation was the result of fomenting hysteria over oil, housing expansion, and pop culture. In their 1981 song Houston is Hot Tonight,  Iggy Pop sings, “Bright lights, Houston is hot tonight / Arabian sheiks and money, up in the sky / Now I don’t mind, a bloodbath / When I’ve got oil on my breath.” Combining exotifying imagery, money, and oil, Iggy Pop captures the overwhelming expectation of growth that seized Houston. This expectation of growth led to the expansion of cheap credit that let Houston expand so rapidly that its edges became undefinable. Urban geographers, trying to understand the limits of Houston, had to come up with a whole new set of terminology. Houston was a “multi-node city,” an “edge city,” an “edgeless city,” and a “boundless city.” Indeed, the only thing that seemed certain was that Houston was growing, and wouldn’t stop.

NASA satellite image of Houston, Texas lit up at night

Houston is certainly “hot tonight,” and getting hotter. (CC BY-NC 2.0, NASA’s Marshall Space Flight Center)

Houston’s role as a “limitless city” was due to credit. Credit is money or goods extended by a creditor to a recipient based on the understanding that the recipient will pay it back in the future, plus interest. Therefore, credit is a bet on the future ability of the recipient to pay back the money they borrow, and then some.

For this article, we’ll limit our discussion of credit to credit extended by a private creditor; in practice, that may be an individual, bank, or company seeking to make a profit (as opposed to a government agency advancing a social objective). Given this definition of credit, we can see how it may create a cycle of growth. Creditors decide to whom they should give credit based on who is likeliest to repay in the future. Creditors look to companies and individuals with historically high growth rates as a determining factor. In turn, having access to credit enables recipients to grow. A cyclical relationship between credit and growth ensues, whereby credit leads to growth, which leads to more credit, which leads to more growth, and so on.

This model of credit-driven growth can be seen in Houston, where growth expectations attracted the market for credit, since the promise of growth suggested that future property prices would increase. Thus, the expectation of growth meant that Houston applicants were perceived as “good bets” for repayment. This enabled the credit-fueled expansion of Houston as a business. At the same time, Houston’s expansion fueled the expectation that it would continue to expand. This expectation, then, fueled its expansion. Thus, the self-reinforcing mechanism of credit and growth expectations persisted.

At some point, this cycle of growth confronts the physical constraints of the natural world. After Hurricane Harvey dumped 51 inches of rain on Houston in 2017, the New York Times published: “A Storm Forces Houston, the Limitless City, to Consider Its Limits.” Since the flood, Houston has made little progress in considering those limits. Houston appointed a “flood czar” who wants to increase Houston’s green spaces to help absorb flood waters, but there’s no movement to limit the city’s growth. Only two years after Hurricane Harvey, the Houston City Council recklessly approved the development of a 100-year floodplain into condominiums.

Possibilities for Credit in a Steady State Economy

Due to this self-reinforcing cycle, the credit market is incompatible with a steady state economy. Ideas for how to reform this cycle come from a rather surprising source: John Maynard Keynes. Far from a steady stater, Keynes was famous for pitching the “propensity to consume” as well as government policies designed for growth. However, towards the end of his General Theory of Employment, Interest, and Money, Keynes presents some rather unique thoughts on the role of credit.

One idea for reform comes from the price regulation of credit. The price of credit (that is, the real interest rate) could be regulated to avoid unsustainable growth. The Federal Reserve already uses its power to set interest rates, and has long prioritized low rates to stimulate growth. However, the Fed could use a more nuanced approach to setting particular interest rates for loans in specific markets. There are certain areas of the economy that need credit to launch, such as the renewable energy sector. The Fed, with a little urging from Congress and the president, could set low interest rates for these sectors, essentially subsidizing them via differential interest rate. Outside of these sectors, the Fed would set higher interest rates to lessen the rate of growth in other sectors, and of GDP at large.

As a macroeconomic actor, the Fed wouldn’t be keen on dabbling with sectoral distinctions. If necessary, Congress could pass a bill to establish differential interest rates, if not directly via the Fed, then indirectly via fiscal policy such as credit supplements or taxes. Presumably such a law would have a sunset clause or be revisited and readjusted annually, as with an appropriations bill.

A related option is for credit to be socialized and overseen by a government agency. (While the quasi-governmental Fed exerts control over interest rates, most actual credit is extended through private banks.) Credit would be fully controlled, in other words, by democratic institutions.

Socializing credit would enable the government to marry its fiscal and monetary policies, extending credit to essential industries and limiting credit for increasingly outdated or harmful ones. However, for this proposal to work, the federal government would have to concurrently abolish the private credit system and limit access to foreign credit.

Portrait of Neil Tracey, CASSE's economic policy intern Spring 2022Neil Tracey is a junior at Georgetown University and an economic policy intern at CASSE.

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A Perfect Storm for Inflation: COVID, Loose Money, and Putin

by Brian Czech

The current bout of inflation should be no surprise to steady staters. We have national and global ecosystems pushed to the limits by population and economic growth. At the same time, we have monetary authorities and heads of state—neoclassically oblivious to limits—eager to stimulate the economy with loose money. It’s a recipe for inflation.

Gift of inflation.

A simple warning issued in March 2020: full tweet here.

We tweeted all the way back in March 2020 that inflation was coming. If it wasn’t already in the works from COVID-caused supply shocks, President Trump’s fiscal stimulus (CARES Act) put it there. President Biden’s American Rescue Plan came a year later (and one year ago today). These fiscal policies were politically prudent and remedial for many, but they fanned the flames for inflation.

And now we have a two-pronged supply shock emanating from the steppes of Eastern Europe. Russian energy and Ukrainian grain (plus Ukrainian energy and Russian grain) are now sanctioned, restricted, and constricted. The Russian threat also puts even more pressure on NATO countries and Russia to let loose with yet another round of money.

All this creates a perfect storm for an episode of inflation that will be long-lasting and global. If the war in Ukraine spirals further out of control for a protracted period, this inflationary period could become one of the worst in world history. It’s time to take a 21st century look at the fundamentals of inflation, and plan for the storm ahead.

Inflation

Inflation is one of those confounding concepts—a bit like gravity—that is at once easy to understand and subjected to baffling analysis. Fortunately, a perfectly clear and memorable phrase can be used to grasp it: “too much money chasing too few goods.” As such, you tend to know it when you see it. If you’re old enough to buy a beer, you’ve already seen plenty of it.

Three animated dollar bills chasing a runaway shopping cart full of goods.

Too much money chasing too few goods.

Economists distinguish “demand-pull” inflation from “cost-push” inflation. These are two sides of the same coin (so to speak), but the phrase “demand-pull” connotes the “too much money” aspect of inflation, while “cost-push” connotes “too few goods.” Yes, the distinction has a chicken-and-egg aspect: Given either pull or push, inflation is hatched.

Given that “too much money” and “too few goods” are aggregate measures, inflation is a macroeconomic phenomenon, but sometimes sectoral price increases are conflated with inflation per se. If everyone suddenly wants a pet rock, the price increases, but that’s not inflation, demand-pull or otherwise. Similarly, if rocks become harder to find, the price increases, but that’s not inflation, cost-push or otherwise. Consumers can turn to cheaper pet sticks or pet ants, or simply eschew the pet sector entirely. Prices don’t go up across the board. The price of pet rocks is simply a microeconomic phenomenon reflecting the supply and demand thereof.

It makes little sense, then, to talk of inflation exclusively in terms of pet rocks, widgets, or even lumber. It would seem that the proper way to measure inflation would be with a relatively full basket of goods, monitoring the cumulative price over time. That is, in fact, what the Bureau of Labor Statistics (BLS) does with the Consumer Price Index (CPI).

The BLS doesn’t need to include every single good and service stemming from the thousands of industries identified in the North America Industry Classification System. You might, for example, leave out the pet rocks. Surely, however, you wouldn’t want to omit groceries and gas, would you?

Yet that is precisely what economists at the Federal Reserve do with the curious concept of “core inflation,” which accounts for the prices of most goods and services except food and energy. For ecological economists, “core” sounds like a misnomer when the most essential goods are omitted. The rationale of economists at the Fed is that food and energy prices are more volatile than those of other goods; the core should be more stable. A less volatile core measure is supposed to make things easier for forecasting and goal-setting purposes, but it’s hard not to suspect some kind of political fish lurking in the waters circa 2000, when the Fed adopted the concept.

The notion of a non-volatile inflation metric is a bit like thinking, “When we weigh the patient, let’s not include the fat in the midsection, because that area jiggles around more than the rest of the body.” If it’s not a political red herring, the notion of a foodless, energy-absent core measure of inflation is yet another example of the conventional economics profession overlooking the primacy of the agricultural and energy sectors at the trophic base of the economy.

When you think about inflation, do you think it wise to omit grocery bills and gas prices? I didn’t think so. Neither would moms, car drivers, or eaters. (Have I left anyone out?)

Century of Supply Shock

In this article, “supply shock” takes on two meanings. We have the typical meaning of a sudden and steep decline in the supply of a resource, such as an oil shock resulting from an embargo. Of immediate concern, though, is the absolutely macroeconomic scenario I wrote about in Supply Shock: Economic Growth at the Crossroads and the Steady State Solution. A suite of essential resources are dwindling rapidly, although unobserved and out of mind for most. Soils, groundwater, sawtimber, fisheries, various minerals, and conventional energy resources become ever scarcer as the global population grows and the stocks of these resources are eroded, compromised, or outright liquidated. We’re entering an era or a century of Supply Shock, corresponding with other labeled periods such as the Anthropocene and Sixth Great Extinction.

Some may argue that, by definition, the ongoing, background declines of natural resources are trends, not shocks. That would be a fair argument if we were talking about one resource, but supply curves across the board are moving inward, and faster by the decade. Soon enough, the cumulative effect will be stunning to generations accustomed to dealing piecemeal with temporary supply issues, such as an oil embargo here or a fishery collapse there.

Furthermore, economists and politicians are still living in a fantasyland, expecting new technologies to save the day. By the nature of their professions, they tend to be older folks who’ve seen many a 20th century problem overcome with new technology. Unfortunately, most of them seem to have little sense that the low-hanging technological and thermodynamic fruits have been picked, leaving the shelves barer and less accessible for this century. The impending wake-up call will be quite a surprise to them, as it will be for the media who cover them.

For the broader public then, which in turn gets its fuzzy understanding of economics from the mainstream media, the combination of widespread shortages and the limitations of technology will suddenly appear overwhelming. People (exceedingly few of whom read outlets such as the Herald) will be wondering, “Why weren’t we hearing about this in advance?” They’ll be shocked.

In other words, while the economy of nature is undergoing its Sixth Great Extinction, the human economy is entering the Century of Supply Shock. The money supply will be chasing fewer goods, and the stage will be consistently set for inflation, just waiting for feckless fiscal and monetary actors.

Fiscal Stimulus

Biden launching the American Rescue Plan.

President Biden touting the American Rescue Plan. (CC BY-NC-ND 3.0, Eric Haynes)

Thus far we’ve had three rounds of economic impact payments—aka “stimulus checks”—to buffer the majority of American citizens from the economic impacts of COVID. Direct payments totaling approximately $867 billion have been or will yet be made pursuant to the CARES Act (2020), the Consolidated Appropriations Act (2020), and the American Rescue Plan (2021). $456 billion is somewhat attributable to Trump (who signed the first two bills), and $411 billion to Biden (who signed the American Rescue Plan). The total is not far from a trillion dollars; roughly five percent of American GDP and well over one percent of global GDP.

Where did such a huge sum of money come from? While it’s a little more complicated than this, the money is mostly debt. The CARES Act, for example, was signed by Trump on March 27, 2020, well into the fiscal year, which itself was budgeted for long before COVID-19 was even identified. In other words, the money came out of thin air, much like COVID.

That means we instantly had an inflated money supply, by definition, chasing goods already becoming scarce in the age of Supply Shock. Demand-pull and cost-push forces were already at work, with the depths of the COVID pandemic yet to come. The subsequent two fiscal stimuli packages were more planned and better budgeted, but still “financed” largely by debt, conducive to further inflation.

COVID-Caused Recession

The COVID-caused recession brings us back to the “fewer goods” part of the inflation equation. While COVID-19 triggered an initial wave of positive demand shocks for such home-bound supplies as toilet paper, pasta, and paper towels, negative demand shocks slammed the hospitality, entertainment, and certain retail industries. (Imagine being an airline or a dentist during the depths of the pandemic.)


Sports and entertainment sectors took a heavy hit during the COVID pandemic.

More importantly, virtually all sectors were slowed by supply chain issues resulting from workplace shutdowns and an erosion of the labor force due to covid deaths, illness, and exposure avoidance. The ultimate avoidance tactic was retirement or resignation. Millions of workers—especially the very young and the retirement-eligible—learned they didn’t necessarily need to work. Not when they were receiving stimulus checks while saving the expenses of commuting and parking. The Great Resignation is “still in full swing,” too.

Only higher-income individuals and families weren’t eligible for stimulus checks. That means those who received the checks were fairly dependent upon them for essential goods and basic services; the checks weren’t deposited in savings accounts. The demand for such goods (most notably food) is price-inelastic, too, so the sudden glut of debt-based money was bound to settle into the prices at grocery stores, convenience stores, and pharmacies. That’s demand-pull inflation.

As if all that wasn’t enough, Russian President Vladimir Putin ordered the invasion of Ukraine on February 24, 2022, setting in motion supply shocks at the trophic base of the economy.

The Volatile Mix of Gas and Grain

The relevance of trophic levels in the structure of the economy is about to take center stage in the tragic play called Inflation 2022. Almost one-fourth of the world’s wheat and nearly a third of its barley comes (normally) from the grain belt stretching from western Ukraine through southwestern Russia. Ukraine alone provides about 16 percent of the world’s corn. Significant shares of rye, soybeans, potatoes, vegetable oils (most notably sunflower), and numerous other food staples emanate from this breadbasket of Europe.

Ukrainian agricultural production and transport will be severely challenged by the Russian invasion. The vast majority of wheat in this part of the world is winter wheat; planted in fall and harvested in summer. If the war remains hot into the summer, with most Ukrainian men—and many women as well—occupied with fighting, farming will suffer. Farmers are also facing shortages (high prices) of fertilizers and pesticides at a time when income flows and even basic financial operations will be difficult to maintain. Similar problems will be faced in all of the major Ukrainian agricultural operations. For what surplus might remain, export routes along the Black Sea are cut off.

In addition, Russian commodity exports have been banned, not only by receiving countries but, in retaliation, by Putin himself. That means grain from the USA and Canada, along with lesser grain belts in Mexico, Argentina, Chile, Brazil, China, India, Australia, Kazakhstan, and Turkey will be needed to feed the world. Wheat and corn prices are already skyrocketing, and supply shocks from the “chernozem” belt of Ukraine/Russia are reverberating into the price points for all cereal grains including rice.

Meanwhile, as steady staters know, money originates from the agricultural surplus that frees the hands for the division of labor unto all other sectors. That’s the trophic theory of money, which links the real (trophically structured) economy with the monetary sector in a manner that makes inflation easier to understand. The trophic theory of money implies that, if agricultural surplus declines, less real money is “authorized.” When the agricultural decline is sudden, as with a pronounced, cereal grain supply shock, the nominal money supply is just as suddenly inflated. And this is precisely the current situation.

In other words, no one should be wishfully thinking that inflation can be confined to the grocery store. All the money in the world—real money that is, adjusted for inflation—stems from agricultural surplus (or more generally, food surplus, which at this point in history is all about cereal grains). This underscores the truly macroeconomic aspect of inflation. It’s not only market forces that reallocate demand into different sectors, spreading price increases along the way. Rather, the money supply—same supply used for all goods and services—is inflated from the moment the agricultural surplus declines. If it takes a little longer for prices of some goods and services to increase, relative to others, the difference can be chalked up to the trophic procession of production from agro/extractive at the base to heavy manufacturing (and rough services) in the middle to light manufacturing (and refined services) at the higher levels. That’s why, in these early stages of the Russian invasion, commodity prices have increased faster than others.

Of course, one such commodity is energy; most notably crude oil and natural gas, supplies of which have also and suddenly been disrupted by the war. These are probably the most widely reported commodities for several important economic, environmental, and geopolitical reasons. I bring them up here primarily to highlight their linkage to agricultural production. Cereal grain production in the chernozem belt has become heavily mechanized, and the trend continues. As if all the other hurdles weren’t enough for Ukraine and Russian grain production and export, rapidly rising fuel prices add further to the cost-push inflationary pressures.

As global leaders, think tanks, and corporations analyze or plan for the future, they may want to pay close attention to the economic effects of the war in Ukraine. We’re learning a painful lesson about how disastrous things can become when we push beyond reason for growth. The planet can only produce so much food, oil, natural gas, and all the other resources. Yes, renewables are coming online for powering electricity grids, but the wheat combines of the Eurasian steppe don’t turn on a dime, and renewables may never cut it for the type of sheer horsepower needed for cultivating the chernozem of Eurasia, North America, or any other grain belt.

The money supply, on the other hand, can become inflated overnight, impacting the lives of billions of people in short order and with long-lasting consequences for families and businesses.

The warning signs are clear now, and they’re not all about the environment. The biggest, newest red flag on the planet is inflation, the dreaded tax-in-effect that hits everyone, everywhere. In the Century of Supply Shock, inflation will always be nipping at our heels, ready to run wild with any agricultural supply shock, ready to run loose with any feckless “stimulus,” fiscal or monetary. It’s yet another warning that we need a new approach: degrowth toward a steady state economy.

Brian Czech, Executive Director of CASSEBrian Czech is the executive director at CASSE.

The post A Perfect Storm for Inflation: COVID, Loose Money, and Putin appeared first on Center for the Advancement of the Steady State Economy.

Biden Administration May Shield Bank Linked To Russian Oligarchs

Published by Anonymous (not verified) on Wed, 02/03/2022 - 10:31pm in

Biden Administration May Shield Bank Linked To Russian Oligarchs

As Vladimir Putin’s war in Ukraine has sparked demands for a financial crackdown on dictators and their oligarch networks, the Biden administration is proposing to waive punishments for a scandal-ridden bank amid revelations that it had been providing resources to autocrats and their financial cronies — reportedly including Russian oligarchs that the Biden administration is promising to target.

The administration’s proposed waiver for the global investment bank Credit Suisse — whose donors delivered more than $100,000 to President Biden’s campaign — could shield a bank linked to those oligarchs as the war in Ukraine rages, after Biden last night used his State of the Union address to promise a crackdown.

“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets,” he declared. “We are coming for your ill-begotten gains.”

Lawmakers in the European Parliament are considering adding Switzerland’s financial sector to a dirty money blacklist in response to the new revelations about Credit Suisse.

Two Senate Democrats have asked the Biden administration to withdraw its waiver proposal. Whether or not the administration now heeds that call will test whether the Ukraine conflict is prompting a more antagonistic regulatory posture toward financial institutions that have enabled oligarchs from rogue nations.

A Scandal-Plagued Bank

At issue is a January proposal from Biden’s Labor Department to waive punishments against Credit Suisse for defrauding investors who financed a fishing project in Mozambique, which the bank pleaded guilty to last year, as well as for “knowingly and willfully” aiding wealthy clients in tax evasion for multiple decades through 2009.

In light of the convictions, the bank is required to obtain a waiver in order to retain an investment classification that allows it to continue managing — and profiting from — American workers’ retirement savings.

Since then, new reporting has alleged that Credit Suisse has aided criminals and financed the luxury assets of oligarchs, raising additional questions about the Biden administration’s proposal to let the bank off the hook.

One month after the Labor Department proposed such a waiver, the Financial Times reported that “Credit Suisse has securitised a portfolio of loans linked to its wealthiest customers’ yachts and private jets, in an unusual use of derivatives to offload risks associated with lending to ultra-rich oligarchs and entrepreneurs.”

The newspaper reported that the bank had reported losses on its yacht- and jet-related loans because of sanctions against Russian oligarchs. After a first round of sanctions in 2018, Credit Suisse declared its commitment to “remain highly committed to Russia,” and Reuters reported that it had been extending financing to two Putin-linked oligarchs. In recent days, many Russian oligarchs have continued to roam free on yachts and jets, escaping American authorities and moving towards countries that don’t have extradition agreements with the U.S.

On March 1, as the U.S. and E.U. were rolling out new sanctions on Russian oligarchs, the Financial Times reported that Credit Suisse had told investors to “destroy documents relating to its richest clients’ yachts and private jets, in an attempt to stop information leaking about a unit of the bank that has made loans to oligarchs who were later sanctioned.”

Meanwhile, in late February, a leak of the account information of more than 18,000 Credit Suisse clients revealed that the bank had been managing money for “clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes,” according to reporting by The Guardian.

“Credit Suisse’s misconduct prosecuted over the years should have disqualified it from pension and investment management privileges supposedly reserved only for good actors,” said Bartlett Naylor of the watchdog group Public Citizen, which criticized the bank’s first waiver in 2015. “Now, details of its rogues list of tax evaders sharpens the case.”

Credit Suisse declined The Daily Poster’s request for comment.

In response to the most recent leaks, the bank has denied any wrongdoing. After Russia invaded Ukraine, Credit Suisse also announced that it will stop accepting some Russian bonds as collateral for debt, and will stop financing commodities trades involving Russia.

Previously Let Off The Hook

When Credit Suisse pleaded guilty to fraud last year, it risked losing its status as a Qualified Professional Asset Manager (QPAM), a required classification for banks to manage — and profit from — the lucrative retirement fund industry.

When QPAM was originally created 40 years ago, lawmakers included a major stipulation for banks seeking the designation: They must avoid felony convictions.

While that isn’t an especially high bar, Credit Suisse has struggled to meet it.

In 2014, when the Justice Department found that Credit Suisse had aided its clients in dodging tax enforcement, by falsifying documents for them or helping them hide assets in offshore accounts, Credit Suisse found itself on the verge of losing its QPAM status.

But the Obama Labor Department let the bank off the hook. Despite protests from financial watchdogs and lawmakers, including Rep. Maxine Waters (D-Calif.), the Obama administration granted Credit Suisse a waiver, allowing the bank to retain its QPAM status.

Credit Suisse wasn’t the only bank to receive such a waiver from the Obama administration. Under Labor Secretary Tom Perez, many major banks received such waivers.

In December 2016, a group of lawmakers sent a letter to Perez asking for a hearing on “recent proposals to let five megabanks with a history of criminal misconduct to continue managing assets of U.S. pension funds.” The letter noted that in 2015, the department had granted waivers to four of those banks without convening a public hearing.

After Perez issued the original waiver for Credit Suisse and then became chairman of the Democratic National Committee, the bank’s donors delivered more than $1 million worth of donations to Democratic politicians and groups. Perez is now running for Maryland governor, and has vacuumed in more than $200,000 of campaign donations from the financial sector, according to data compiled by the National Institute for Money in Politics.

The Labor Department under Obama did deny a handful of requested waivers, but those denials were the exception rather than the rule. Between 1997 and 2014, the department granted waivers to all 23 firms that sought them, according to reporting from Pensions and Investments.

Tip Jar

“You Have The Opportunity To Send A Clear Message”

Now, a familiar battle is playing out — but the focus on oligarchs during Russia’s invasion and the recent revelations about Credit Suisse’s business practices have raised the stakes. In effect, Biden must now choose between his tough-on-oligarchs Ukraine policy and his Wall Street donors.

According to data from OpenSecrets, Credit Suisse employees gave more than $117,000 to Biden’s 2020 campaign, and employees of the law firm representing Credit Suisse, Steptoe and Johnson, contributed nearly $140,000 to Biden in the 2020 cycle.

Credit Suisse was already operating under a QPAM waiver for its 2014 tax crimes when it pleaded guilty to fraud in the Mozambique case. In the newer case, the bank arranged loans for the Mozambique government to invest in a new tuna fishery. Law enforcement officials said a contractor spent a substantial portion of the money on kickbacks, including to Credit Suisse bankers to secure better deals on the loans, and bribes to government officials. The bank was charged with defrauding the investors who had financed the loans, and pled guilty.

Both the 2014 and 2021 convictions are being considered for the current waiver, since both occurred in the past decade — the time frame in which QPAM institutions cannot commit felonies.

Last month, Sens. Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) sent a letter demanding the Biden administration rescind its QPAM waiver proposal for Credit Suisse.

“The Department of Labor exists to protect American workers and their retirement savings from greed, corruption, and mismanagement. Exempting corporations from consequences for misconduct and allowing Wall Street’s most powerful bad actors to continue business as usual flies in the face of that obligation to the public,” they wrote. “You have the opportunity to send a clear message that the federal government holds corporate criminals accountable for their misdeeds rather than shower them with special regulatory favors. We ask that you review and rescind this proposal.”

For its part, Credit Suisse has argued that the parts of the bank found to be involved in fraud and conspiracy are separate from those managing worker retirement funds — and that regulators should not punish one part of the bank for the crimes of another part of the bank.

"The granting of the exemption should not depend upon public allegations of wrongdoing, regardless of where in the world it occurred, including outside the separate asset management division and not involving the CS Affiliated QPAMs,” the bank’s lawyers wrote in its comment on the proposed waiver.

The 1982 QPAM rule explicitly stated that regulators are supposed to judge the criminal record of an entire financial institution and its affiliates.

“A QPAM, and those who may be in a position to influence its policies, are expected to maintain a high standard of integrity,” the Labor Department’s original rule states. “Accordingly, the proposed exemption does not cover transactions if the QPAM or various ‘affiliates’ have been convicted of various crimes that involve abuse or misuse of a position of trust.”

Echoing the same argument it made back in 2015, Credit Suisse has also insisted that punishing the bank right now could harm retirees.

“The decision to propose an exemption granting relief will avoid significant harm to plan clients,” the comment letter said, adding: “An adverse decision on the exemption is seen as the Department’s vote of no confidence in a manager, and thus effectively denies plans their preferred manager, which in itself is harmful to plans.”

That rationale echoes the financial crisis-era notion that punishing banks should be avoided because it can cause “collateral consequences” — and it has become a rationale for many banks seeking aa QPAM exemption. Indeed, in a recent case in which the Labor Department granted a QPAM exemption to Goldman Sachs, the department told Warren and Smith that the bank insisted it should receive the waiver “because it was concerned that harm may arise to American workers” if it was denied.

In their letter to the Biden administration, Warren and Smith noted that if it is indeed true that these financial institutions are “too big to fail,” then “the agency must develop rules that mitigate these types of risks for workers if their QPAM is involved in illegal activity, not simply repeatedly refuse to enforce the law against large financial institutions that continually break financial laws.”

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