John Key has poured cold water on the APEC meeting’s joint statement, which expressed confidence that “we can overcome this crisis in a period of 18 months.” He was correct to do so, although he probably doesn’t arrive at that conclusion by the same path I do.
The fundamentals of the global economy are not sound. There is simply too much debt leveraged against highly inflated assets and the corrections continue. With 71% of the US economy driven by consumer spending, the current collapse in US consumer spending has yet to bite, as this assessment shows. While I don’t believe that the global economy is quite as dependent on the US economy as it used to be, globalisation means that no country is an island, including our own.
With the bubble well and truly burst, the inflationary pressures we have all felt are relaxing, particularly as essential commodity prices fall. However, despite their fall, many essential commodities are still at historically high prices, which will slow any recovery. Fears for job security mean that many folk are putting their cash against their debt rather than spending. I don’t think that John Key would have any problem with anything that I have said so far, but here is where we diverge.
While Key wants to stimulate us back onto an exponential growth path, pretending to balance environmental concerns with economic concerns, he fails to seee the true relationship between the environment and the economy. You cannot ‘balance’ two things when one is a subset of the other. As Jeanette loves to say, the economy is a wholly owned subsidiary of the environement. What is bad for the parent company is bad for the subsidiary, and vice versa. To pretend to play them one off against the other is a false dichotomy.
The global environment is in freefall. This is mirrored in the global economy. In both instances we are living beyond our means, spending our capital frivilously instead of living on the interest only. Is the estimated rate of species extinctions (3 per hour) mirrored in failed businesses/livelhoods? Probably. Does the estimated rate of language extinctions (3 per month) mirror the loss of diversity in industrial design and architecture? Probably.
Does the annual loss of forest around the globe, estimated at between $2 and $5 trillion, dwarf or at least mirror the losses we have witnessed on Wall Street recently? It certainly does.
John Key can probably feel it in his bones. We are not going to bounce back from this economic turmoil the way we have in the past. This is not to say that we cannot recover and that all is lost. On the contrary. If we simply acknowledge that we are living beyond our means and that the planet and our children are paying the price, we will very quickly make the corrections required to sort this mess out. Unfortunately, where Key wants to lead us is down the same well-worn path that got us into this mess in the first place.
Only a green revolution can turn the fortunes of both the planet and the economy around. We already have all the technology, capital and other resources that we need. All we are lacking is the will and the leadership. I hope we come up with these two ingredients soon.