Is our civilization about to collapse? Not yet.

“Not yet.”    This concept applies in first aid and it would be prudent to apply it when evaluating the numerous threats currently facing our civilization.

This may have been the most important concept I  learned when I took an industrial first aid course some years ago. The course was focused on an examination and the instructor repeatedly told us, if the examiner asks if a seriously injured  patient requires immediate transport to hospital the appropriate answer could be “not yet.”    This recognizes that the patient’s condition could deteriorate and requires constant monitoring.

We know from experience that when people have been injured they sometimes die and first aid people know that some of their patients need to arrive at a hospital within an hour.  When dealing with civilizations this is not quite so obvious unless one looks at history over several millenia.

There are numerous threats to our civilization including overpopulation, climate warming, agricultural collapse, resource depletion, nuclear war or an electromagnetic pulse from the sun which could fry all computer chips

Some people take these threats seriously and others dismiss them.  A favorite argument is that predictions have not come true therefore they are invalid.   For example, look at this put down of  Paul Ehrlich for his overpopulation prediction.  Just because a prediction doesn’t come true in a time frame does not mean it is invalid.  Sometimes predictions do not take everything into account.  For example higher prices for resources increase the supply of those resources as more difficult deposits become available.  One needs to monitor the continuing supply of resources and the consequences of the higher prices.

Sometimes people have difficulty with things they don’t want to hear and one’s hearing may depend upon the color of hat one is wearing.  A person with a good job that appears secure may find it more difficult to accept negative predictions than a person who is without a job and in danger of becoming homeless.

Through the millenia all previous civilizations have collapsed.  Is our’s going to be the first to survive forever?  Perhaps ignorance is bliss and we should ignore the warning signs.  On the other hand if we say “not yet” then we can monitor the situation and plan how we will cope if it does get worse.



Ministers, teachers and consumer power in the economy

How much power do consumers have in our economy?  In theory they have all the power but in reality their power varies according to the degree of competition in any industry and their own personality.

Economic power means the ability to make decisions about what and how much is produced. If we lived  in small self-contained communities such as a Pacific island these decisions would be made mostly by people for themselves.  If we had perfect competition we would also make these decisions for ourselves and the market mechanism would transmit our decisions to producers.  As there are lots of people who want to make decisions for others one of the conflicts of our society is over economic decision-making.

Two examples illustrate how decision-making by individuals can vary according to competition in the industry.  The provision of spiritual services is, at least in Canada, the industry which comes closes to perfect competition.  Education is a mostly a monopoly.

As most of us Canadians have a strong commitment to freedom of religion people are free to attend the church of their choice or not at all. This means governments do nothing to restrict competition. Anyone with an inclination to preach can rent a school or community hall on Sunday mornings and some congregations allow anyone to do services.  No licenses are required by the government although some denominations use ordination, a form of licensing.  A minister’s career path is determined by his ability and his/her reputation. The Bible and most other religious texts are not copyrighted.  Churches receive no government subsidies other than an exemption from property taxes (which makes entry into the business easier).

On the other hand governments interfere extensively in education.  Parents are required by law the send their children to school, teachers must be licensed and governments closely supervise curriculum. Teachers generally must be licensed and are very difficult to fire.  Job security goes with length of service rather than teaching skills.  The result is a monopoly which is strongly defended by its employees.

In the spiritual world the customers are kings and make their own decisions.. :People can and do express dissatisfaction with their feet and some people go church shopping.  Ministers can be and are fired.  (My observation is that ministers are asked to leave for one of two reasons:  They get into an inappropriate relationship or they stay too long.)  Those people with the right skills rise to the top and those without the skills drop out.  To survive churches and staff must satisfy the spiritual needs of their congregations.

In education the customers (or their parents) make very few decisions.  They have no say in the curriculum and very little over who teaches their children.  Education is one of the most important things parents should give their children, yet it is where they have the least control.  This may be why home schooling and private schools are appealing to those who can manage them.  I believe education is too important to leave all decision-making to those employed in the field.

In other sections of the economy producers have to be more creative in influencing customer decision-making. Governments are usually willing to limit competition with licensing, tariffs, subsidies, patents and copyright.  Some firms can use the media to make emotional appeals to customers. Consumer power comes from being able to switch to another provider. The reaction to emotional  appeals may vary by person and personality. Maybe those people who don’t watch television have it easier when it comes to economic decision-making.

Another aspect of economic control is money creation.  The fractional reserve money we currently use creates money when bankers make loans.  This gives bankers a great deal of power to decide what economic activity happens and who does it.  On the other hand creating money  via a national exchange trading system as proposed in the essay “LETS go to market: Dealing with the economic crisis” on this weblog would transfer this power to individuals.

Some of us like to make our own decisions, some people like to make decisions for others and probably some people don’t care.  As one of those who likes to make his own decisions I like the perfect competition model.



The gold standard, printing money and getting the right amount

A return to the gold standard and the printing of money to provide a social dividend have recently been suggested on LinkedIn and Reddit as ways to deal with the economic crisis.  The gold standard and the printing of money have been both tried with disastrous results.  To the best of my knowledge the social dividend has not been tried but I see it as a guaranteed annual income and I believe it has a lot of potential – subject to paying attention to the amount of money in the economy.

The problem  with the gold standard is that it can cause recession because it limits the amount of money to facilitate the exchange of goods and services.  The problem with printing money is that it can lead to inflation which wipes out people’s savings.

The key to financial economic nirvana is to have just the right amount of money for the quantity of goods and services a society wants to exchange.  Too much money leads to inflation and too little money leads to deflation and a curtailment of economic activity.   The amount of money needs to be flexible to follow the ups and downs of economic activity.

At several times during their history Americans have tried to follow a gold standard.  Generally the result was depression.  In the 1930s the monetary authorities tried to restrict the amount of money in circulation and the result was depression.  The exception was during the gold rushes of the late 19th century when the newly discovered gold allowed the money supply to increase along with economic growth.

Following the first world war the German Weimar republic had lots of financial obligations.  As the external obligations were requiring gold the government met its internal obligations by printing money.  As the money was printed faster than economic activity increased that country experienced inflation which became hyperinflation.  The result was that the savings of most people became worthless.

The social dividend proposal was a feature of Social Credit which had its origins in England in the 1920s and prospered in Alberta and British Columbia.  At least in British Columbia the social dividend was forgotten and the party became a right of centre business coalition.

To the best of my knowledge the social dividend has not been tried.  I think it should be so long as the amount of money in the economy is close to the amount needed.

Money is something we all use and we teach our children at an early age how to manage their money.  However,  very few people understand the economics of money and especially how money is created. I believe that if we are to resolve economic problems we have to understand the economics of money and banking.  The essay “LETS go to market: Dealing with the economic crisis”  talks about how money is created, some of the problems with fractional reserve money which we currently use and proposes an alternative way of creating money based on Local Exchange Trading Systems.  Also a number of posts on this weblog have dealt with money.  Here they are.

Money is a highly emotional issue in part because our culture has raised us to believe that our future depends upon our having adequate savings.  As it is so important one would think people would be wanting to understand it and be prepared to consider reforms as there are such emotional costs to losing it.

I believe the fractional reserve way of creating money is a Ponzi scheme and has built into it a mechanism for forcing a continuous increase in the money supply regardless of increases or decreases in economic activity.  As a part of money creation reform we should look at incorporating a social dividend or universal income scheme.

However the money process is reformed an essential feature is that the money supply should be flexible up and down according to changes in the level of economic growth or degrowth.

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