Running
 throughout
 this
 book (the Homebrew Industrial Revolution),
 as
 a
 central
 theme,
 has
 been
 the
 superior
 efficiency
 of 
the 
alternative 
economy: 
its
 lower
 burdens
 of
 overhead,
 its 
more 
intensive
 use 
of 
inputs, 
and
 its 
avoidance 
of 
idle 
capacity. Two 
economies 
are
 fighting 
to 
the 
death:
 one
 of
 them 
a 
highly capitalized,
high‐overhead,
 and
 bureaucratically
 ossified
 conventional
 economy,
 the
 subsidized
 and
 protected
 product
 of
 one
 and
 a
 half
 century’s
 collusion
 between
 big government
 and
 big
 business;
 the
 other
 a
low
 capital,
low‐overhead,
 agile
 and
 resilient
 alternative
 economy,
 outperforming
 the
 state
 capitalist
 economy
 despite 
being 
hobbled 
and 
driven 
underground.

The 
alternative
 economy
 is 
developing
 within 
the 
interstices 
of 
the 
old 
one,
 preparing
 to 
supplant
 it. 
The
 Wobbly
 phrase 
“building 
the 
structure 
of 
the 
new
 society
 within
 the
 shell
 of
 the
 old” 
is
 one
 of
 the 
most
 fitting
 phrases 
ever
 conceived 
for
 summing
 up 
the 
concept.

- Kevin A. Carson, The Homebrew Industrial Revolution

Coming back to the real meaning of the term “economy” derived from “oikos” is looking after your home, looking after this planet. Ecology and economy were two sides of the same coin. Ecology was the science, economy was the management.

Aristotle said economia is the art of living. Chrematistics is the art of money making. We have taken the art of money making which has created the oligarchs and has allowed the stealing of our democracies and the creation of poisoned food, climate change and disappearing diversity — that art of money making is being called the art of living but it is really the end of humanity. It is time to reclaim our humanity, our future, and it is a very exciting moment.

- Vandana Shiva, Scientist and Environmentalist

Our Unsustainable Economic Model

Human beings, like other animals have to carry out basic physiological functions in order to stay alive:  eat, breath, excrete and sleep. While our body automatically regulates all of these, we must spend large amounts of our time engaged in one of these activities in particular - putting food on the table. The economy is fundamental to human life because it is our means of putting food on the table each and every day. If we have no economic activity, we have no food. If we have no food, we have no life.

The concept of provides a simple framework which makes it easy to gain clarity about the root of the ecological, energy, economic and human crisis currently plaguing humanity. Simply stated, we have evolved a socio-economic system which artificially pits economy against ecology; short term survival needs with long term survival ones. The key word is artificial. We are living under an artificial, relative regime which forces us into a zero sum game. We are daily faced with a dilemma in which we are forced to persistently choose economy over ecology. This system effectively pays each one of us to destroy the planet.  Since we are all interconnected and there are countless ways to degrade ecology and other living forms, we are all being paid as hired assassins. If we look at our economic system from the perspective of this stark, undeniable reality, we can appreciate how sociopathic it really is. An analogy may be further helpful to see. Imagine that each of us is getting paid to administer a slow acting poison to each of our loved ones – infants, children, women, older people – everyone without exception. The poison will result in certain death, but there is a time delay so we do not notice it immediately.

 is a simple tool to remind us that the two major currents of Ecology and Economy come from the same Greek root that means “home”. So while the distorted economic system results in making ecology appear foreign from economy, the original meaning of both words refers to our home. The distortion is so extreme that the two are now perceived as diametrically opposing concepts. Big banks, fossil fuel companies and multi-national companies don’t truly care about ecology. They care most about profit. They have become blindly infatuated with the symbol, rather than what it stands for. What use will it be to have mountains of such paper, coin and digital symbols when the ecology and all the ecological goods and services that come from it are in complete ruin? As the saying goes, you can’t eat money.  Living in a separate, symbolic world – a world of abstraction in which symbols take on a life of their own – is quickly turning out to be the Achilles heel of civilization.

Ours is an artificially created dilemma and the way to solve it is to literally think outside the box – to imagine a new system which does away with the artifice completely. Money has been used blindly, without further thought of its implications and ramifications. For example, we all accept that we don’t like our jobs, yet we must work in order to survive. We never question this intolerable circumstance but assume it is a fundamental and absolute condition of life itself. It isn’t. It’s only a consequence of the arbitrary economic system we have blindly accept. As soon as we begin to shed light on this fundamental paradigm, we will begin to see that many of our assumptions of absoluteness can actually fall away. It is in the interest of those who game the system to keep the masses ignorant. In a sense, they count on our ignorance to continue to perpetuate it. It is the case of the prisoner who constructs his/her own prison. The prison warden need not worry about investing in any real structure or in guards to keep you imprisoned; the warden counts on your own belief that you are in prison.

The world is out of balance today, moreso than ever before. We all acknowledge that we are living beings who need to the economy to feed ourselves each day. Yet, if we can’t also acknowledge the value of the ecology  we are all embedded within, if we cannot harmonize our economy with the other half, the ecology, we will face a questionable future as a species on planet earth.

Our Current Paradigm pits Human Short Term Needs against our own Future

Instead of thinking that nature is this huge bank that we can just, this endless credit card that we can just keep drawing on, we have to think about the finite nature of that planet and how to keep it alive so that we too may remain alive. Unless we conserve the planet, there isn’t going to be any “the economy”.

- Margaret Atwood, author

The current economic paradigm creates an artificial dichotomy, pitting our economic well being today with the world our children will inherit tomorrow. A 2013 study When we see the naked facts before us, the choice appears blatantly unconscionable and self-destructive. We are stealing from the future to feed our wants and desires today.

Respected Investment Analyst Jeremy Grantham on how our generation is selling out our grandchildren

In reality, we are presented with a false and completely unacceptable duality. Both our current and our future wellbeing are absolutely vital and we cannot be forced to choose between the two, we must have both. It’s like asking  you who you want to save on a sinking ship, your life or the lives of your children; either way, there is going to be extreme suffering. We can and must create a just economic system which gets rid of this false dichotomy once and for all and ensures well being for all people on the planet now and into the far future. It must be a system which meets both our immediate, short-term needs in a way that embeds responsible environmental stewardship that will help preserve the natural capital for future life on the planet.

…and is based upon Consumerism which displaces Human Values & encourages Resource Depletion and Pollution

Consumerism lies at the heart of our current economy. Our current economy must stoke the fires of consumerism and continue unabated growth in order to provide jobs. Yet, this blind consumerism is itself fundamentally flawed because it operates by making a promise that it can never deliver. Alluring marketing is continually used to create desire which promises happiness. Yet true happiness can never come about through such materialism. Products are intentionally designed-for-the-dump. They are not designed to last and it is often cheaper to buy a new product than to fix a broken one. In this modern age when we look to technology for answers, technology itself contributes significantly to our  fast growing resource depletion, energy and waste disposal problems.

Such consumerism not only depletes resources and creates waste, but does so at the expense of distracting millions of youth from seeking a more authentic and fulfilling sense of happiness.  Product designers embed the next set of novelties to continue the consumers misplaced thirst for material happiness.

The champions of the current economic system are blindly following a mantra of continuous established even long before their own generation. Unfettered economic growth  has already dislodged 38% of the environment. If left to itself, it will continue expanding blindly – like a cancer which has no intrinsic intelligence and cannot know that it is destroying its own host. It is this  myopic economic system which is the main source of all the other harm.

…creates Artificial Scarcity and an Attitude of Competition instead of Cooperation

Scarcity is built into the current monetary system. We all live under it’s shadow and suffer it’s effects, yet few of us truly understand the simple mechanics of our own slavery. We have been keep in the dark about it because in order for it to work at extracting wealth from the masses and concentrating it in the elite, the masses must remain ignorant of its inner workings. The system is designed so that at any one time, there is always more debt owed than actual money available to pay that debt (for example, if there were a trillion dollars of actual money, including paper and electronic bank deposit money, in an economy but the total amount owed, the outstanding loans, came to 1.5 trillion.  Therefore, those who have taken out the loans are always in competition with each other for the scarce money to repay their debts. In the end, there will always be losers. In an economy of one trillion dollars and 1.5 trillion of debt, there will be losers who cannot pay 0.5 trillion dollars of debt and so will have to declare bankruptcy.

Add to this the extreme poor of the world who have never had a say about such a system being imposed upon them and you begin to see how unfair such a system is.

It is clear that we cannot do business-as-usual. In this section, we offer up a host of alternative economic paradigms and ways we can fix or transform the current one.

Why we cannot take the Business-as-usual Approach

The business-as-usual approach is what got us into this mess in the first place and as Einstein said, we cannot use the same thinking to solve a problem that created the problem in the first place. In this section below, we revisit briefly some of the reasons why business-as-usual cannot work.

Population Growth – Past, Present and Future

In the past, human population was low and our ecological footprint were insignificant relative to the planet. With industrialization, the mean lifespan as well as population increased substantially. We reached our first billion when the Industrial Revolution began and population has been rising dramatically ever since.

Figure 1: World population growth – each billion (Source UN State of Population 2011)

Table 1: Time to add 1 Billion People

It took all known history to reach our first billion in 1804, then only 123 years to add our second billion. Now, we are adding a billion people every 12 years!  The UN has found that the population growth rate has been declining during the past several decades,

• 1.65% per year in the early 1990s
• 1.2% per year in the late 2000s

This represents a 27% decline in the growth rate between 1992 and 2010. Population is increasing quickest in developing countries, which tend to have a 2-3 times higher growth rate than developed countries. As development occurs however, people have less children. This overall, global “decrease in the increase” means that the world’s population and its population growth rate are increasing more slowly, and could eventually stabilise around 10 billion  people in 2100 (Source: UNEP: Keeping Track 2012).

Even with this large population, it is still possible to uplift the bottom of the pyramid out of poverty without incurring a large carbon footprint (see Oxfam Report: A Safe and Just Place for Humanity)

Resource Use 

Our population growth, resource use and pollution are all intimately bound together as shown below.

 

  

Figure 2: A. Human Resource Use     B. Largest interregional fluxes of emissions (Source: Helmut Haberl, Addicted to Resources, IGBP)

Human Appropriated Net Primary Production (HANPP) is the biomass that human beings have appropriated from nature for our species own use. In 2012, prominent agricultural researcher Jonathan Foley, Director of the Institute on the Environment at the University of the Minnesota estimates that we now appropriate 38% of all available land mass (excluding polar ice caps) for human use. The problem we face today is that the very economic system that ensures our immediate day-to-day survival threatens our long term survival. Our current economic model must continually grow in order to provide jobs. Since every other part of society is currently unsustainable, the implications of continuous growth are:

• we must expand our HANPP beyond our current enormous 38%
• we must continue high rates of resource depletion
• we must continue drawing 80% of our energy from dirty fossil fuels
• we must continue polluting the atmosphere with CO2
• we must continue creating unnecessary,short-lived, throwaway consumer products which end up as non-recoverable waste streams

Limits to Growth

We have a capitalist system that reflects our weaknesses; one that is fine-tuned only for the present and immediate future. Because of these factors, we will probably wait to deal with the obvious problems of living well beyond our means until the signs are powerful and clear that we must change; until, that is, it is basically too late.

- Jeremy Grantham, Investment Advisor

As the recently revisited Limits to Growth study revealed, the data of the last 30 years confirm without much doubt that the human race is indeed following a completely unsustainable trajectory. The collected data perfectly matches with the worst case scenario of the 3 scenarios found in the original study, the Standard Run, which is another name for Business-As-Usual.  This study shows that the average person who leads a developed-country lifestyle is overconsuming natural resources by a factor of 6.

This study shows a steep descent in global energy supply, food production, service and industrial output and maxima of global population and pollution occurring as early as 2020. There is a short timeframe of about one or two decades at the most to act if we are to avoid the immense suffering that will result if we keep to Business-As-Usual. The The immense failure of the ten year Kyoto Protocol program reveals just how difficult it is for governments to agree on anything. What is clear is that if we act the same way in the next decade or so, humanity will not be ready for the shock and face an equally immense human tragedy.

The key to real change is the economy.

1. The economy is what modern humans use to meet our basic needs; an exchange of service for the basic necessities of life
2. The economy therefore drives the majority of human actions and it’s effect on the planet
3. The reason why we have a broken planet is because we have a broken economic model; the current model of work does not include minimum enforceable standards for human and environmental well-being
4. The decoupling of money from basic needs creates the possibility of accumulating “wealth”
5. Capitalisms inherent short term focus on an individual’s wealth creation creates an environment where individuals justify overconsuming the planetary resources and doing no long term planning whatsoever. In effect, we are allowing affluent citizens to steal the planet’s resources from all future generations.
6. Without a fundamental change in the current economic paradigm, none of the other necessary critical changes will happen.

The Kaya Identity Points to the Qualities embodied in a Sustainable Socio-Economic system

The equation known as the Kaya Identity, named after the Japanese economist Yoichi Kaya can guide us to the critiria that any sustainable solution must satisfy.  The identity is expressed in the form:

C emission = P  *  G/P  *  E/G  *  C/Watt

where

1. Cemission  is global CO₂ emissions from human sources in Gigatons/year
2. P is global population
3. G is world GDP in $
4. G/P is global per-capita GDP in $/capita
5. E is global primary energy consumption in Watts
6. E/G is the energy intensity of world GDP in Watts/$
7. C/E is the carbon intensity of energy in Gigatons/year

• P and G are social factors
• E/G and C/E are technical factors

It is clear that in order to solve this problem it is not sufficient to provide engineering and scientific solutions that solve the technical factors. If the social factors are not reduced, the emissions will continue to increase. This equation points to the features of an economic model that works: Any successful holistic solution must satisfy:

1. Low P
2. Moderate GDP (or another variable that reflects TRUE well being…not just material wealth)
3. Low E/P – we must find a model where economic and all activity requires substantially reduced fossil fuel energy
4. Low C/E – we must find a model where  economic and all activities require substantially reduced carbon footprint/emissions

A simulation model of the Kaya Identity is here

Looming Disaster – the Logical Consequence of a system based on unbounded economic growth

The price for failing to act will not be gradual, but a catastrophic singularity event. Our current global course is headed for disaster unless we make fundamental changes in the next few years. The data from recent 30 years (1970 to 2000) best matches the original MIT Limits to Growth study’s “business-as-usual” trajectory in which  we have done nothing to address the many inter-related problems. The study shows that we will reach a point in the near future (less than a few decades) in which human population will suffer massive population decrease. What will it be for a world to experience billions of death in a few decades? The experience will surely traumatize every member of society to experience hundreds of millions of deaths each year. This kind of projected rapid population decline will decimate all know human institutions. From the most recent studies, “long term” may not be that far away…a catastrophic event may happen as soon as 8 to 10 years from now if we don’t make fundamental changes immediately.

Figure 3: A Comparison of the Limits to Growth with Thirty Years of Reality, June 2008, ISSN: 1834-5638, Graham Turner, senior scientist, CSIRO

Step towards Liberation

Lowering Consumption and Intelligent Consumption

In a consumption-based society, one of the greatest and most obvious gains will be to cut our consumption. This simple strategy has profound implications. Manufactures build a lot of their products without concern for longevity. They use the cheapest materials and processes possible to create goods that don’t last long. Not lasting is, in fact an intentional design objective that ensures an ongoing supply of customers. This is the design-for-the-dump logic at work; make things that don’t last and be guaranteed a stream of customers. This ill conceived logic based upon greed rather than a holistic concept that considers the environment must fundamentally change if we are truly to enter a sustainable era. Simon Farlie, a writer for the Guardian sums it up best by saying:

Education

It is this framework of scarcity which guides us to self-organize into competitive societies filled with selfish behavior that will naturally lead to inequity. It conjures up a picture of a “Dog-eat-Dog” world and those who are reasonably well off have varying degrees of fear and psychosis of being one of the unfortunate ones.

There is a way out but the first step is to educate yourself. You can do this by watching the new generation of enlightening media such as the Money Fix below or other enlightening movies here.

The Money Fix: An excellent explanation of how the current system creates scarcity starting 24 minutes into the movie!

Economists are looking towards natural systems for models that can replace our artificial system of scarcity.  In nature,  the biosphere consists of species that are not only in competition, but also in cooperation. Within the human body, organs and countless subsystems must work together harmoniously in order to sustain it. Similarly, in ecosystems, countless systems work together to benefit the entire community of living organisms. Such new currency and economic paradigms are designed to eliminate this prevalent artificial scarcity and attain prosperity for all without consumerist driven growth. Go here to see how the people of the planet can take back control and stop the inequitable flow of wealth that is built into every form of central bank currency in the world (which is most of them)

Understanding how the Current System creates Scarcity

Detailed Explanation:

1. Banks, including central banks f all countries (such as the Federal Reserve in the USA)  are private entities
2. The Central banks are Bank Cartels – groups of large banks which monopolize the creation of money
3. Money is created out of thin air by banks at the time that anyone (government, corporation or private individual) apply for a loan; it is nothing more than 2 equal and opposite data entries in a database or spreadsheet: 1) a   numeric entry into the bank’s column and an equal but opposite entry into your bank account column. Therefore, all money that exists is loaned into existence; it is an IOU to the bank
4. The money that is created does not CORRESPOND TO ANY REAL EXISTING WEALTH SUCH AS LAND, HARD WORK, NATURAL RESOURCES AT THE TIME IT IS CREATED. It’s simply made out of thin air and corresponds to nothing of value.
5. Whoever uses the money is also charged a fee called the  INTEREST. This interest is not created by the loan transaction; ONLY THE PRINCIPAL IS CREATED. Hence the total of the principal and interest exceeds the money that has been created by the loan.
6. As soon as this money is created by the bank and loaned out to government or the public, it increases the quantity of money circulating in the public domain. Loans are created independent of the amount of available goods and services in the economy. Therefore, any loans  cause the price of goods and services to rise. This is called INFLATION.
7. Inflation is really a HIDDEN TAX on the public. A loan transaction causes Inflation  the public’s money to decrease in value. For example, assume a loaf of bread used to cost 50 cent before the central bank makes a large loan. Then the central bank doubles the money supply overnight. That money is divided amongst the same set of goods and services so the loaf of bread must rise to a dollar. Your 50 cents savings used to buy a loaf of bread but now can only buy half a loaf. In summary, when banks make loans, the bank wins from the interest payment but the public loses because of inflation.
8. When you take out a loan, only the PRINCIPAL is created but NOT THE INTEREST. If  the economy consisted of only 1 person, it could not work. If it consisted of 2 people who have taken a loan, if you make the interest payment, then you must have taken the money from the other person who will then default. As the number of people taking loans out increase, it becomes more difficult to see the mechanics but it remains the same; someone always has to default because there isn’t enough money in the entire system for everyone to survive.  The banking system creates a framework for competition and motivates selfish behavior; you must go out and take from others in order to survive.
9. The successful people in life are usually the ones who best know how to take from others. Sadly, selfishness and competition become established as the foundation for survival in this modern society.

Short Explanation

1. Money is loaned into existence. It is called the principal
2. Each time a loan is made, the public’s money is devalued at the same time the bank makes money
3. Interest is the banks charge for using their money. It is not created yet it is owed
4. There is not enough money for everyone to pay off their debt hence everyone must compete for a limited pool of money to pay off their loan
5. Some people will default and lose their assets
6. This economic system enhances greed; it makes everyone selfish and competitive in order to survive
7. This economic system makes people want to earn their money as quickly as possible and this destroys the environment and people
8. It is possible to create another system which assures survival while based upon compassion, sharing, the welfare of people and the environment

 Replacing a Paradigm of  Greed with a paradigm of Sharing

Most people associate the Open Source movement with software but it has spread rapidly into manufacturing where it is has the ability to profoundly shape its future landscape. In fact, it is emerging as the potential foundation for a new society which replaces scarcity with abundance.  Michel Bauwens is founder of the P2P Foundation, whose purpose is to promote a socio-economic paradigm that:

1. ends the destruction of the biosphere by abandoning the false premise of unlimited resources
2. promotes innovation and free cultural exchange by abandoning the false creation of scarcity (copyrights, IP, patents, the current money system)

Bauwens is part of a growing movement that is seeking concrete solutions that will put power back in the hands of the people. Open Source movement is penetrating into every field of human endeavor but perhaps the most profound influence will be in the monetary system.

Bitcoin is a decentralized digital monetary system designed to take advantage of the internet. It uses peer-to-peer networking, digital signatures and cryptographic proof  which enables user to conduct irreversible transactions without having to rely on trust. The Bitcoin network came into existence on 3 January 2009 with the issuance of the first bitcoins.^[5] In the same month the creator, Satoshi Nakamoto (thought to be a pseudonym), released the original Bitcoin client as open-source software. Prior to the invention of Bitcoin, electronic commerce systems could not securely operate without relying on a central authority to prevent double-spending. Nakamoto sidestepped this requirement for Bitcoin by employing a proof-of-work approach in a peer-to-peer network to reach consensus between peers on the validity of transactions. Currently, Bitcoin is an experimental project under active development and developers warn users to treat it as such. Each transaction is validated with a proof-of-work system then broadcasted to the network by nodes which record it in a public history called the blockchain.  The digital currency comes into existence through a process called mining and is done according to predetermined rules. Bitcoins are not controlled by any government or central agency.

Migrating towards Local Decentralized Economies & Regional Integration 

As economists come to terms with the widespread failures of the existing economic paradigm, new and old models are emerging which can serve as the foundation of a truly sustainable society. Because of their many sustainable virtues, local economies and regional integration which deconstruct unethical, centralized power are seen as the logical conclusion to reversing the globally destructive trends of the current economic system:

• independence from volatile global economy and multi-national companies
• insulated against shock of Peak Oil
• food security prioritized for the community
• lower transportation costs due to significant reduction of international trade
• community empowered with  major decision-making power
• lower barrier to the implement ecologically sustainable solutions

To explore local economies further, go here.

Alternatives to GDP and the Current Economic System

In May, 2012, the government of Bhutan convened a UN meeting to put forth a proposal for a new economic paradigm that will serve as a suitable foundation for a sustainable model of the future. The proposal calls for replacing the GDP with GNH or Gross National Happiness index. It is designed to place human and environmental well-being at their proper place. In the same month Bernard Lietaer, codesign of the mechanism that became the Euro argues in his latest book that as long as the current global monetary system exists, there can be no major sustainable development because it is inherently against sustainable development:

• it causes boom and bust cycles in the economy
• it produces short-term thinking
• it requires unending growth
• it concentrates wealth
• it destroys social capital

Explore more here.

Alternative Models

Decentralizing power through Relocalization

Figure 1: A picture that represents our Centralized Global Economy (Source: Garamut WordPress)

If centralization of power is the problem that creates the 1% and the 99% and the continual generation of pollution and resource depletion then it’s time to decentralize and deglobalize. The unfettered movement of Capitalism is equivalent to unsanctioned individual greed on the personal level. The effects of greed are the same, regardless of whether it manifests in “democratic” states or fascist ones; it creates inequity.

Relocalization is the process of decentralizing power and knowledge and returning true wealth to where it was before the last few hundred years of industrialization and capitalism created the multi-nationals that now rule the planet. It is the process of putting the control back where it has always belonged…. into the hands of communities of people.

Relocalization returns knowledge, food security, energy security and economic livelihood back into the community. The result is a  more autonomous and resilient community that is far less dependent on the global economic system. This is especially important in developing countries as it is expected that when global economic shocks occur, as usual, those who have the least will be demanded to suffer the most. This has already been illustrated by shocks in the food supply in recent years.

Explore more here