When will the Economy get Back to ‘Normal’?

Someone asked me the other day if I thought the world economy would get back to ‘normal’ this year.

By ‘normal’ this person meant the familiar unsustainable economic pattern of ever-growing consumption. I explained that this might well happen for a while, but because it was not sustainable it would run into trouble and be stalled again in some way, as it was late in 2008 and has been before in recent history.

I said that we would have to develop a new idea of what is economically ‘normal’. We have to develop a sustainable world economy that can run forever because it takes account of the limits to the quantity, and the renewal rate, of every economic resource. Reckless over-consumption and wastage and destruction of any resource would be abnormal, even criminal.

A vital component of the new normality would be a system where employment is always full, in the sense that everyone who can and wants to work will have a job. In this system wages and salaries, not employment, would go up and down with changes in the level of throughput in the economy.

This might sound difficult but it must be achieved.

It is unfair that a minority should suffer the whole burden of economic recession. Unemployment can be devastating. In extreme cases, people can lose their house, their goods and their marriage and never get any of it back. They can suffer psychologically so that they will never again be as effective workers as they were before.

Both the present and the incoming administrations in the United States favour policies which involve more of what has led to the current recession. More borrowing to fuel more present consumption, thus more debt to be paid off in the future. All this to keep unemployment from rising too high.

In Australia, the unions are asking for big wage increases with the aim of keeping consumption high, supposedly preserving jobs while maintaining living standards for those employed. I’m amazed to hear this 1970s style kindergarten economics again after all these years.

But these policies are simply unsustainable, as has been proven in recent history. So there might be slightly less unemployment for a while, at the expense of higher unemployment later on when the next crisis hits.

There can be no full employment, only rising unemployment, as long as we stick with our current unsustainable economic system. But there can be no sustainable world economy unless it includes all who are willing and able to work. Thus whatever material living standard is possible, will be experienced by everyone, without a minority being crushed.

A challenge for governments is to get people used to the idea that material consumption cannot keep rising and must fall in many places where it is unsustainably high.

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