Will the big stimulus work?

Many people have asked me if the huge stimulus packages being tried by governments around the world will ‘work’. The packages aim to restore economic activity, that is throughput, to the levels of a year or two ago. They are intended to restore so-called ‘economic growth’, that is throughput-increase (see the post Concepts and Terms, early in the book) to those levels.

The stimulus is being applied by governments taking on more debt in order to fling vast sums of money at consumers to get them to buy more goods and services.

So, the disease that caused the world to lurch into the present crisis, was too much borrowing from the future to support present consumption, and the cure proposed is the same as the disease! Governments are like a doctor who is confronted by a patient suffering from a severe cold. So the doctor says, ‘Right, everyone, let’s cough and sneeze all over him, that’ll cure him!’

The other point is, of course, that what we call economic ‘growth’, as explained in Concepts and Terms and other posts, is not sustainable. It doesn’t create wealth, it depletes wealth. The level of economic activity, throughput, before the present crisis was not sustainable either. Even the recent depressed level of throughput is not sustainable.

But what else can governments do?

They are limited by their own economic concepts and by what their people will demand and current laws allow.

The point is that the human race is at a crisis. This is a natural process - it was always going to happen. It may well have happened elsewhere in the universe, on countless planets unknown to us. Life evolves, a particular species becomes so intelligent and adaptable and gains such a command over its planet’s resources that it gets to the stage of gobbling them up at an unsustainable rate. This what we face, here in our time. This is the greatness of our time.

Getting through this crisis will be a long and difficult process. It will be got through, because it has to be. What shape we, and our planet, will be in after that, who knows.

Here’s something to cope with immediately.

One phenomenon of recent ‘boom’ years has been the concentration of an inordinate proportion of the world’s money in relatively few hands.

Governments have mentioned this, but have done little or nothing about it. But something big and strong needs to be done about it.

In my own country, Australia, some public transport systems have been privatised. In the state of Victoria, a private company now runs the capital city’s mass transit rail system. Taxpayers’ money is given to the company to run the system while keeping fares acceptable to the public. The executives get paid millions a year, the shareholders do well, but the system is starved of staff, maintenance and investment. Recently during a heat wave, the whole system broke down and simply stopped running for days.

A manufacturing company recently sacked thousands of workers, at the same time awarding millions in pay rises to executives, on top of the millions a year they were already receiving.

Another company asked its workers to accept a 20 percent cut in pay, while again, executives retained or increased multi-million dollar earnings.

No-one needs or deserves to receive 100 million dollars a year in salary, no matter how hard they work or how intelligent they are.

Many billions of dollars are held by a small minority who hide in their luxurious gated communities.

Reducing pay and cutting hours would do much to share the pain of reduced economic activity. A scourge of our current economic system is that a minority of people suffer disproportionately in a downturn. A pool of unemployed people is created, and these lives are devastated, often never to recover. However, pain-sharing simply won’t work if a minority of people, who already have far too much, are seen to be totally exempt from it.

All those billions must be clawed back and used to reduce public debt, to fund public services, to maintain employment and provide unemployment pay and assistance to prevent the unemployed becoming homeless and malnourished.

Executive pay must be limited, by law. Oh, yes, I know, that implies governments with far more power to interfere in the economy than has recently been fashionable, but I think we all realise that’s the way of the future.

For sustainability to be achieved, there will have to be more sharing, more limiting, and much more control by elected governments accountable to the whole people.

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