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21

Tony,
Profits are really a reallocation of the money within the debt based money system.  How the money is used determines whether growth will occur or not.  For instance, what if the shareholders receive a dividend and decide to learn from a spiritual teacher and compensate the teacher for his/her services.  This would be another example where growth in the conventional sense does not occur.  However there might be an increase in prosperity.  Society can continue to expand its prosperity indefinitely - what you get when you spend money determines what happens in the economy.  The problem is that fresh money requires debt - see below.  Money originates from debt initially - once each are created they cause different behavior in the economy - but most people are running on a treadmill to get the fresh/circulating money to repay their debts.

In my massage therapist example he/her would get all profits - for a self employed person labor and profits are one and the same.

I also agree with Mary Ellen’s arguments.

The root of the problem is the debt based money system which requires growth so that new loans exceed old loans to allow for debt repayments plus interest.  A principle way that money comes into the system is from new homes which have collateral plus a homeowner with a job for debt repayments. 

When growth stops the economy slips into recession. 

The Fed has tried various ways to inject debt into the system to hide the losses and keep the game going but the debt based money system needs to be replaced because it isn’t compatible with a planet with finite limits.

Cheers,

James

22

Thanks rhare,

You are right - I was focusing on the profits themselves which provide the source for the equity appreciation and the distribution of dividends which together determines the share value of the corporation.  Growth of profits is a huge component in the value of the share value.

[quote=rhare] While I agree that many investors do not account for these issues, it’s really not the corporations that are at fault.  We have become a society seeking instant gratification and because of the realitivly recent (30 or so years) distortions of the markets, that has become the normal behavior.

I don’t see anything wrong with either of these investment methods or the sustainability of them. The issue is that the investing public has been lulled into easy money, but that will change.  A more realistic investment environment will certainly be upon us soon, and then the sustainability and validity of business ventures will result in much more due dilligence by the investor.

[/quote]

I suppose I wasn’t laying the blame solely on corporations - just that externalities should be pushed back into the corporations to reflect sustainability on a planet with finite limits - this would mean that their true profits would be much lower.  I believe that the planet will force changes upon us so that profits will become true profits with externalities imposed and share prices would drop markedly.

As for the current value of shares I believe we are in a depression and the stock market is only assuming that nothing is wrong because the Fed is buying up shares to artificially keep everyone happy.  At this time I have an aversion to stocks - taking the view that if it isn’t real then you don’t own it.  This may indicate an opportunity to reallocate from shares to precious metals - or better “slow money”.

Cheers,

James

23

The only reasonable solution I’ve seen to avoid total collapse was put forth by Herman E Daly last year:

From a Failed Growth Economy to a Steady-State Economy — Herman Daly – An Economic Policy Approach to Avoiding Collapse At the bi-annual conference of The United States Society for Ecological Economics in June of 2009, Herman Daly was honored for his many contributions to the field of ecological economics.  During his acceptance speech, in which he vilified the religion of growth hardwired into mainstream economic thought, he offered ten policy proposals directed at transitioning us to a sustainable steady-state economy and by implication, saving us from our own “ecological suicide”.
  1. Use a Cap-Auction-Trade system for basic resources – Caps would limit biophysical scale by quotas on depletion or pollution, whichever is more limiting. Auctioning the quotas would capture scarcity rents for equitable redistribution. Trade would allow efficient allocation to highest uses. This policy has the advantage of transparency. It would limit  the amount and rate of depletion and pollution that the economy can be allowed to impose on the ecosystem. Caps are quotas or limits to the throughput of basic resources, especially fossil fuels. The quota would typically be applied at the input end because depletion is more spatially concentrated than pollution and hence easier to monitor. The resulting higher price of basic resources would promote more economical use at each upstream stage of production.
  2. Institute Ecological Tax Reform (as an alternative or supplement to cap-auction-trade) Shift the tax base from a tax on value added (labor and capital)  to a tax on “that to which value is added”, namely the entropic throughput of resources extracted from nature (depletion), and returned to nature (pollution). This internalizes external costs as well as raises revenue more equitably. It prices the scarce but previously un-priced contribution of nature. The value added by labor and capital is something we want to encourage, so stop taxing it. Depletion and pollution are things we want to discourage, so tax them.
  3. Limit the Range of Inequality in Income (establish a minimum income and a maximum income) Without aggregate growth poverty reduction requires redistribution. Complete equality is unfair; unlimited inequality is unfair. Seek fair limits to the range of inequality. The civil service, the military, and the university manage with a range of inequality of a factor of 15 or 20. Corporate America has a range of 500 or more. Many industrial nations are below 25. Could we not limit the range to, say, 100, and see how it works? People who have reached the limit could either work for nothing at the margin if they enjoy their work, or devote their extra time to hobbies or public service. The demand left unmet by those at the top will be filled by those who are below the maximum. A sense of community necessary for democracy is hard to maintain across the vast income differences current in the US. Rich and poor separated by a factor of 500 become almost different species. The main justification for such differences has been that they stimulate growth, which will one day make everyone rich. This may have had superficial plausibility in an empty (resource abundant) world, but in our full world (resource limited) it is a fairy tale.
  4. Free up the Length of the Working Day, Week, and Year Allow greater freedom for part-time or personal work. Full-time external employment for all is hard (impossible) to provide without growth. Other industrial countries have much longer vacations and maternity leaves than the US.  For the Classical Economists (versus today’s neo-classical economists) the length of the working day was a key variable by which the worker balanced the marginal disutility of labor with the marginal utility of income and of leisure so as to maximize enjoyment of life. Under industrialism the length of the working day became a parameter rather than a variable. We need to make it more of a variable subject to choice by the worker. And we should stop biasing the labor–leisure choice by advertising to stimulate more consumption and more labor to pay for it. Advertising should no longer be treated as a tax deductible ordinary expense of production.
  5. Re-regulate International Commerce Move away from free trade, free capital mobility and globalization, and adopt compensating tariffs not to protect inefficient firms, but to protect efficient national policies of cost internalization from standards-lowering competition. We cannot integrate with the global economy and at the same time have higher wages, environmental standards, and social safety nets greater than the rest of the world. Trade and capital mobility must be balanced and fair, not deregulated or “free”.
  6. Reduce and amend the authority of the International Monetary Fund, World Bank, and the World Trade Organization Transition to something like Keynes’ original plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances. This arrangement would seek balance on current account, and avoid large foreign debts and capital account transfers. For example, under Keynes’ plan the US would pay a penalty charge to the clearing union for its large deficit with the rest of the world, and China would also pay a similar penalty for its surplus. Both sides of the imbalance would be pressured to balance their current accounts by financial penalties, and if need be by exchange rate adjustments relative to the clearing account unit, called the bancor by Keynes. The bancor would serve as world reserve currency, a privilege that should not be enjoyed by any national currency. The IMF preaches free trade based on comparative advantage, and has done so for a long time. More recently the IMF-WB-WTO have started preaching the gospel of globalization, which, in addition to free trade, means free capital mobility internationally. The classical comparative advantage argument, however, explicitly assumes international capital immobility! When confronted with this contradiction the IMF waves its hands, suggests that you might be a xenophobe, and changes the subject. The IMF-WB-WTO contradict themselves in service to the interests of transnational corporations. International capital mobility, coupled with free trade, allows corporations to escape from national regulation in the public interest, playing one nation off against another. Since there is no global government they are in effect uncontrolled. The nearest thing we have to a global government (IMF-WB-WTO) has shown no interest in regulating transnational capital for the common good.
  7. Move to 100% Reserve Requirements instead of Fractional Reserve Banking. This would put control of the money supply in hands of the government rather than private banks, which would no longer be able to create money out of nothing and lend it at interest. All quasi-bank financial institutions should be brought under this rule, regulated as commercial banks subject to 100% reserve requirements. Banks would earn their profit by financial intermediation only, lending savers’ money for them (charging a loan rate higher than the rate paid to savings account depositors) and providing checking, safekeeping, and other services. With 100% reserves every dollar loaned would be a dollar previously saved, re-establishing the classical balance between abstinence and investment. The government can pay its expenses by issuing more non interest-bearing fiat money to make up for the eliminated bank-created, interest-bearing money. However, it can only do this up to a strict limit imposed by inflation. If the government issues more money than the public wants to hold, the public will trade it for goods, driving the price level up. As soon as the price index begins to rise the government must print less and/or tax more. Thus a policy of maintaining a constant price index would govern the internal value of the dollar.
  8. Stop treating the Scarce as if it were Non-scarce, but also stop treating the Non-scarce as if it were Scarce. Enclose the remaining commons of rival natural capital (e.g. atmosphere, electromagnetic spectrum, public lands) in public trusts, and price it by a cap-auction–trade system, or by taxes, while freeing from private enclosure and prices the non-rival commonwealth of knowledge and information. Knowledge, unlike throughput, is not divided in the sharing, but multiplied. Once knowledge exists, the opportunity cost of sharing it is zero and its allocative price should be zero. International development aid should more and more take the form of freely and actively shared knowledge, along with small grants, and less and less the form of large interest-bearing loans. Sharing knowledge costs little, does not create un-repayable debts, and it increases the productivity of the truly rival and scarce factors of production. Existing knowledge is the most important input to the production of new knowledge, and keeping it artificially scarce and expensive is perverse. Patent monopolies (aka “intellectual property rights”) should be given for fewer “inventions”, and for fewer years. Costs of production of new knowledge should, more and more, be publicly financed and then the knowledge freely shared.
  9. Stabilize Population Work toward a balance in which births plus in- migrants equals deaths plus out-migrants. This is controversial and difficult, but as a start contraception should be made available for voluntary use everywhere.  Support voluntary family planning, and enforcement of reasonable immigration laws, democratically enacted in spite of the cheap labor lobby.
  10. Reform how we measure and manage national well-being Separate GDP into a cost account and a benefits account. Compare them at the margin, stop throughput growth when marginal costs equal or exceed marginal benefits. In addition to this objective approach, recognize the importance of the subjective studies that show that, beyond a threshold, further GDP growth does not increase self-evaluated happiness. Beyond a level already reached in many countries GDP growth delivers no more happiness, but continues to generate resource depletion and pollution. At a minimum we must not just assume that GDP growth is “economic growth”, but prove it. And start by trying to refute the mountain of contrary evidence.
 

The authors of “The Limits to Growth – The 30-Year Update” ran a systems theory model [World3] which calculated and projected out future collapses in population and human welfare using key global metrics. There was only one scenario which could be followed, and only if implemented in time, to avoid catastrophic collapse. It included the three following assumptions:

  1. All couples limit their family size to 2 children and have access to effective birth control technologies
  2. A fixed goal of industrial output per capita (i.e. a steady-state economy)
  3. The development  and investment in powerful technologies for pollution abatement, land yield enhancement, land protection and nonrenewable resources (assuming 20 years for full implementation)
We are pretty much beyond the point of implementing anything right now to avoid catastrophic collapse. It's all too little too late.

see paper here:

Avoiding Societal, Economic, and Ecological Collapse? Too late ...

 
24

Maybe a reason to join.
http://www.youtube.com/watch?v=4aa66bc2xoU&feature=related

V

25

Mary,

I’m thinking specifically of profits, in the business sense, since the Slow Money principles talks about businesses giving away half of their profits, implying that the notion of businesses continuing to make a profit is supported.

Even in your example above, if there were excesses each year that were sold, eventually, the farmer will spend the profits (once he or she has enough to cover those rare health situations and has painted enough potato fields). But, yes, with the right attitude that particular profit need not lead to growth but our economy is made up of many types of businesses and the Slow Money principles don’t state that only farm businesses are viable future businesses.

26

[quote=James Wandler]For instance, what if the shareholders receive a dividend and decide to learn from a spiritual teacher and compensate the teacher for his/her services.[/quote]Yes, but how many students can that spiritual teacher handle? At one extreme, the teacher wouldn’t be in business, if enough students didn’t receive those dividends. At the other extreme, there are too many students for the teacher to handle and so he, or she, has to grow the business (or else limit the intake, which forces those dividend receivers to spend the money elsewhere).

[quote=James Wandler]for a self employed person labor and profits are one and the same.[/quote]I don’t see that. The person could choose to double his charges (and, if he’s good enough, will get that price). It’s the same amount of labour (and so requires the same amount of energy input - which may be food, for example) but profits have more than doubled. Any profit, income above expenditures, will be spent on something eventually (or provide capital for banks to lend money to others, to spend on something), thus fuelling growth.

I’m just having a hard time understanding how an economy that incorporates the profit motive can be sustainable, at least without a very disciplined (legislated?) approach to how those profits are used.

 

[Damn it, why does this software not honour the paragraph tags consistently? Sorry for the lack of blank lines between some paragraphs.]

27

Yes, and that scenario is already well behind schedule. As you say, we are past the point of avoiding collapse, in our opinion.

28

[quote=ltlredwagon]

"...organizations dedicated to bringing intelligent responses to our predicament."
Well, I will definitely support SlowMoney (their principles seem fundamental and vital), but I was hoping for something more related to the "predicament" of debt-based money, and corrupt monetary and banking systems.....[/quote]

Agree.  These folks (ISM) seem well intentioned and their heads are right with regard to food production but they will get creamed by debt-money system if they do not take steps to play outside the bounds of fiat currency with a closed loop hard currency of their own; but then the FEDs will come…   I am also suspicious there will be plenty of Obama stickers on the cars at Shelburne farms…anyone attending their event who voted for Obama and hasn’t scraped the sticker yet is naive and cannot possibly be genuine.  Chris, I thoroughly appreciate your reluctance to associate with “groups” for the reasons you stated; what we need is paradigm shift and “groups” can’t make that happen.

USNRol (Lurker)

29

Awesome.  So people are finally admitting what conservative/anti-progressive folks have known since the Milkman dissappeared 40+ years ago…it’s way better to get ur milk in glass bottles that are reused each time. Duh.

30

Tony,

I’m just using an example to support my argument - to address your special cases I can say that if the spiritual teacher isn’t very good then another would get the students.  In the event that the teacher couldn’t handle all of the students then perhaps the students might decide to take up art or some other activity in the realm of prosperity not growth.

I don’t see that. The person could choose to double his charges (and, if he’s good enough, will get that price). It’s the same amount of labour (and so requires the same amount of energy input - which may be food, for example) but profits have more than doubled. Any profit, income above expenditures, will be spent on something eventually (or provide capital for banks to lend money to others, to spend on something), thus fuelling growth.[/quote]

Profits are just reallocations of the debt based money between people’s bank accounts.  It doesn’t matter how much is charged - and for employed persons their “profit” is their wage - what matters is how the money is spent.

A switch from debt based monetary system is necessary but Herman Daly wrote the unread books I have on Ecology Economics so I’ll throw my hat in the ring with post <a 0=“href=/comment/77916#comment-77916"” rel=“nofollow”>https://peakprosperity.com/comment/77916#comment-77916

Cheers,

James

31

I am fully confident that you will always find someone to burn it all up :slight_smile: That’s how it works in nature… animals eat plants, other animals eat other animals… some things get created, while others die.

Samuel

32

[quote=James Wandler]In the event that the teacher couldn’t handle all of the students then perhaps the students might decide to take up art or some other activity in the realm of prosperity not growth.[/quote]But, even then, that money gets spent on stuff (artist materials, travel to paint landscapes). Only if the students don’t spend the profits can growth be avoided, as far as I can see. Of course, if some steady state is ultimately achieved, then any profits are soaked up by (the new) business as usual activities, which leads into a whole set of other questions about winners and losers, and how, or why, new businesses start up.

[quote=James Wandler]It doesn’t matter how much is charged - and for employed persons their “profit” is their wage - what matters is how the money is spent.[/quote]Employed persons also have costs involved in providing their labour, so their profit is a proportion of their wage. Some people never really make a profit, because of lifestyle choices or lack of opportunity. But I’m focused on business profits, since Slow Money appears to support businesses making a profit (i.e. charging more than the cost of providing a product or service).

[quote=Carl Veritas]A switch from debt based monetary system is necessary but Herman Daly wrote the unread books I have on Ecology Economics so I’ll throw my hat in the ring with post <a 0=“href=/comment/77916#comment-77916"” rel=“nofollow”>https://peakprosperity.com/comment/77916#comment-77916[/quote]I must read more Herman Daly. A steady state economy is a must, for sustainability, but it’s difficult to envisage how that would work, in practice (how do businesses arise, and why; how do they operate; how are prices determined; what products are services are sustainable; and so on).

33

You know, maybe we shouldn’t try to make things more complicated than they really are (brandishing Occam’s razor). There are winners and losers… people compete with each other, just like animals, which we basically are. For the past century, it’s been going better in the Western world because we found lots of food (energy, oil) as a species, but that doesn’t make us any better than any other species. Nature will avoid any further growth whether we like it or not. What makes us so certain that we are any more rational than the average stray cat? That’s the question I think we need to answer first… Maybe “I made a profit today” is just our human way to say “I stole that other guy’s food today” or “I prevented a newborn to come to life today”.

Samuel

34

[quote=sofistek][quote=James Wandler]A switch from debt based monetary system is necessary but Herman Daly wrote the unread books I have on Ecology Economics so I’ll throw my hat in the ring with post <a 0=“href=/comment/77916#comment-77916"” rel=“nofollow”>https://peakprosperity.com/comment/77916#comment-77916 [/quote]I must read more Herman Daly. A steady state economy is a must, for sustainability, but it’s difficult to envisage how that would work, in practice (how do businesses arise, and why; how do they operate; how are prices determined; what products are services are sustainable; and so on).
[/quote]

Another approach is to read David Holmgren’s book “Permaculture: Principles and Pathways Beyond Sustainability”.  For instance, if 50% of the profits given away were used to plant trees then we go beyond sustainability into regenerating the Earth. 

A second example would be to set up High Density grazing operations using the principles of Allan Savory’s book “Holistic Management” which would turn desert back into grassland with a yield of healthy pastured meat.  It turns out that grassland in arid climates has a symbiotic need of rest and then intense grazing as herds in the wild would do. 

Joel Salatin will emphasize that we get three votes every day to buy healthy food.  Michael Pollan says: “Eat food, mostly plants, not too much”.  Gary Hirshberg of Stonyfield Farm focuses on growth because every time he grows he converts another farm to organic - in a world gone haywire he sees a lot of merit in being good and succeeding rather than trying to be perfect and not getting anywhere.

It really is a question of that we get what money is used for - destructive or regenerative.  We need to invert the way we spend our money.

Oh, and in case anyone is interested - the calf I mentioned above did learn how to get its mother’s milk at the end of Day 4 so I’m glad not to have to bottle feed it!

Cheers,

James

35

Hi pjc
Could you give some more info on " Rishi Krishi" sounds interesting.

I believe Maharasrthra  is in India. Are there many organic farmers there? What do you think as to the sustainability of India?

V

ps who is Meher Baba?

36

We all yearn for home but … you can’t go home again. 

37

sofistek,
 

It may be too late at night to give this the thought it needs but in the natural world an animal can grow and sequester more resources than it needs (ultimately coming from the constant stream of solar energy reaching the earth) but eventually it will die and all will be lost to entropy, or other organisms that subsequently sequester its previously accumulated growth, all on a constantly diminishing energy scale according to the laws of thermodynamics. If the money supply is set by how much gold we have and every bill corresponds to a piece of that gold then there will be a limit to how much profit can be made. Companies will grow to serve their market and no more, not like the current mega corporation mess. Much like in the wild, businesses will grow to fill a void and excess profit (energy) will be spread around just like a top predator does. That company will reach a limit to its growth because there won’t be a large enough market to serve. Alternatively, it will displace other less efficient businesses and grow at their expense. The profits that are spread around will do their thing and enable others to sequester more ecological energy for themselves but this all goes according to the laws of thermodynamics so all profit and energy accumulated will diminish with time.

My gut feeling is that since the seccond law of thermodynamics says that energy only flows downhill, and money is basically a claim on biological energy (via human labour) then the profits will simply get radiated out to outer space as infrared radiation. It sounds bizarre, but this is exactly what happens if you assume all money is a claim on human labour and all human labour is a product of biological productivity and biological productivity is a function of solar energy captured by plants and brought into the ecosystem.

38

 
Rishi Krishi (pronounced Rushi Krushi) is v. ancient vedic agriculture based on the brahma cow. Currently, twenty-six holes for my trees have dried b. cow manure, leaves, and grass. Black earth is due tomorrow as my site is mostly stony. That will sit for a month until monsoon rains. Then the trees planted. 2x / month, a RK staff / farmer will visit  with RK fertilizer – all organic. Also he’ll watch for good, healthy growth.

I learned Rishi Krishi Agri from my neighbor, Shami Shaligram, founder of an NGO, PRITHVI, that has among its activities an agricultural forum, organic farm, and education extension. Shami left for U. Minnesota yesterday where she’s a presenter in a Leadership Workshop. She has global experience in work and advanced education in India. She can inform you.

In conversation listening to her talk about RK, I told her I wanted to be the first home owner to have RK in my compound. Since then 4 others have signed up. Your interest pleases me for Shami’s effort growing a vital, expanding, serving NGO that she links globally to others’ similar efforts / accomplishments. .A friend to her both here in MS, India, and America has loaned her 40 acres in Alabama for the first RK experiment in America. To that end she has contacted the Brahma Cow Association there and had a reply from Texas. American cows’ dung isn’t the right quality. There is a Brahma cow breeder near the land in Alabama.

I haven’t seen this video but Shami told me a farmer in a nearby village growing onions had a poor financial return on a crop and taking Shami’s suggestion to plant 1/3 the amount of land but use the RK method his crop results were triple the amount and higher quality onions. We’ve been in onion harvest season so fields are full of pyramids of red onions. He tells his story on the video.

Writing this I realized I could add Shami’s e-address. She’s also on FACEBOOK.

“Shami Shaligram” <shami.prithvi@gmail.com>,

I had sent her my blog comment on “Slow Money” and I’ll forward your inquiry and my reply. Knowing Shami, she’d be absolutely delighted to hear from you directly.

I am in my eighth year living in India coming first in 1994, then 1997 - 99 and in 2003 moving here. If you know the meaning of karma then you understand why I’m here. This is where I am to be in this lifetime at this period of my life.  I’ll give you the website for Meher Baba. It’s my choice of spiritual belief but doesn’t come under “Slow Money” so I won’t comment. It’s part of my writing as it defines where I am in India and why.

 http://www.ambppct.org/

 

I haven’t figured out the formatting yet.

39

Hi V
 

I can’t speak for organic farmers in India or sustainability. My exposure is limited to Arangaon Village area. What I do see is the families on my lane harvesting grains from their farms and bagging the wheat, millet… hanging onions. If you look on their porches or into their homes you see large bags stacked. It’s impressive sustainability to me. Then there are foods they make, dry on tarps, and store.

This is a drought area. I see more bore wells being dug and that only lowers the table more rapidly. Rain harvesting is non-existent to my view among villagers. At Meherabad some have roof rain harvesting. I have an underground second tank for rain and my gutters are in the gutter materials-buying stage. Water usage is restricted in pilgrim and resident housing from 6 p.m. to 5 a.m. No Trust water is allowed for personal garden usage. No water, no irrigation, and I’ve seen brown acreage some years kilometer upon kilometer on the way to Pune.

The Burpee seeds I brought Shami were not organic but she explained that through growing, harvesting, planting over and over in the R/K soil she will produce organic seeds / crops from them. A relief to me as I’d spent 40.00.

It’s from her practice at the PRITHVI farm that she extends to farmers building a growing improved agricultural land usage spreading exponentially as each one farmer who comes for education may have brothers, brother-cousins, and uncles to bring into the program.

 

 

40

[quote=James Wandler]Another approach is to read David Holmgren’s book “Permaculture: Principles and Pathways Beyond Sustainability”.  For instance, if 50% of the profits given away were used to plant trees then we go beyond sustainability into regenerating the Earth.[/quote]I don’t have that book, though I’ve a few others on permaculture. I agree that using 50% of profits to plant trees would be great but I’d worry what is being done with the other 50%. We have to get to steady state, as a minimum, otherwise all the good work that could be done with 50% of the profits will eventually be undone. Growth kills the planet, smart growth kills the planet.
Maybe I’m looking for perfection but, to me, it’s simple. Unsustainable societied must end. Only sustainable societies will not collapse (via our own hand).