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Green Economics and how it might work
Tushara Kodikara, Scoop
In times of the global economic recession and ecological crisis, it is obvious a radical response is needed. World-renowned economist Herman Daly maintains the future of human civilisation is dependent on a new economic model, based on a dynamic model—known as the steady state economy—preserving the environment we are all dependent upon.
There needs to be a shift away from the current paradigm of the growth economy towards a system that emphasises conserving natural capital and views the economy as a subset of the environment. Neoclassical economics has ignored the environment. The current system views environment and economy as intertwined. Any environmental problem can be solved by the market or by governmental interference…
(20 July 2009)
Washington’s Dilemma
Gregor Macdonald, Gregor.us
Washington is bluffing that it will not bail out California, and every other state suffering from collapsed revenues and massive job losses. If cuts in police and schools don’t force DC off from its current position, then the math will. Because in many states the aggregate revenue losses and looming cuts to state payrolls will largely render the intended effects of federal stimulus as moot. Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you’ve still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn’t a recession. This is collapse.
In Recession vs. Collapse published in March, this blog explained that in a normal recession existing savings are used to support government debt issuance and that those who remain employed increase their savings to also support government debt issuance. Neither phenomenon is at work today. Yes, the savings rate has soared in the US. But this has not resulted in any actual accrued savings. Because private sector debt came to define the internal structure of the US system, savings currently is little more than debt service. Also, bank purchases of US Treasuries are really just a result of the circularity of monetization. It’s just money from the FED being recycled into Treasuries. There is no privately driven growth of bank deposits, in the aggregate. Americans as a class are broke. What the savings rate more accurately measures is a collapse of consumer spending.
…This is the core problem of this collapse and why the prospect for recovery is dim. Americans can’t actually rebuild the savings that the banking system needs to escape from the current mess. Individually, Americans are trapped by debt and cannot spend. In The Seigniorage Curse, I explain that one of the primary mechanisms for the hollowing out of the American economy over many years was the dollar advantage, which at first was earned. And then, came to be un-earned. By the time the US reached the 21st century, our primary manufactured product was debt, and dollars. Is it any wonder that once that system collapsed, that we quickly gave up 100% of the phantom job growth that had been sitting on top of the debt bubble? The current level of employment in the United States has now returned to the levels of June 2000. Enough said.
(13 July 2009)
Arnold Schwarzenegger in last-minute deal to save broke California
Tim Reid, The Times
Arnold Schwarzenegger, the Governor of California, struck an eleventh-hour deal with political leaders yesterday that saved the Golden State from bankruptcy — but the budget he announced contained some of the most painful and swingeing cuts in its history.
After weeks of negotiations, in which the state of California had been issuing IOUs to thousands of contractors and small businesses, Mr Schwarzenegger emerged with legislative leaders to say that a deal had been reached to close the state’s $26 billion (£15 billion) shortfall.
He compared the final five hours of negotiations to a “suspense movie”. Darrell Steinberg, the Democratic leader in the state senate, said: “This is a sober time. We have cut, and we have cut in many areas that matter to real people.”
…His greatest victory was standing firm and warding off tax increases, something that Democrats had demanded. Another large chunk of the budget shortfall will be paid for by borrowing money from the state’s local governments — its counties and cities — which has enraged many local politicians.
Since July 2, California has been issuing IOUs to its creditors, which some banks had started to refuse to accept. The sobering reality about yesterday’s deal is that it does little to address California’s long-term economic problems, with many predicting another budget crisis next year.
Terminated spending
Schools $6bn California’s state school system looks set to be the single biggest loser in the budget cuts, although Mr Schwarzenegger has promised to repay $11 billion once the economy turns around
Universities $3bn California’s state universities — which include UCLA and Berkeley and are among the best in the US — face a severe cut
Prisons $1.2bn Authorities have said the cuts will not result in the early release of inmates but the Governor retains the authority to order them if necessary
Parks $8m Approximately 20 per cent of parks will close, significantly less than the $70 million of cuts originally thought necessary
Healthcare $1.3bn Medi-Cal, the statewide programme to provide healthcare to the poor, will have its budget slashed
(22 July 2009)
