Global Growth: Democratic Capitalism's Coming Waterloo

Eras in which population growth furthered the public good are behind us.
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Eras in which population growth furthered the public good are behind us. The global costs of population growth now outweigh the benefits on the whole. Humanity must transition to a new understanding and global commitment in which economic growth is not subsidized by population expansion. Economic growth must come from improvements in education and decision-making: a more prudent ingenuity, enhanced business efficiency, improved loss control, better consumer and lifestyle choices and the overhaul of partisan politics. Standard fare business and popular political goals can no longer be trusted. We must reevaluate the growth paradigm at democratic capitalism's core. Paradoxically, the growth paradigm that helped build democratic capitalism is now set to bring it down.

Ecological Logic Versus Economic Design

When competent biologists examine the terrestrial ecological system, the arrangement's functionality makes sense: it is scientifically justifiable. Absent improvident human intervention, the system is self-adjusting and sustainable. It rebounds from catastrophes, even if it must alter life forms. Competition for natural resources limits species growth as does scarcity and hardship at the margins of species' habitats. While this is a good arrangement for the plant and animal kingdom it is far from desirable for humankind, especially in the modern context where people's sensitivities are increasingly actuated by global communications and comparative images. Social media's impact upon African and Asian emigration is a case in point. An awareness of relative deprivation is not something people enjoy, whether in terms of lost opportunities or impossible outcomes. Who can justify wealth concentration for the few by widening the economic gap for the many? Sensed injustice is the mother's milk of populism.

When informed and objective economists examine the financial architecture of the global economy, what they see is irrational and unethical. It is truly bizarre that in 2014 the world's 85 richest people had as much wealth as the bottom half of the world's 7.5 billion population: a situation that Nobel economist Joseph Stiglitz sees as becoming more extreme. But this is merely half the problem. The other half is that neither the population growth nor the economic system of asset appreciation predicated upon growth is sustainable. Unfortunately, each feeds off the other, making needed reforms difficult to attain. While it may be possible to moderate a tragedy of the commons by incentivizing a curtailment of population growth in densely populated and developmentally challenged nations, a master plan of incentives is not achievable until several things happen. First, financial markets must be redesigned so that reasonable asset values are not dependent upon growth. Secondly, the field of investment must be restructured so that those who invest responsibly in sustainable development are not penalized competitively. Finally, business success must be measured and rewarded in new ways, thus increasing the logic of businesses growing better instead of bigger in order to succeed.

Reforms: Do Davos Leaders have the Answers?

The problem is that multiple competitive money cults on every continent have been allowed to evolve asset markets into forms that elevate the value of growth capital over prudently measured merit. As a result wealth becomes concentrated in the hands of the few: an unsatisfactory outcome under any reasonable system of social justice. Is there something that can be done? Joseph Stiglitz thinks so. He says the world's top one percent should pay their taxes and forego tax dodges such as offshore tax havens. Additionally, the ultra-rich should pay their employees decently, invest in the future rather than in stock buybacks and dividend maximization, and cut back on the lobbying that continually rewrites market rules in favor of the largest capital holders.

Remedial actions on the recommendations offered by Stiglitz are overdue. Perhaps dangerously overdue with or without Davos elites influencing the world's economic architecture. Stiglitz writes: "If a majority of citizens feel that they are not getting what they view as a fair share of the economic gains, they may turn against our economic and political system, or at least those parts of it that they blame. If a majority believes that globalization is hurting them, they may turn against globalization."

What is Stiglitz arguing? Does he hope that elites will dial back enough of the excesses to prevent electorates from tearing down the existing system? Or does he argue something else? Would Stiglitz approve of a market design that impedes huge fortunes because it works to reward people on the basis of merit soberly measured?

A Coming Demographics Cold War?

The subsidization of asset appreciation by imprudent population growth generates largely undeserved gains for those with concentrated capital. On a planet of finite size (diameter 7,917 miles) where limited natural resources are already under siege, some caution is in order, especially since well over half of the world's population cannot earn a modern (European equivalent) lifestyle.

Human population is growing at a net rate of 80 million people annually. During President Obama's eight years enough people were added to the world's population to triple the population of the USA, or match the population of the European Union and Russia combined (i.e., 640 million net additions). Is it any wonder that struggling people are overflowing in a profound emigration dynamic that threatens to overthrow the world order not through nuclear weaponry but through excessive reproduction in democracy's equality of persons environment. Asia and Africa are set to win a demographics cold war.

What is the future of nation-based democracy (i.e., one person, one vote) if responsible low population growth countries get washed out by emigration emanating from high population growth countries? The acceptance of democracy is threatened less by weapons of mass destruction or jihadist terrorism than by the endless efforts of multinational corporations to cultivate growth markets for their products and services. Heat is added to this unfortunate dynamic by investors longing for asset appreciation and by wealthy philanthropists inadvertently subsidizing unsustainable population growth in their quest to address recalcitrant human welfare problems. Military conquest now has a challenger. Emigration and immigration are the world's new vehicles of conquest, as facilitated by the unfettered corporate hunger for growth and the desire of debt-laden and entitlement-burdened governments to stimulate new tax revenues.

Replacing Growth with a Steady State Environment

Tragically, the international money cult (consisting of plutocrats, global financiers and wannabe elites) is locked in by a market paradigm designed to enlarge capital assets by financially leveraging the growth of human population. Financial elites cannot imagine abandoning the growth paradigm, as half of the current value of the world's $60 trillion dollars bet on stocks is dependent upon the prospect of continued growth. If growth were to languish, dividend yields would rise dramatically to justify risk versus reward ratios in equities. Such a retreat would undermine the viability of the bond market which predicates the repayment of debt based upon projected income streams. Add the potential impact of a retreat from growth upon the universe of derivatives and it becomes evident why the world's central bankers are not willing to contemplate an exit from a market design predicated upon growth. Nonetheless, phased in remedies are less painful than dead-end calamities.

As Asia's environmental problems worsen, observers are educated as to the complications of bringing hundreds of millions of people into modes of living that require higher resource consumption and heightened risks of human actuated climate change. Meanwhile, the asset appreciation design of today's financial markets forces young investors to purchase inflated assets that carry high risk hazards as the feasibility of continued growth peters out. The longer we hold off reforms, the smaller the prospect for a soft landing. It is imperative to move to a sober politics which redesigns the global economy in accord with a steady-state design.

A prudent overarching ethos must guide the world toward a sustainable state: ecologically, demographically and economically--an idea long advocated by Herman Daly. A modern and ecologically responsible standard of living is available for perhaps two to four billion individuals in the context of today's best technology. This calculus leaves behind half of the world's existing population. So, what is the justification of growing the world's population toward a dangerous 2050 projection, especially in countries with demographic profiles where technological and learning aptitudes lag? If the central rationale of growth is the generation of business profits to support asset prices, the system's ethics are defective. If the world's human population is already excessive, and the number of people left behind rises faster than the number wisely accommodated, a policy dead-end awaits.

What will it take to show the current jockeying for growth as brutish and short-sighted? Where can America find a president, Democrat or Republican, who will confront these critical issues straight on?

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