Tax Cuts, Tax Cuts and More Tax Cuts: Fooling Most of the People Most of the Time

In many parts of the world, from the United States to Europe to the Philippines, tax cuts is the hottest thing since sliced bread. Reducing taxes, it is claimed, is the best way to stimulate the economy.

Nobody enjoys paying taxes. High taxes reduces the money we have left to spend. Tax cuts are therefore quite popular and a sure way to get voters. Especially if the tax cuts are supposed to benefit ‘the middle class,’ since nobody, regardless of their economic status, likes to consider themselves lower class.

But the truth about tax cuts, or tax reforms, as it is commonly called, is that they invariably benefit the rich, not the middle class. The rationale for giving tax cuts to the rich is that it puts more money into the pocket of those that are able to invest. The assumption is that the rich will use this money to build factories and create jobs that will benefit everyone.

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The problem is that this is just a hoax, and does not really work. In several of his books, Dr. Ravi Batra explains this quite eloquently. The gist of the argument goes like this: If the government reduces taxes and keeps on spending the same amount of money, it means it has to borrow more money in order to keep up with spending. So who will the government borrow money from? The rich, naturally, since you cannot borrow from the poor, those who don’t have money.

This means that the government borrows money from the very same people who had the biggest reductions in their taxes. For example, if the tax cut reduces taxes by USD 500 billion, the wealthy are supposed to have USD 500 billion more to invest in the economy. But if this 500 billion is given to the government as a loan, then the rich end up with the same amount of cash on hand as they had before the tax cut. As they cannot lend it to the government and invest in new factories and jobs at the same time, the net stimulating effect on the economy is zero!

The only difference is that now, instead of the money being income for the government, it is a loan that has to be paid back, with interest! So, tax cuts to the rich does not help the economy grow but only makes the rich richer. Instead of paying taxes, they invest the same money in government bonds and earn an income!

What if the government cut expenses to finance the tax cuts? Would that stimulate the economy? Not in the slightest. The cut in government expenses, which might be pensions, Medicare coverage, or any other social programs, reduces the size of the economy.  Money given to the poor through social welfare is immediately consumed, and thus stimulates the economy. By removing money that is sure to be spent in the economy, and give it to the rich, there is no guarantee that they will either consume it or invest it. Rich people generally speculate with their money, such as buying assets or investing in the stock market, and this has zero stimulating effect on the economy!

There is another popular way to finance tax cuts, and that is to cut income tax but raise direct taxes such as VAT, sales tax, etc. An approach chosen for example in the Philippines, this is a direct way to transfer the tax burden from the rich to the poor. Due to progressive taxation, the rich pays a higher percentage of their income in taxes than the poor, but everybody pays the same rate of VAT. Since the poor generally consume all their available income, while the rich only consume a small portion of it, the increases in VAT hits the poor much harder.

Because these incremental forms of taxes are not noticed as acutely, there are less protests against VAT and sales taxes. The psychological effect on people is stronger when the government takes away a chunk of what you earned than when you just pay a little more each time you buy groceries or clothes.

So, given its dubious efficacy, why is it that tax cuts are popular among governments all over the world? There are two main reasons: First, politicians need to win elections to stay in power, and to win elections they need money. Since the big corporations and the banks have the most money to support their campaigns, they create policies that are favourable to the banks and the big corporations.

In addition, politicians are generally much wealthier than ordinary citizen. Therefore, they are much more likely to benefit from tax cuts favouring the rich. Donald Trump is an extreme example of both: he owns large corporations and is extremely wealthy, and at the same time, he is the President of the United States. Few people will gain more financially than Donald Trump from the recently enacted tax cuts.

In a judicial system, Donald Trump would have had to recuse himself from participating in a case where he had a personal interest at stake. Unfortunately, there are no such rules when it comes to politicians. They are free to vote and press for changes that may directly or indirectly benefit them as persons.

Secondly, these days corporations are very mobile, and can easily relocate to other jurisdictions. Some countries, such as Ireland, made it the foundation of their economic policy to reduce taxes so much that all major companies would want to relocate there. This creates competition, so other countries also have to reduce their tax rates to prevent companies from leaving. The logic behind this is that it is better to get some tax revenue from a company than none at all. This fuels competition to provide the most business friendly environment with the lowest taxes. In the end, the only ones who benefit are the rich. As if inequality is not high enough as it is, this trend is bound to make it even higher.

Can this trend go on indefinitely? No. When common people have no purchasing power left to drive the economy, something will have to give. Either we’ll have a reversal to more equality, or the entire capitalist system will collapse.

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Prout’s position is very clear. While in principle Prout opposes income taxes, and prefers direct taxation, this only works in a society where there is a wealth and income cap or ceiling, and where corporations have evolved into cooperatives. Until that happens, Proutists must oppose measures creating even higher levels of inequality, and that is what these so called tax reforms do.

Noam Chomsky once said that when taxes are used for their intended purposes, such as public transportation, the corporate friendly politicians call them subsidies. When taxes are used to help out the rich, they call it tax reform. So when someone talks about tax reform, you should hold onto your wallet.

Finally, Abraham Lincoln once said, “It is true that you may fool all of the people some of the time; you can even fool some of the people all the time; but you can’t fool all of the people all the time.”

This may be true, but given the feeble opposition we have to tax cuts since the time of Thatcher and Reagan, even among those who are most hurt by them, in the case of tax cuts the politicians have been able to fool most of the people most of the time.

 

Tax Cuts, Tax Cuts and More Tax Cuts: Fooling Most of the People Most of the Time
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Ethnic Cleansing in Myanmar: Stand Up for the Plight of the Rohingya

The most dramatic example of ethnic cleansing in this century must undoubtedly be that of the Rohingya, a largely Muslim minority in Myanmar. It is estimated that 60% of the Rohingya population have fled Myanmar in the past few years. While mistreatment of the Rohingya has been going on since independence in the predominantly Buddhist Myanmar, or Burma as the country was called at the time of independence, a sizeable migration first started in 2015.

Thousands of Rohingya left Myanmar in boats in desperate attempts to flee oppression in their home country. Since August 2017, however, this trickle of refugees has turned into a flood, with close to 600,000 out of a total population of one million fleeing for their lives to escape full scale extermination, rape, torture and burning of their villages. A recent United Nation’s report calls this exodus a “text book example of ethnic cleansing.”

All this has happened under the rule of the Nobel Peace Prize Laureate, Aung San Suu Kyi, who until now has been internationally championed as the saintly freedom fighter that ended military dictatorship and restored democracy to Myanmar. Her lack of action has frustrated and angered her worldwide supporters. Author Salman Rushdie and many other luminaries have written an open letter denouncing her government’s lack of action, and popular Guardian columnist George Monbiot has demanded that Aung San Suu Kyi should “give back” her Nobel Peace Prize.

But who are the Rohingya, and why are they persecuted? Rohingya in their own language means “Inhabitants of Arakan,” which approximately corresponds to present day Rakhine  State in Myanmar. According to the Rohingya, the area has been populated since 3,000 BCE, but there is little archaeological evidence to support this claim. What is historically certain is that the Arakan State was established in the 4th century, and that Islam arrived in the area around the 8th and the 9th century. The Rohingya believe that they hail from these early settlers.

Around 1430, more Muslim migrants from Bengal arrived in Arakan. This was during the Kingdom of Marauk U. The Burmese population, on the other hand, settled in Myanmar between the 9th to 15th centuries and did not conquer Arakan until 1785. At this junction, many of the indigenous populations escaped to British Bengal to avoid persecution. From this short historical review, we can see that the Rohingya has as good a claim to the land as any of the other ethnic groups in Myanmar.

During British Colonial Rule, Britain encouraged migration from Bengal into the sparsely populated Arakan, something resented by the local Arakan, and possibly the original source of the hatred of the Rohingya.

During Burmese independence in 1948, while the Rohingya were not officially recognized as one of the 135 ethnic groups in Burma, those who could prove that they had lived in the country for two generations were issued ID cards. Some were even awarded citizenships and allowed to participate in the political life of Burma.

After the military coup in 1962, things took a turn for the worse for the Rohingya. The military government forced all citizens to get national ID cars, and during this exercise all Rohingya were classified as foreigners. With the new citizenship law of 1982, the Rohingya were effectively rendered stateless, and the military government both tacitly and openly supported discrimination and attacks against the Muslim minority. Buddhist monks were often in the forefront of stirring up hatred against the Rohingya, which they considered as illegal migrants from Bangladesh that should either be killed or thrown out of the country.

Still, during the military rule, large scale atrocities against the minority were unheard of. While they may have been discriminated against, open and persistent attacks against their communities started only after 2010 when the military stepped down and Aung San Suu Kyi came to power.

So what does Aung San Suu Kyi have to say about this situation? Strangely enough, very little, and when she does speak about the situation, she seems in total denial. In a speech given on September 9, 2017 about the crisis, she did not refer to the Rohingya by name and claimed, falsely, that “all people living in Rakhine state have access to education and health care services without discrimination.”

She also blamed the violence on terrorism, when it is clear that it is perpetrated by her own army. Acting as if no killings or burning of villages are taking place, she commented that “We want to find out why this exodus is happening. We’d like to talk to those who have fled, as well as those who have stayed.“ These statements seem hypocritical in light of the fact that all the people who escaped to Bangladesh are very clear about why they left: to escape systematic and wide spread murder, looting and rape.

Just like a holocaust denier, Aung San Suu Kyi has closed her eyes against this undisputed reality and is acting as if genocide has never taken place.

What lies behind this paradoxical position of the famous Nobel Peace Prize Laureate? Whatever her reasoning, it is a chilling reminder that just because a person once fought against a dictatorship, that does not make him or her beyond reproach. There are many tyrants and dictators that have risen to power from being genuine freedom fighters, such as Robert Mugabe of Zimbabwe, who recently was disposed of by his own army.

Regardless of her motivation for acting as she does, she has clearly let down all of those who admired her as a role model. If she is not actively supporting the ethnic cleansing, murder, rape and torture of a significant minority in the country she is leading, she is at the very least lacking the moral backbone to speak out, and is thereby complicit in the crimes committed.

From a Prout perspective, discrimination against an ethnic or religious group should not be tolerated. Furthermore, a member of a Samaj is someone who has merged his or her interests with the local community, regardless of their ethnic origin or set of beliefs. It is therefore the duty of all Proutists to clearly speak out against the ethnic cleansing of the Rohingya, and to support a Samaj movement to protect the fundamental human rights and economic opportunities of the community. If at present we are unable do anything concrete to help the situation on the ground, at the very least, all Proutists can take a principled stand in the matter and speak out against the genocide and ethnic cleansing perpetrated by the hypocritical Myanmar government.

 

Ethnic Cleansing in Myanmar: Stand Up for the Plight of the Rohingya
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On Catalonia and Samaj Movements

At the time of this writing, the former president of Catalonia, Carles Puigdemont, has been stripped of his powers and is facing sedition charges, while the government in Madrid has imposed direct rule on the previously autonomous region. The issue at stake was a unilateral declaration of independence by Catalnoia on 27 October 2017, following a referendum on independence that was held in this prosperous region of Spain.

The referendum was bitterly opposed by the Spanish government. Under conditions of strong suppression by Spanish police the referendum was held on 1 October 2017. With 43 percent of the population voting, the result was that 90 percent was in favor of independence. After vain attempts to initiate negotiations with a hard line Spanish government, Catalonia declared independence.

It has been argued that all those in favor of remaining part of Spain boycotted the elections, and that the outcome is not a fair representation of the will of the majority of Catalonians. The strong pro-unity demonstrations that took place in the days following the referendum is an indication that there could be much truth to that argument.

But what is Catalonia, this obscure region of Spain, which few outside the country could have placed on a map prior to this crisis? And why are the Catalan people looking for independence from Spain? Would Catalonia qualify as a Samaj, and if so, should Proutists support the bid for independence?

Catalonia

Catalonia is a region in the North East of Spain which includes the city of Barcelona. It makes up 6.3% of the Spanish landmass, and contains 16 percent of the population.

Its economic importance to Spain is higher than what the following economic figures would suggest. The GDP of the region represents 1/5th of Spain’s GDP, but it contributes 25.6 percent of Spanish exports and 30 percent of all new investments goes to Catalonia. Its GDP per capita of EUR 28,590, even if not the highest of Spanish regions, is still much higher than the GDP per capita for Spain as a whole.

Historical Roots

The area around Barcelona, which today makes up Catalonia, was unified in 1070 by Ramon Berenguer I, Count of Barcelona, who subdued other Catalan Counts and brought peace to the region. This sowed the seeds for a Catalan cultural identity.

The terms Catalan and Catalonia emerged first around 1150, and over the next 300 years, the prosperity and influence of Catalonia grew steadily. A distinct language and culture emerged, which is alive and well until today. From around 1450, the political freedom Catalonia had gained gradually faded, and it finally ended up ceding its independence to Spain.

Dreams of an independent Catalonia never disappeared completely, and when Spain’s power weakened after losing the American-Spanish War, fresh demands for Catalonian independence emerged which finally led to an autonomous status with Spain in 1931. With the emergence of General Francisco Franco as victor in the Spanish Civil War, he abolished the autonomous status in 1938. After Franco’s death in 1975, Catalan regained its independent status within Spain.

Dreams of full independence never died, and from 2006 there has been a movement that has demanded total independence for Catalonia, and several referendums to legitimise a declaration of independence were held leading up to the events in October 2017.

Is Catalonia a Samaj?

Catalonia has a common language, a sentimental legacy, a common culture, and the potential for creating a self-sufficient economic zone. It is economically prosperous, but even without an anti-exploitation sentiment, all conditions for a genuine samaj movement are present.

Would Prout Support Bids for Catalan Independence?

This issue is potentially a contentious one. Should a people of a specific region, if the majority so desire, have the automatic right to independence? Should West Bengal, for example, have the right to become an independent state? P.R. Sarkar did not specifically discuss this issue as far as I am aware, but he gave some hints that can serve as a clue. He was clearly against the partitioning of India into India and Pakistan, and blamed many subsequent problems on this partitioning. He also discussed Samaj movements as socio-economic zones within the context of countries, and there is no indication that he proposed that they should become independent states. P.R. Sarkar also said, “This age is not the age of big animals and small countries.

From this, it is doubtful that Sarkar would support the idea of Catalonian independence, and I see really no strong argument that any Proutist would argue for such a stance. But be that as it may. It is clear that Catalonia would qualify as a Samaj, and as long as Catalonia would remain within the European Union, even independence from Spain would not allow it to achieve that goal unless radical changes are made to the EU constitution.

That said, in other areas of Europe or the globe, there may be instances where a certain samaj would stretch across national boundaries, as in the case of the Sami people, whose ancient homelands spread across Norway, Sweden, Finland and parts of Russia. In a large, integrated system comprising various samajas, such autonomous regions supporting the cultural, geographic, religious and linguistic legacy of a people can emerge as part of a larger economy and across national boundaries.

Catalonia and the European Union

The basis of the European Union are the so-called Four Freedoms, that is, freedom of movement of people, goods, services and capital. In such a system, the basic prerequisites for creating self-sufficient economic zones or samajas are simply absent. Neither sovereign states nor regions within these states can have an independent economic policy, as the rules of EU precludes any meaningful samaj to be formed! If there is free movement of people, how can you give priority to local people for employment? Actually, the laws of EU specifically forbids you to give priority to local people.

If there is free movement of capital, how can you prevent profits to be taken out of a region? Any such restriction, which is one of the basic tenets of a samaj, is currently not possible in the EU.

If there is free movement of goods, how can you promote indigenous industries to ensure that any goods that can be produced locally indeed are produced locally, instead of being imported from other parts of EU?

The same principle goes for services. As we can see, in the present European Union, the laws are such that samajas cannot function the way they are supposed to. So-called sovereign states are not sovereign at all, as they are bound by the free market principles imposed by the EU.

Thus, one of the first demands samaj movements inside the EU must make, is to push for changes to the framework that makes up the EU constitution.

Conclusion

The rise in nationalist and independence movements in Europe is a clear indication of the failed policies of the European Union. Trade is good, and free trade is even better, but it has to be between equal economic partners. Therefore, to be truly beneficial, European trade agreements have to include possibilities for less developed countries and regions to improve their competiveness and welfare for the people, rather than to benefit those already ahead and preventing less developed regions from advancing.

Unlike many other regions of the EU, Catalonia is a relatively prosperous area, and that is also one of the reasons the Spanish government is taking such a hard line approach. But if both the Spanish government and the EU had been more accommodating to the Catalan demands, a workable compromise may have been possible. The sentimental legacy of people cannot be suppressed, and if both national governments and the EU continue to ignore these issues, this conflict is the beginning of more to come.

Rather than seek independence from Spain, the Catalans, and all other samaj areas within the EU, should seek independence from the current anti-regional policies of the EU and organise its region along the principles of decentralization, self-sufficiency and economic democracy. The enemy of true regional independence is not nationalism but neo-liberal capitalism as exemplified by the four freedoms set forth in the EU constitution.

 

On Catalonia and Samaj Movements
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North Korea – Nuclear War and Self Sufficient Economies

Nuclear War

The escalating rhetoric between North Korea and the United States has brought the world closer to Nuclear War, something that has not been contemplated since the Cold War.

Some news commentators insist that the North Korean Supreme Leader, Kim Jong-un, is a mad and crazy person. That is unlikely. There is every indication that he, like his father and grandfather before him, is a shrewd and calculating leader.

In North Korea, the Supreme Leader has an almost godlike stature, as well as near absolute, political control. But despite being the Supreme Leader of North Korea, Kim Jong-un’s grasp of power, unlike that of his father, is not secure. It is therefore necessary for him to act strong and powerful to stay in power. Threatening the United States, the most powerful nation on earth, makes him look powerful and invincible. It also redirects attention away from his domestic problems, such as food shortages, etc.

Therefore, the escalating threats against the United States are more for domestic consumption than actual threats, and it is unlikely that Kim Jong-un believes he can win a nuclear war. However, it is a game of brinkmanship, and during such games things can go wrong.

The nuclear program itself is not illogical from a North Korean point of view. A country with nuclear weapons capabilities is much less likely to be attacked than a country without it. Libya, Iraq and Ukraine were all countries with nuclear programs which were abandoned, and they were all invaded. North Korea believes, probably rightly, that it is less likely to be invaded if it has a nuclear deterrent.

Apart from creating an external enemy to bolster his popularity at home, Kim Jong-un has also taken internal steps to eliminate threats to his regime. It has been reported that China was actively pursuing a plan to oust Kim Jong-un, whom China regards as out of control and a threat to their national interests. China was therefore grooming Kim Jong-un’s estranged half-brother, Kim Jong-nam, to become the new leader.

Kim Jong-un discovered the plot, according to the reports, and had his half-brother assassinated in the Kuala Lumpur International Airport in Malaysia. He also had his own uncle executed, as he was suspected to be involved in the same plot. This indicates that China may not have had as much influence on North Korea as the American government might think. A collapsed North Korea is not in the security interests of China, with the prospect of millions of refugees entering the country and the possibility that the US would station troupes near its border. China needs North Korea as a buffer, but China is probably almost as concerned about North Korea’s nuclear ambitions as South Korea.

“The Poorest Advanced Economy in the World”

Dr. Mitsuhiro Mimura, a leading expert on North Korea, calls North Korea “the poorest advanced economy in the world.” While the country is poor, he explains, the Koreans “have built a comprehensive production structure including both labor-intensive and capital-intensive industries. They are able not only to produce capital goods to run their society, such as railroad locomotives and carriages, cargo vessels, turbines and generators for power plants, numerically controlled lathes, but they also make most of the things needed for military use, from small arms to ballistic missiles and nuclear weapons, trucks, jeeps, destroyers, and diesel engines.”

Resemblance to Prout

What is striking about the North Korean economy is that it has many elements that resembles Prout. The guiding philosophy of North Korea, the Juche Idea, calls for economic self-sufficiency. Anything that can be produced locally is produced inside North Korea, using locally available raw materials whenever possible. Advanced production methods are encouraged, and the stated goals are self-reliance, modernisation and scientific development.

In essence, North Korea is self-sufficient in most things, including energy, food and capital goods. While it is still a centrally planned economy, a decentralisation of production decisions has been taking place over the years, and presently there is a system where heavy industries are controlled by the central government, while light industries are increasingly under the control of local authorities. While private companies are banned, “socialist cooperation,” which works more or less like cooperatives, are encouraged, and there is an important role in the economy for individual, small scale enterprises such as artisans and household farmers. This economic system has an uncanny similarity to Prout’s three tier economy. But there is more.

In theory, North Korea guarantees the minimum necessities of all people through a food distribution system. This system collapsed during the famine in the 1990’s, as the government was unable to provide even a fraction of the food requirements for its people. In 1997, people were allocated only 40 grams of grain per day, which is far below starvation levels. These days, the guaranteed food rations have been restored to something close to the caloric minimum requirements.

The direction of the economy is also not for profit. The main goal of a factory manager is to ensure the survival and welfare of his workers, and as long as he manages that, he can get away with breaking laws and formal regulations.

Problems within the North Korean Economy

With these and other ‘Proutistic’ policies in place, one would assume that North Korea is prosperous. But it is not. After this economic development started in the 1950’s, the GDP per capita or North Korea is still only 1/7th of that of South Korea, which has pursued an unashamedly capitalistic way of development. There are sporadic food shortages and the electric consumption per capita is 17 times below South Korea. Access to telecommunications and the Internet is severely restricted. Any independent thinking is effectively cracked down upon; and the general population is not only poor but deprived access to modern technologies, such as the Internet and mobile phones. The North Korean experiment, in other words, has not worked out that well for its people.

There are several reasons for this, and the foremost is the country’s isolation. North Korea has taken the concept of self-reliance to an extreme, not unlike Rhodesia during the economic sanctions imposed toward that racist regime. North Korea has chosen the path of isolation, and that has dramatically cut down the productive potential of the country. If this is due to fear of the introduction of foreign ideas into the country, which may upset the monolithic system of government and its Supreme Leader, or for ideological reasons, the effect is the same. In recent years, economic sanctions have isolated the country even further. North Korea has effectively been cut off from the rest of the world.

There are also other reasons for the economic problems, such as the strong centralization of economic planning and the lack of incentives for people.

Caution for Proutists

Human society progresses through increased cooperation between its members, and this require an ever increasing level of specialization between individuals. The more people specialize in their respective fields and cooperate with others, the more prosperous and productive they will be. This complex cooperation is what makes human society unique, and today’s complex global cooperation has made the world much more productive than any other time in history. International cooperation is not the problem. The problems are that in a capitalist system the distribution of the fruits of this international cooperation overwhelmingly benefits a small minority and the system depletes our natural resources and destroys the entire eco system in the process.

Prout has the answers to this dilemma, as it envisions a coordinated cooperation that prevents exploitation of some areas and some people for the benefit of the few. But Prout does not advocate a decrease in international cooperation, as this would be tantamount to reducing the productive potential of the world. Even though P.R. Sarkar talks about self-sufficient economic units, this is NOT a call for isolation and an end of trade. Contrary to the general belief amongst Proutists, Sarkar, if certain criteria are met, encourages total free trade without any duties.

 

“In the existing world structure geo-sentiment is an obstacle to the implementation of free trade.    Neither the capitalist countries nor the communist countries like the free trade system because it is detrimental to their respective self-interests. But there are some free trade zones in the world which are very bright examples of the success of this sort of system. Singapore is one such example. There was a good proposal to declare Calcutta a free trade zone, but it was not implemented for many reasons, including the failure of the concerned leaders. Bengal could have been greatly benefited by such a system”.     [Economic Dynamics, 13 September 1987, Calcutta]
The big caveat here is that the free trade has to be done between equal parties, and that countries with an underdeveloped economy must first build up their industrial potential before opening up their borders. If not, they will end up being exporters of raw materials and importers of manufactured goods, something Sarkar strongly speaks against. But Sarkar never encouraged economic isolation. (For a detailed discussion on the balance between self-sufficiency, protectionism and free trade, please refer to Ramesh’s book “Growing a New Economy.”)

North Korea presents an important lesson for Proutists: to avoid the temptation to take Prout policies out of context and to apply them superficially or blindly. P.R. Sarkar’ theory is far too comprehensive and refined to limit itself to simplistic interpretations. Moreover, in the end, the prosperity of the general masses is a country’s true measure of economic success.

Final Thoughts

While the immediate threat of nuclear war with North Korea is probably exaggerated, the long term prospects are worrisome. On the one hand we have widespread exploitation, injustices and social problems that lead to conflict, and on the other hand we have leaders of nuclear capable nations that are more interested in power and wealth than the welfare of their people. This is a volatile mix, and as long as this situation continues, the threat of an “accidental” nuclear war will remain.

 

North Korea – Nuclear War and Self Sufficient Economies
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Forget Peak Oil-Think Instead About Peak Everything

The world is heading for an “ecological credit crunch” far worse than the recent financial crisis. We humans are over-using the natural resources of the planet. The Living Planet report[1] calculates that humans are using 30% more resources than the Earth can replenish each year.

This results in deforestation, degraded soils, polluted air and water, as well as dramatic declines in numbers of fish and other species. According to the report’s authors, led by the conservation group, WWF International, formerly the World Wildlife Fund, we are running up an ecological debt of $4 trillion to $4.5 trillion each year—double the estimated losses of the world’s financial institutions as a result of the credit crisis.

The report also calculated the economic value of services provided by ecosystems destroyed annually, such as diminished rainfall for crops or reduced flood protection. The report concludes that by the year 2030, we will need two planets to sustain our consumption. Unfortunately, we have only one.

“The recent downturn in the global economy is a stark reminder of the consequences of living beyond our means,” says James Leape, WWF International’s director general. “But the possibility of financial recession pales in comparison to the looming ecological credit crunch.”[2]

In an article in Scientific American titled “Forget Peak Oil, We’re at Peak Everything [3] published in March 2013, the journal claims that apart from oil, we are running out of forests for paper production; the demand for water is 40% higher than sustainable levels; and fish levels in the seas are dropping due to overfishing.

Minerals are also starting to be in short supply. In his book, The Race for What’s Left: The Global Scramble for the World’s Last Resources[4], Michael T. Klare concludes that global shortages are forcing us to look for resources in more and more difficult places, at an increased cost.

Shortages of oil and minerals, such as silver, zinc, antimony, indium, hafnium, terbium, platinum, gallium and many other rare, but exceedingly important resources, forces us to search under the sea, in the Arctic regions, and in other hostile places.

While doing so, the cost of extraction increases, and we are increasingly running into diminishing returns by having to spend more and more resources to get the same amount of oil, gas, and minerals as before.

At the same time, we are damaging the ecosystem, providing us with a complex array of services needed to sustain life. Therefore, while we are desperately trying to delay the time when these resources finally will run out, our unsustainable economic system keeps us on a pilot course of continued destruction of nature and our natural resources—the very foundation of our existence.

[1] World Wildlife Fund (WWF), ”The Living Planet Report 2012,” http://awsassets.panda.org/downloads/1_lpr_2012_online_full_size_single_pages_final_120516.pdf

[2] WWF, “Living Planet Report 2008,”  http://wwf.panda.org/about_our_earth/all_publications/living_planet_report/living_planet_report_timeline/lpr_2008/

[3] http://www.scientificamerican.com/article.cfm?id=forget-peak-oil-were-at-peak-everyt-2013-03.

[4] Michael T. Klare, The Race for What’s Left: The Global Scramble for the World’s Last Resources (Metropolitan Books, New York, 2012)

 

Published with permission of Roar Bjonnes and www.growinganeweconomy.com

Forget Peak Oil-Think Instead About Peak Everything
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