Sustainable economics

I'm entirely impressed by President Obama and by how quick he's moving to take action on a number of important subjects. So the following is not a criticism of him, just a riffing on something he said. Nor is it a criticism of the speech in which he said it: a speech is a place for sound bites and inspiration, not exhaustive reasoning. I'm just using some of his words as a starting point for some other thoughts.

One of the most-quoted bits of Obama's inaugural address is the following:

We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished.

He makes a good point on the face of it: the current crisis doesn't have to be as catastrophic as some have made it sound. But the reasoning itself is wrong.

The recent financial meltdowns springing from the credit crunch and other things are a perfect example of when something unsustainable catches up at last. In a way, Madoff wasn't the only one perpetrating a Ponzi scheme: the entire banking industry was practicing something similar, taking on more and more risky debt, shuffling it around with the buying and selling of debt insurance, keeping the short-term cash flows good while building up a bigger and bigger disaster waiting to happen. Until it finally did.

Is this an isolated incident, one particular string of bad decisions in one particular industry? Maybe. It would be irresponsible and inaccurate to suggest that such unsustainable practices, sustaining record growth by accumulating potential disaster, fill all our industries. But at the same time, it would be folly to imagine it's limited to this one mistake; that apart from that, we're doing fine. In fact, the entire history of American industry is a story of unsustainable practices, starting from the very first of them, the rapacious consumption of America's vast natural resources dating from the days of the first European settlers.

It was that sense of a land of plenty, as much as any other cause (like freedom from religious persecution), that brought so many people to these shores. Even more, it was that plenitude that built the foundation of America's economic might. More than two centuries later, the United States remains a pre-eminent force in the world economy largely because of the effects of that early bounty, and the culture of industry that grew from it.

But while our wide open spaces, plentiful mineral and timber reserves, and vast herds of buffalo might have gotten us to a great start, they also were the first American unsustainable economy. Within a lifetime of European settlement, some of the most basic natural resources were already being lost to overuse and irresponsibility. And every decade since then, the American people have destroyed something irreperably. Some land is now too polluted to use, some species is now extinct, some chemical change in our atmosphere is worsening, some toxin has leached into a water supply, some mine has been exhausted and left filled with poisonous tailings. The entire world stands on the brink of several concurrent environmental catastrophes because its rapacious economy demands continued heedless destruction in the name of consumption.

In a way, the credit crunch can be seen as a microcosm of a much larger pattern of capitalism's greatest failing: the elevation of the short-term profit over things like sustainability, responsibility, and cooperative allocation of resources.

So if our workers are no less productive than when their consumption caused landfills to poison water tables and factory farming to wash away our soil; if our minds are no less inventive than they were when we invented things that are destroying the ozone layer and causing global warming; if our goods and services are no less needed than they were when our parents stopped saving to buy more things, ensuring we would need even riskier debt to finance our homes with no savings to fall back on, until the bell finally tolled; then are we really standing on the precipice of a new start?

In my opinion, we are, but it will not come from reviving the past, from drawing on our past investiveness, our past consumerism, and our past industry. It wouldn't fit into a tidy, quotable sound-bite for Obama to say it, but I think he would agree: our salvation will come from applying a new form of American industriousness to new forms of American industry, forms built around not merely failing to repeat the mistakes of the last two centuries, but on the burden of fixing them.