Just a simple concept today:
Perpetual growth in a finite world is mathematically impossible.
Pretty easy, right? Limited resources cannot possibly meet the demand of an exponential growth curve.
The repercussions of that simple common sense notion are profound:
1. Compound interest (perpetual exponential growth, defined as a percentile) is mathematically unsustainable. It will either create a hyperinflationary death spiral as seen in the Weimar Republic, or redistribution of the limited resources, with ever-increasing concentration of the resources in the hands of those who had more to start with.
That’s how interest (especially compound interest) works; the more money you have, the faster you accumulate more interest proceeds. (That’s why there are thousands of shills proclaiming “make your money work for you”; interest does the work, and the “investor” does nothing.) Taken to a logical conclusion, without inflation of the money supply, the ultimate endgame has all of the money in the system in the hands of the single entity who took the best advantage of interest. (Typically, that’s also the entity who had the biggest piece of the pie when interest started counting.) With inflation, it’s actually the same endgame, it just takes longer.
2. Finite worlds (like the one we live on) are zero sum. There are only so many resources to go around. It’s basic physics: you cannot make more of something, matter or energy, without adding to the finite state from somewhere outside of the system. (And yes, the irony of the wiki link on “zero sum” showing a misunderstanding of the math as applied to an economy is not lost on me.)
I suppose, to be fair, Earth is continually bombarded with a great deal of energy from the Sun, so from an energy standpoint, we’re not truly zero sum… but it’s interesting to me that in all the fuss over “energy independence”, we still talk of using up the finite resources here on the planet, all while largely ignoring solar power, our only significant source of long term sustainable energy.
3. The “investment society” that drives our cultural obsession with Wall Street, retirement investing and ROIs is built on the notion that a percentage of “returns” on our investments is healthy and desirable. In reality, it is parasitic and inflationary. Demanding perpetual growth of companies that we “invest” in is setting them up to fail. They can no more fight the realities of math than they can fight the laws of physics. This is why we see companies, even huge ones, turning to the bailout bar, sucking at the teats of the taxpayer. They cannot sustain operations at the level of demand that investors have placed on them. It’s a mathematical impossibility. (And all the bailouts in the world will not help; they merely siphon taxpayer money to the bailout beneficiaries, throwing even more of our money into a financial black hole. The best it can do is stall the inevitable.)
To be fair, there have been a ton of fraudulent activities involved, including fiat money supply and fractional reserve lending, but underneath it all is the drive for an ever-increasing slice of the pie that interest promises. Crashes are inevitable, as the supply will never keep up with demand, and the disparity accelerates as time goes on in an interest-based regime.
4. Nothing will stave off the inevitable crash of a system built on perpetual growth and interest. It is built to fail, collapsing into a financial singularity, with the resources concentrated in very few hands. Crashes will accelerate and be more severe, mitigated temporarily by shuffling the deck chairs, but there is no other possible outcome. That’s the inevitable nature of the intersection of the infinite and the finite. It’s not market psychology, it’s not sociology, it’s not politics. It’s pure math.
So what of “sustainable business“? The politically correct buzzword is rooted more in sociology and feel-good PC terminology. The only truly sustainable business is one that is mathematically stable. That means no interest. It means providing a valuable service at a fair price and maintaining cost parity with the effort required to provide the service. It means an honest day’s work for an honest day’s pay.
The current worldwide economic meltdown is a fight against the inevitable. We will wither adopt truly sustainable practices or we will see increasing income disparity, social upheaval and hyperinflationary deaths. Iceland has already declared bankruptcy as a nation. Finite beings, whether nations, businesses or individuals cannot fight the mathematical demands of perpetual growth. Criminals will work the system and profit handsomely during the collapse, but unless systemic changes occur to reflect the reality of life in a finite world, the endgame is assured.