Communicating the financial crisis in 7 easy steps
Young people in Greece and Spain are worried, angry, and question- ing the financial power structure that is causing economic hardship in their countries. The financial system has shown over the last few years that it has the potential to wreak havoc in all of our lives.
The environmental movement has argued long and hard for us to make this shift:
However what we would like to explore with you is how to include financial crisis along side the environmental issues in a way that makes sense, appeals to us a Transition folks, and speaks to people in our communities who maybe are not yet fully with us.
Step 1 Ecological limits are, real, pressing, and creating constraints in the economic sphere that have not been there before.
As evidenced by:
o The high price of oil creating a drag anchor on the economy
o The high price of other commodities constraining ‘normal’ economic activity
o Climate change pressing particularly on global food supplies, and altering hydrological patterns that in addition to constraining food production is creating water stress in many parts of the world.
Step 2 The ecological constraints in step 1 mean we won’t be able to carry on as we have even if we want to.
As evidenced by:
The limits to growth scenarios, world watch foundation reports, and IPCC 2007.
Step 3 We have built a financial system is based on growth, without growth it doesn’t work
Step 4 A growth based economic system, turbo charged by debt, has the capacity to crash our civilisation of its own accord even without us hitting ecological limits due to the unconstrained creation of debt.
As evidenced by:The blue curve is exponential, and shows that the creation of debt, that has enabled our expectations of unabated, rising living standards over the last 40 years to continue up to now.
The next doubling is highly unlikely, and therefore we are either living on borrowed time, or have to change to a non growth based economic system.
And :*260% was the record for total indebtedness by a nation state ever repaid. It was by Britain in the 19th century and it took many decades, an industrial revolution, and an empire of resources to do it.
It appears that our uncontrolled debt creation is the factor most likely to create a ‘tipping point’ into system collapse. However, we feel that the complexity of the interplay between resource constraints and the economic system make some kind of transition likely but impossible to predict the nature, speed, or duration. It is what we do now that will determine the nature of any transition as well as what emerges from that transition.
The financial crisis of 2007 has not been solved. Big banks and other financial institutions have used their political power to ensure the socialisation of debts, while retaining profits. There has also been an assault on weaker economies by stronger one in the by the latter’s financial institutions, which has led to national ‘bailouts’ used as cover for dismantling of welfare states and selling off of public assets. While this process is nothing new, 3rd world countries have suffered this treatment at the hands of the IMF for years, what is new is that this is now being done to first world countries.
• We have ‘kicked the can down the road’ nothing more, and in fact made the problem worse by creating more debt. We prevented the immediate crash but made the inevitable worse.
• Efforts to solve the debt problem with more debt will probably ultimately fail, and make the problem worse.
• We are not so much facing a liquidity crisis- i.e. “the banks aren’t lending”, but rather an insolvency crisis because banks and other financial institutions have large, and ultimately worthless debts that will never be repaid on their books.
• The adverse effects of debt socialisation are falling disproportionately on the poor and middle class, through slashing of public services, decreased spending power of national currencies, and increased taxation to service those debts.
• Financial war is also being waged between nations via a sovereign debt crisis in Europe, played out between the creditor nations of Germany, UK, Holland, and France (and the USA) and the so called PIGS.
• There is a crisis in the USA with national, state, and municipal debt reaching unsustainable levels.
Part of a solution to all this, as far as we can see, are Transition towns. Including financial crisis does not alter one jot the core transition approach; re-localising all we can and making ourselves less dependent on the global economic (as well as food/energy/consumer goods) system. By radically lowering our economic expectations, living standards, and resource use we will be well placed to weather whatever comes.
We are highlighting the financial piece of what is after all a whole system because we feel it is important to take the financial system, in particular the debt issue, into how we talk about and frame Transition alongside climate change and peak oil (and other resource issues).
Photo: the Financial INstability workshop, Liverpool, July 2011