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Growth vs. Prosperity: Crash Course Chapter 5

One of these is a much wiser choice
Friday, July 18, 2014, 8:52 PM

Chapter 5 of the Crash Course is now publicly available and ready for watching below.

It challenges the conventional thinking that "economic growth" is the same thing as "prosperity". It isn't. And increasingly, we're being forced to trade one off for the other. As global surplus resources dwindle, we need to ask ourselves: Which of these do we value more?

For the best viewing experience, watch the above video in hi-definition (HD) and in expanded screen mode

Coming next Friday: Chapter 6: What Is Money?

For those who simply don't want to wait until the end of the year to view the entire new series, you can indulge your binge-watching craving by enrolling to PeakProsperity.com. The entire full new series, all 27 chapters of it, is available -- now-- to our enrolled users.

Enrolled users can access the new series at www.peakprosperity.com/crashcourse

And for those who have yet to view it, be sure to watch the 'Accelerated' Crash Course -- the under-1-hour condensation of the new 4.5-hour series. It's a great vehicle for introducing new eyes to this material.

Transcript: 

Now I’m going to introduce the second Key Concept, and it is far enough outside of current thinking that I’m going to get a little backup from a 19th-century philosopher.

Here’s the quote.

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

This great quote comes from this happy guy here (Arthur Schopenhauer)

At some point over the next 20 years, this next concept I’m about to introduce will be “self-evident.”

But for now, I think it would be safe to say that a lot of people would consider it to be ridiculous.

What is this wild concept? It's that economic growth may not be good for us any longer.

But growth is good, right? Nearly everybody would agree that we want a growing economy because a growing economy means that we are becoming more prosperous.

Economic growth offers opportunities, and we are all for opportunities. At least I am. And the desirability of economic growth is virtually unquestioned today. 

It's just something that everybody – from politicians, to investors, to business owners -- talks about wanting more of. 

So, many people would say that growth equals prosperity.

But is this actually true? And what if it’s not?

Growth is actually a consequence of surplus, if we think about it. For example, your body will only grow if it has a surplus of food. With an exact match between calories consumed and calories burned, a body neither gains nor loses weight. A pond only grows deeper if more water is flowing in than is flowing out.

So, it can be said that growth is actually dependent on surplus.

Similarly, prosperity is dependent on surplus. Here’s another example. Imagine that you are a family of four, your yearly income is $40,000, and at the end of the year there is no money left – on December 31, there are exactly zero extra dollars to spend on your family.

But then a 10% raise comes along, which equals $4,000, and your family can EITHER afford to have one more child OR you can enjoy additional prosperity by spending a little bit more on each person. But you can’t do both.

There is only enough surplus money in this example to do one thing, so you have to choose – will it be growth or will it be additional prosperity?

And what is true for a family of four is equally true for a town, a state, a country, and, yes, our entire world.

Through this example we can tease out a very simple and utterly profound concept, that growth does NOT equal prosperity. For the past few hundred years we have been lulled into linking the two concepts, because there was always sufficient surplus energy that we could have both growth AND prosperity.

That is, we didn’t have to make any hard choices between the two.

The economist Malcolm Slesser, of the Resource Use Institute of Edinburgh, Scotland, has calculated that over half of the world’s energy is now used to simply grow.

So here’s the big question: What’s going to happen when 100% of our surplus money or energy is being used to simply grow? The result is going to be stagnant prosperity.

And what happens if there’s not enough surplus to even fund growth alone? Well, when that time comes, we will experience both negative growth and negative prosperity– not exactly the sort of future I am looking forward to.

More immediately, all of the developed world's bond and stock markets are priced with the implicit and explicit assumption baked in that there will be continued future growth in the economy, corporate earnings, money supply, debt and all the rest.

But what if that growth never arrives?  What then? 

Without robust growth those markets will be worth a lot less than their current valuations, and that's a huge risk for individual portfolios, pensions, endowments, and even social stability. We’ll talk in more depth about the seriousness of this risk later in the Crash Course.

But simply put: If we do not properly allocate our dwindling surplus resources towards prosperity, and instead default into the comfortable and familiar pattern of growth, then we risk a future of less prosperity.

This, then, is the greatest challenge of our times – properly recognizing where we want our remaining surplus to go and getting that story out.

I, for one, want to see continued advances in energy efficiency, medical technology, and everything else that modern society can offer.

I want my children to have reasonable and fulfilling jobs, and I personally would vastly prefer to live in a world of happy and prosperous individuals versus one that is merely larger, but with less to go around for each person. 

It is our future prosperity that we place at risk if we allow ourselves to do what is easy – that is, take the path of least resistance and simply grow – instead of doing what is right, which is directing our surplus towards a more prosperous future.

So there it is, Key Concept #2 of the Crash Course: Growth does NOT equal prosperity.

Now that you have these two in hand, we are ready to explore this thing called “money.”

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3 Comments

treebeard's picture
treebeard
Status: Gold Member (Offline)
Joined: Apr 18 2010
Posts: 390
growth

I know that this is the shortened version, but in the example, population growth (one more member of the family) is used as an the example for all growth.  I think to put another more substantive nail in the coffin of the growth Mentality, how about an example of economic "growth", growth in industrial "production", or growth in consumerism as an example.  At the foundation isn't the problem that we have substituted having for being?

Those who point to population as the fundamental problem of our time miss the deeper problem that we face.  Reduction of population just allows us to go back to business as usual because there fewer of us around damaging the planet.  Isn't changing the relationship each of us has with the planet the critical piece in the story?  Can each of us come into a relationship with the world around us so that we are not destructive to our surroundings?  I think that is the idea that we as a culture cannot get our arms around, that is the issue of our times.  If we understand this as an individual issue, that puts the power and the responsibility back in our own hands.  If population is the problem, then its the fact that someone else is having kids becomes the problem, we slip neatly off the hook.

I know that other portions of the crash course deal with those deeper issues, perhaps this is to difficult to communicate in a short segment like this. Perhaps it is just to deeply ingrained in our culture to discuss at all?

thc0655's picture
thc0655
Status: Platinum Member (Offline)
Joined: Apr 27 2010
Posts: 642
Or maybe

Or maybe it's because the solutions to THAT are in the realms of spirituality and morality where science and the scientific method are of very little, if any, help.

treebeard's picture
treebeard
Status: Gold Member (Offline)
Joined: Apr 18 2010
Posts: 390
In our minds

We spend to much time in our minds and not in our hearts. We are trapped in Plato's cave gazing at shadows.  We can see what is with the heart, but we have rejected our hearts because we confuse them with our pleasures and desires.

The scientific method works in the spiritual realms as well, but not the religion of a materialistic and reductionist science who's only desire is power.  The mind can poison morality and the spirit as well.  Can we make the world whole hearted again and stop smashing it into pieces with our heads.

If it is the morality and spirit of the heart I'm on board, but if it is the morality and spirit born of the mind, no thanks, we have drunken too much from that bitter cup already.

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