Runaway Capital and the Necessity of SLOW

Slow Food; Slow Money; Slow Life. Such concepts are anathema to the frenzied culture of the dying industrial age. But these ideas are becoming popular among a small but growing class of folks who are simply tired of ‘the rat race.’ “Slow” is closely aligned with the simplicity movement. What do they mean, why should we want to achieve them, and what’s the point?

To fully recognize the fatal flaw of the current economic path and the need for a new direction, one really must understand acceleration. Or, grasping the power of compound interest would do. With regular savings and compound interest over a working career, a worker with a modest salary could retire a millionaire. But how many do?

For that to work, the saver must also avoid debt – especially consumer debt. That is increasingly less likely as wages are squeezed for ordinary workers who are pressured to consume more with “easy” credit. Of course, “credit” is the availability of money for borrowing. Consumer debt is a burden that more than neutralizes any savings program. The debt-based economy is a complex trap.

Runaway Capital
The debt-based economy must continually expand. How else can interest be paid but by adding more money to the system? Banks are allowed to loan a lot more money than they keep in “reserve.” That new money is created as debt in the accounts of borrowers. Economic expansion is based on expanding debt. Government debt and private debt are the basis for the profit that interest rates generate as growth.

Since the 2008 collapse, the Federal Reserve loans the Big Banks money at near zero rates. It has bought the bad debt that should have pushed the Big Banks into bankruptcy. But infused with new cheap capital, banks are nevertheless afraid to lend to businesses since so little demand remains in the economy. The result is that with institutional rates so low, banks buy each other instead of lending to business.

Corporations are afraid to invest in production since demand is so low. They use their trillions horded in cash to buy back shares and drive up share prices, making themselves appear more valuable. This allows executives to ‘justify’ larger bonuses, instead of investing in meaningful production – which would expand employment, if only in Asia.

In a finite world, at some point the acceleration of growth – via compound interest on growing debt– becomes an unsustainable Ponzi scheme. It is no longer the real economy that is growing. The expanding “financialized” economy of accelerated growth of phantom wealth through complex derivative instruments keeps expanding. It is allowed because no real restraints have been imposed on the banksters who caused the crash. The fatal flaw has been covered over in imaginary cash.

This false creation of money has no substantive basis for capital creation in real life. These financial manipulations generating phantom wealth produce no real value. The consequences for the currency will be dire. The basis for the value of the dollar cannot be sustained in debt alone. That is why the Chinese are quietly unloading dollar debt instruments – treasury notes and bonds – in favor of gold and currencies with more long-term security.

Slow Capital, Real Investment
The most important problem with “Fast Capital” is that it drives financialized economic growth at the expense of the real economies of communities. “The economy” no longer fits the real circumstances of the world we live in. It was a tenuous fit to begin with. By the 20th century so little of the world was left to conquer that it had scant room to grow. Now the growth model is being tested against environment limits. But financial growth, being abstract, is only limited by debt structures.

Today the real-growth economy is restrained by a finite supply of depleting resources and its own accelerating ecological destruction. Unfortunately, most attempts to provide an alternative world based on ‘renewable’ energy and resources are framed in the failing economic-growth model. Most advocates of renewable energy and resources do not argue for a no-growth economy. Growth is a deep political value in the economic culture. Growth is seen as an inevitable requirement for prosperity – everyone is for it. It is both the essential element and fundamental flaw in the conventional model of the economy.

A new economy that is based on slow capital is now necessary. Certainly, the transition from the economy of indiscriminant expansion to a carbon neutral economy of stability will involve selected areas of real growth – and others of major contraction. In this new context, capital investment must apply technological innovation to “the old ways” of producing needed goods in creative ways. The technologies of “labor saving” overproduction cannot work. Slow production with higher quality responding to real needs will support more jobs requiring more skill and education. Slow education is labor intensive and would require little capital – it will require social commitment of slow capital.

Creating an abundant new ecological economy requires innovative thinking and experimentation, not automated extractive industry to supply overproduced useless objects. Slow capital must be invested in new technologies for effective use of more skilled labor to convert the economy to more carbon-neutral activity serving human needs, not fast capital serving financial growth for elite phantom wealth.

It is still hard for us to visualize. Our thinking is so influenced by the growth-economy culture. But the ecological economy will be slow and both intellectually and artistically rewarding. It will focus on human interaction to realize the cultural goals of achieving basic sustenance, artistic expression, intellectual exploration, and civic engagement. None of these require fast capital, or false wants for overproduced meaningless objects of momentary attraction. All those suburban storage units will not be needed. What is most required is a societal commitment to an economy driven by core human needs.

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