Green Options

The economic, psychological and deglobalizationeffes of unemployment can be devastating.

As the G20 leaders gather in Washington for what has been dubbed “Bretton Woods II”, here’s a brief list of the economic opportunities they need to discuss:

The World’s population is estimated at 6.7 billion:

• of this, 15% live in slums and are permanently hungry
• yet the USA, the EU, the UK, Russia, China, India and Brazil have all reported bumper harvests this year

The World’s GDP is estimated at $55.5tr per annum:

• of this 85% is consumed by 20% of the population
• while 45% of the population live on around $900 per annum
  
• and 0.0001% of the population have a combined wealth of over $10tr

In the USA, in the ten years to 2006:

• employment stayed at around 72%
• while average earnings rose 45% from $37,000 to $54,000
• and the average real income of the poorest 20% of households fell

In other words, the global economy is fixed in a spiral where prosperity is hoarded by those who already have and isn’t shared with those who already have not. Social mobility is non-existent.

With a New Economy starting to emerge, how should we measure it’s strength? Using the old fashioned Gross Domestic Product, or the more holistic Genuine Progress Indicator?

Stop me if you’ve heard this one before:

A businessman is showing a potential investor around his factory. The investor is very impressed and likes the businessman’s figures. These show that the factory produces $5.2m worth of goods.

“And what about your expenditure?” he asks the businessman. The businessman looks back at him blankly. “You know: raw materials; transport costs; staff wages; loan repayments…..”

The business man starts to dribble from the corner of his mouth. In the end the investor storms off muttering darkly about how the gene pool needs to be reduced.

Last week, while poking around a few dusty corners of the internet, I came across a small business future group which one person had left because of disagreement about the prominence of sustainability in the group’s charter.

This is a shame. Those who are facing up to the current challenges in business need to work together to find the solutions, not argue over the relative importance of their preferred approaches.

Then a post on World Changing caught my eye. “The Two Faces of Economic Reporting” points out that last week’s growth in US GDP growth was underpinned by the largest drop in personal income for over three years.

America has money scorching a hole in her pocket.  Like many a college student with a credit card, Lady Liberty is racking up charges she knows she can’t pay when the bill comes in at the end of the month.  Her spending far exceeds her income and, by the end of 2009, the amount of money she owes will be well over 9 trillion dollars.  Were she a person, she would have no hope for early retirement, or maybe even any retirement at all.

How did America, one of the richest countries on the planet, end up in this situation?  The new documentary I.O.U.S.A. helps to answer that question.  Directed by Patrick Creadon of Wordplay fame, the film follows former US Comptroller General and CEO of the Peter G. Peterson Foundation David Walker and the Concord Coalition’s Robert L. Bixby around the country on their “Fiscal Wake-Up Tour.”  Bixby adds comic relief as they trace the history of the national debt, revealing startling facts like, the only year in US history that the federal government was ever one hundred percent debt free was 1835.

How much does business-as-usual cost? This morning, Green Car Congress reported that the US is projected to pay $440 billion for imported petroleum in 2008:

The increase to the estimated $440 billion for 2008 is based on an average $90 per barrel crude oil price for the year. In 2002, before the current bull market for oil began, US oil imports cost less than $103 billion. The preliminary figures for last year came to some $327 billion.

With little prospect for cheaper gas prices in the future, any decrease in the US export bill will have to come from a reduction in petroleum usage.

Which brings to mind two important questions:

1. What percentage of our Gross Domestic Product will the US have to export before things start to change dramatically?
2. Where is all this money going, anyway?

An economic analysis released February 25th shows major gains for the U.S. job market and GDP from 2007’s ethanol industry boom (emphasis added):

The analysis, conducted by John Urbanchuk of LECG, LLC, determined that the increase in economic activity resulting from ongoing production and construction of new capacity supported the creation of 238,541 jobs in all sectors of the economy during 2007. These include more than 46,000 jobs in the U.S. manufacturing sector. The goods and services required to produce the estimated 6.5 billion gallons in 2007 added $47.6 billion to the Gross Domestic Product and raised household incomes by $12.3 billion.

While the gains themselves aren’t all that surprising, they may turn the conventional wisdom that “ethanol subsidies are bad” on its head since increased tax revenue actually paid them off: