The problem with growth

The “free market economy” presupposes falsely that the economy can go on expanding indefinitely. That, however, is mathematically impossible. An economy which set that as its goal would end up destroying itself. Let us recall briefly the old story about the king who granted the inventor of the game of chess one wish as a reward. The inventor wished one grain of wheat on the first square of the chessboard, two grains on the second square, four on the third square, and so on: on each of the following squares twice of the preceding square. The king could not grant the wish! Why? The last square would claim eighteen and a half billion grains of wheat or four hundred and forty times the grain harvest of a whole year!

Put differently: One German penny banked at 5% interest per year at Jesus’ birth would, in 1990, amount to 134 ingots of gold, each the size of the earth. However playful the comparisons, the mathematical laws behind them are those invoked by the ideology of growth and the whole system of money earning money.

This is real economics and not just a game, as we can see from the following example. In the early 1980s people could buy US government bonds that earned 12-14% a year. The term of the bonds was, and this is no misprint, thirty years! These bonds were so-called “zero bonds” or no-dividend loans. They did not pay dividends each year. Rather, the sum invested is noted and paid back with interest and interest on the interest after thirty years. That means that the investor who lent the US government $ 10,000 dollars in 1982 could expect to receive in the year 2012 at 12 % some $ 300,000, and at 14 % about $ 500,000. That means thirty or fifty times the amount of money on the initial loan.

A government which makes such a rash promise reveals the condition in which it finds itself. For such a promise is realistic only if the economy and the national revenue could be expected to grow thirty-fold or fifty-fold. We do not have to explain that such increase is not realistic, even if there were no problems with the environment. The sale of such bonds is realistic only if the government is expecting the value of its currency to lessen because of inflation. There is no other explanation for such promises. But that also means that the US government can in no way even wish the currency to maintain its purchasing power over time.

For these reasons unrestrained capitalism will end up destroying itself. It is only a question of time. But we will not get there until the environment has suffered irreparable damage and millions of people have paid with their lives.

CCFMC, Lesson Unit 21,1