A thought occurred to me during my morning walk on the contrast between a growth economy and a maintenance economy.
The concept came up in thinking about isolated countries like Cuba, and in the context of Israel/Palestine discussions, Gaza.
Cuba has been isolated from much of international trade for 50 years now, a long time.
Economies function through a combination of intra-regional trade and inter-regional trade. In an undifferentiated global marketplace, the definition of a region (boundary) is indistinct. For example, although some that live in New England think of themselves as “New Englanders”, there is no distinct boundary or even identifier. The closest that I’ve heard anyone come up with is whether one is a Boston Red Sox fan or a New York team fan. (It sounds silly, but it actually does describe some sympathies). In Boston, identity is obvious. In Maine its obvious. In New Hampshire, where I worked for the last three months (near Canada, far from Boston), they were still Red Sox fans. In Greenfield, MA where I live, they are Red Sox fans. In Connecticut, the loyalty starts to dissolve a bit. In Hartford, its 60-40 Red Sox. In New Haven, 50-50. In Stamford, probably 80-20 for New York.
The point is about the frontier, the gradual shifting of identity, not a distinct boundary. In northern New Hampshire everyone on this side of the boundary is American, and everyone on that side is Canadian, no exceptions.
In the global economy, there are nationalities, but can one say that a Brazilian subsidiary of Exxon-Mobil is an American company? Trading is conducted in few and transferable currencies (dollars or Euros largely).
In a bound setting (US or Canada) it is possible to say that an export has occurred, an inter-regional transaction. Between Hartford and Stamford, its not possible to say that, even if they root for different baseball teams.
In Cuba and in Gaza, you can define trade as primarily intra-regional. There are few imports and few exports, barely enough to supply the import of needed materials, that are embargoed as well. Those economies have been forced into a maintenance mode, more than a growth mode.
They suffer for it. Neither economy is functioning, even residually, at level of confident sustenance. They need growth, and as growth comes primarily from inter-regional trade which exists withina competitive marketplace, they need sophistication and the whole support network of an aspiring and motivated middle class, and access to capital at risk, to achieve growth. They don’t need a lot of growth theoretically to bridge the gap between what they manage to maintain and what they need to confidently survive, but because of the competitiveness of the market economy and their absence from it over extended periods, they are stuck.
Cuba in particular has been forced to get very adept at maintenance economy. They measure their success at economy by social experience metrics not by quantitative GDP metrics. (They use GDP, but it is a secondary data contributor, not the primary.) Cuba has the most complete recycling program of any “industrial” nation. They had to. They can’t buy much raw materials to be imported. They don’t have the currency to do so.
In 19th century Marxist thought, they perceived that they could abandon the motivation for growth and dominance, because they reasoned that industry had multiplied the ability to create value so much, that it was feasible to manage to transition to a maintenance economy. They thought that the reasoning was so compelling that all countries would adopt it, and the lagging techological development curve would be irrelevant, that they would not suffer competitively.
Russia failed at it, partially because of their incompetence, but also partially because the technology employed was a physically toxic model, similar to the rust belts of the Michigan, Indiana, Ohio, Bridgeport, Worcester, etc. They drove their technology into an ecological cul-de-sac.
Europe sought to “land” from their growth economies, in the wave of incremental socialist efforts post-world war 2, that still continue residually. They also had the rust phenomena and had not yet realized a level of technological development that is actually “enough”. Growth was still needed. Some European countries have however succeeded at proceeding to a managed primarily maintenance economy.
China is an unusual exception to the socialist trend. China used the institutions of socialism, now for the purpose of growth, combining elements of capitalist institutions, but only elements, and within a socialist norm.
Sustainable economy is primarily a maintenance economy, NOT a growth economy. Ironically, we now have more to learn from Cuba, than we do from our rugged entrepreneurial past. I don’t propose that the US adopt neo-marxism, but that the US emulate Cuba’s materials recycling, public institutions as a large component of its economy, and emphasis on relative equality and commonwealth.
A sustainable economy would require 80% of the applicable workforce to engage in maintenance productive activity, and a minority of effort in ambitious. The United States economy currently conflicts with that emphasis, and is unsustainable, not only from debt, but from irrelevant goals and poor judgement.
A sophisticated sustainable economy (in contrast to Cuba’s, not particularly complex) requires the ability to recycle close to 100% of its materials and energy. It must be designed to require a minimal amount of materials inputs. Prior to recently, that was impossible technologically, as well as institutionally. With the implementation of near universal cradle-to-grave product design, it could be possible.
Socially, a maintenance economy, a sophisticated and efficient one, does not require full employment to realize. It takes maybe 70% of the current workforce to maintain our society, implying a maximum unemployment rate of 30% without self-cannibalization. That is a high level of unemployment as a potential norm. Obviously, growth and waste, do not make up that 30% now.
The predictions of Jeremy Rifkin in “The End of Work” are coming to pass. We need less work to sustain our economy. There are also less growth opportunities as we have really come close to the level of material amenities that are needed in the society. It used to be made up by cultural contributions, but the cultural institutions in the country have also been cannibalized (thankfully in ways, the entertainment business is a corrupt one).
So, according to Rifkin, there is less need for work, but society is increasingly reluctant to provide for public goods and services, less forgiving less charitable (whether by government or individually). So, how do we avoid a permanent downward spiral to a large and depraved underclass?
Its an open question at this point, but it is inevitably a question inherent in the shift from a growth to a sustainable economy, an in the shift from a growth to a maintenance economy.
Governance is dependant on growth. There is no social security payouts possible for example without growth, no sophisticated health care system, no healthy municipalities without increase in property values.
It is not a simple question to realize a landing (the shift from temporary growth to permanent sustainability) institutionally. I believe that we have accomplished close to all of the technological drivers that we need frankly, so that growth is not that necessary, as it is also now not that possible.
Those companies that will realize revenues (used to be growth) and profits, will do so by recycling, reformulating service options, much moreso than by creating and building more.
Its time we led in that, no? That is our growth.
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