The Wealth of Nature: Economics as if Survival Mattered

271 Pages·2011·1.125 MB·English

by  John Michael Greer

Advance Praise for
The Wealth of Nature
John Michael Greer has done something that desperately needs
doing, for all our sakes: he has re-thought economics, starting
from its fundamental premises, giving it a basis in ecological real-
ity rather than political fiction. In doing so, he acknowledges his
predecessors (principally, E. F. Schumacher), while contributing
his own wry verbal style and impressive knowledge of history. The
result is perhaps the most important and readable book on eco-
nomics since Small Is Beautiful.
— Richard Heinberg, author of The End of Growth
Economics has often been called the dismal science, not the least
because it is a boring read. John Michael Greer has changed all
that. His Wealth of Nature is a romp through the past, present
and then the very near future, fribbling iconoclasticly with Adam
Smith, E.F. Schumacher and Nouriel Roubini. Anyone who does
not believe or comprehend why civilization is collapsing, or would
enjoy hearing it told well, should read this excellent rendering.
— Albert Bates, author of The Post Petroleum Survival
Guide and Cookbook and The Biochar Solution
John Michael Greer writes with unsurpassed clarity about the pre-
dicaments of energy and economy mankind faces. And he does it
with a wonderfully kind, genial, and wise spirit. This is the must-
read book for anyone who wishes to make it through the coming
turbulence.
— James Howard Kunstler, author of
The Long Emergency and World Made by Hand

Copyright © 2011 by John Michael Greer.
All rights reserved.
Cover design by Diane McIntosh.
All photos ©iStock (abacus — Garry518; shells — tacojim; acorns — tshortell;
daisy — egal; beetle — robisklp; pine cone — SamCastro; leaves — AlexMax;
eggs — Ornitolog82; stones — svstiv)
Printed in Canada. First printing March 2011.
Paperback ISBN: 978-0-86571-673-5 eISBN: 978-1-55092-478-7
Inquiries regarding requests to reprint all or part of The Wealth of Nature
should be addressed to New Society Publishers at the address below.
To order directly from the publishers, please call toll-free (North America)
1-800-567-6772, or order online at www.newsociety.com
Any other inquiries can be directed by mail to:
New Society Publishers
P. O. Box 189, Gabriola Island, BC V0R 1X0, Canada
[phone]
New Society Publishers’ mission is to publish books that contribute in fundamental
ways to building an ecologically sustainable and just society, and to do so with the
least possible impact on the environment, in a manner that models this vision. We
are committed to doing this not just through education, but through action. Our
printed, bound books are printed on Forest Stewardship Council-certified acid-free
paper that is 100% post-consumer recycled (100% old growth forest-free), processed
chlorine free, and printed with vegetable-based, low-VOC inks, with covers produced
using FSC-certified stock. New Society also works to reduce its carbon footprint, and
purchases carbon offsets based on an annual audit to ensure a carbon neutral footprint.
For further information, or to browse our full list of books and purchase securely, visit
our website at: www.newsociety.com
Library and Archives Canada Cataloguing in Publication
Greer, John Michael
The wealth of nature : economics as if survival mattered / John
Michael Greer.
Includes bibliographical references and index.
ISBN 978-0-86571-673-5
1. Economic development--Environmental aspects.
2. Environmental economics. 3. Sustainable development.
I. Title.
HD75.6.G74 2011 338.9 C2011-900654-5
www.newsociety.com
Contents
Introduction: A Guide for the Perplexed . . . . . . . . . 1
1 The Failure of Economics. . . . . . . . . . . . . . . . . . . . 11
The Illusion of Invincibility . . . . . . . . . . . . . . . . . 14
The Failure of Markets . . . . . . . . . . . . . . . . . . . . 19
Harnessing Hippogriffs. . . . . . . . . . . . . . . . . . . . 23
The Market as Commons . . . . . . . . . . . . . . . . . . 27
Energy’s Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Lies and Statistics. . . . . . . . . . . . . . . . . . . . . . . . 33
Economic Superstitions. . . . . . . . . . . . . . . . . . . . 39
Undead Money . . . . . . . . . . . . . . . . . . . . . . . . . 43
2 The Three Economies . . . . . . . . . . . . . . . . . . . . . . 49
The Power of Paradigms . . . . . . . . . . . . . . . . . . . 54
Primary and Secondary Goods. . . . . . . . . . . . . . . 59
Exchange Value and Nature’s Wealth . . . . . . . . . . 62
The Anti-Ecology of Money . . . . . . . . . . . . . . . . 68
The Finance Trap. . . . . . . . . . . . . . . . . . . . . . . . 74
Before Money . . . . . . . . . . . . . . . . . . . . . . . . . . 78
3 The Metaphysics of Money. . . . . . . . . . . . . . . . . . . 85
The Metastasis of Money . . . . . . . . . . . . . . . . . . 92
The Flight into Abstraction . . . . . . . . . . . . . . . . . 98
The Twilight of Money . . . . . . . . . . . . . . . . . . . . 103
The Money Bubble. . . . . . . . . . . . . . . . . . . . . . . 105
The End of Investment . . . . . . . . . . . . . . . . . . . . 109
ix
x ThE WEAlTh oF NATurE
4 The Price of Energy. . . . . . . . . . . . . . . . . . . . . . . . 115
Energy Follows Its Bliss. . . . . . . . . . . . . . . . . . . . 120
A Crisis of Concentration . . . . . . . . . . . . . . . . . . 127
Barbarism and Good Brandy . . . . . . . . . . . . . . . . 131
Working With Diffuse Energy. . . . . . . . . . . . . . . 136
The Economics of Entropy . . . . . . . . . . . . . . . . . 144
5 The Appropriate Tools . . . . . . . . . . . . . . . . . . . . . . 149
The End of the Information Age. . . . . . . . . . . . . . 155
The Economics of Contraction. . . . . . . . . . . . . . . 160
The Twilight of the Machine . . . . . . . . . . . . . . . . 164
Toward Appropriate Technologies . . . . . . . . . . . . 170
Becoming a Third World Country . . . . . . . . . . . . 178
The Twilight of the American Empire. . . . . . . . . . 183
Survival Isn’t Cost Effective . . . . . . . . . . . . . . . . . 187
6 The road Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Remembering What Worked. . . . . . . . . . . . . . . . 194
Defending the Commons . . . . . . . . . . . . . . . . . . 198
Taxing the Right Things . . . . . . . . . . . . . . . . . . . 202
Housebreaking the Corporations . . . . . . . . . . . . . 207
A Crisis of Complexity . . . . . . . . . . . . . . . . . . . . 213
Back to the Future . . . . . . . . . . . . . . . . . . . . . . . 219
A Future of Victory Gardens. . . . . . . . . . . . . . . . 222
After Retirement . . . . . . . . . . . . . . . . . . . . . . . . 229
Afterword: Small Is Beautiful . . . . . . . . . . . . . . . . . 233
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
About the Author. . . . . . . . . . . . . . . . . . . . . . . . . . 263
Introduction:
A Guide for the Perplexed
More than two centuries have passed since Adam Smith, a Scots
philosopher with a clergyman’s training and a previous reputation
mostly as a moralist, launched the modern science of economics
with a book entitled The Wealth of Nations. The first widely ac-
cepted analysis of how markets guide economic behavior, Smith’s
book quickly took on the status of a classic. Its approach to the
subject of economics has dominated the field ever since; just as
Bertrand Russell famously defined all of Western philosophy as
“footnotes to Plato,” it would be by no means inappropriate to de-
fine all of modern economic thought as footnotes to Smith.
While Smith’s work deserves its reputation, the timing of its
publication also had a good deal to do with the way it came to
dominate the field it brought into being. It was published the same
year that America’s Declaration of Independence was signed, and
just as Britain was launching the social and technological trans-
formations that would make it the world’s first industrial society.
Smith’s central thesis — that a market economy governs itself
through what would today be called feedback loops, and thus does
not need close government supervision — appealed to audiences
who were well primed by the events of the day to question the need
for government intrusion in private economic affairs, while the ris-
ing class of industrial entrepreneurs found their own r easons to
support an analysis that claimed to justify their interest in making
as much money with as little interference as possible.
The meteoric expansion of the industrial economy over the
two centuries that followed was marked, in turn, by the rise to
1
2 ThE WEAlTh oF NATurE
prominence of the profession of economics. In Smith’s time, pro-
fessional economists did not yet exist; today they rank among the
most prominent figures in contemporary intellectual life. The cre-
ation of a new Nobel prize in economics in 19681 can be taken as
a suitable marker of the profession’s coming of age. Still, there is a
discordant note in all this, for the rise of economics as a science and
a profession has not been accompanied by any noticeable improve-
ment in the ability of societies to manage their economic affairs.
It’s ironic , in fact, how few benefits industrial societies seem to
have gained from their economic experts in the last few decades.
Beginning around 1980, when many of the world’s industrial na-
tions adopted a market-centered economic philosophy based on
recent revisions of Adam Smith’s ideas, it has become routine for
government policies to have results completely different from, and
far less pleasant than, those predicted for these policies by public
and private economists alike. From the deregulation of utilities in
the early 1980s, which was supposed to cause prices of utility ser-
vices to go down (and made those prices go up), through a litany
of failures culminating in the drastic cuts in interest rates that
followed the 1999–2000 tech stock crash, which was supposed
to restore economic stability (and launched an even more drastic
cycle of boom and bust), it has become uncomfortably clear that
whatever the talents of today’s economic profession happen to be,
making meaningful predictions about economic policy is not one
of them.
There has been plenty of discussion of these failures, to be
sure, and a great many attempts to tinker with the structure of
contemporary economic thought; many writers in and out of the
profession have attempted to explain the failures and prevent their
recurrence. Still, as this book will try to show, most of these ef-
forts stop short of the changes that will actually be needed to bring
economics back in line with reality. The problems with contem-
porary economics cannot be fixed by minor adjustments to exist-
Introduction: A Guide for the Perplexed 3
ing models. They reach down to the basic assumptions on which
Adam Smith and his successors based the science of economics,
and can be fixed only by recognizing the flaws in those assump-
tions and exchanging them for others more in keeping with the
way the world actually works.
It is not going too far to compare Smith to Claudius Ptolemy,
the great classical astronomer whose writings became the founda-
tion for all cosmological and astronomical thought for a millen-
nium after his time. Ptolemy’s theories were clear and compelling,
and they corresponded closely enough to the way the heavens
seemed to work that most of the astronomers who built on his
work took his models for hard fact. Underlying those models,
though, was a fundamental mistake: Ptolemy’s conviction that
the Earth was located at the center of the cosmos and everything
else rotated around it. That mistake forced Ptolemy’s successors
to come up with one workaround after another for celestial mo-
tions that never quite did what the model said they should do,
until Nicolaus Copernicus eventually figured out where the prob-
lem actually was. By turning the cosmos inside out, moving the
supposedly central Earth to a peripheral position and putting the
Sun at the center, he solved problems that could not be solved from
within Ptolemy’s analysis, and also opened up avenues of inquiry
that made possible Kepler’s discovery of the laws of planetary mo-
tion, Newton’s theory of gravitation and a great deal more.
Economics is badly in need of a Copernican revolution of its
own, one that will recognize that the center of economic activity is
not where today’s economists think it is. Fortunately, the field has
already had its Copernicus.
Ernst Friedrich Schumacher was born in Bonn in 1911 and at-
tended universities there and in Berlin before going to Oxford in
1930 as a Rhodes Scholar, and then to Columbia University in New
York, where he graduated with a doctorate in economics. When
the Second World War broke out he was living in Britain, and was