Saturday, 22 October 2011

Growth error

Jolyon Connell, founder and editorial director of The Week magazine writes in the 8 October 2011 edition that Matt Ridley, wrote in The Times that "the West has been running a vast financial pyramid scheme, but the world itself is not in debt." Correct. We haven't tried borrowing money from other planets yet and the world is of course a closed system: This applies as much to finances as anything else and importantly physical resources. But Ridley continues: "the world economy actually grew by 5% last year according to the IMF." This is factually correct, I assume, but we are talking about growth in GDP/GNP (which are identical at world level). We can't have a pyramid scheme with real resources, because they are finite. If we "liquidate our natural capital and call it income" as the authors of Natural Capitalism term what we are doing, no restructuring, bailing out, quantative easing or any other financial tinkering will save us.

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