Wednesday, January 23, 2008

The Economic Pyramid

The impending recession continues to expose structural defects in the global economy.
The fundamental problem is that far too many people are simply left out.
In order to include them, global rates of consumption must be in balance with the productivity of the biosphere. We cannot provide a reasonable standard of living for nine or ten billion people (which is the likely peak in world population if present trends continue) if that standard of living requires rates of consumption similar to those imposed by the structures of our civilization. In other words we have to change the way we live, to create a viable example that the rest of the world can emulate.
We have, in the past, regarded ourselves as the “Shining City on the Hill” that all the peoples of the world aspire to re-create for themselves. Had we been successful in having the rest of the world copy the way we behave, then our high consuming lifestyle would have perhaps destroyed the ability of this planet to support life. Even with the minimal participation in economic activity now enjoyed by one fifth of the world’s population, habitat destruction and pollution result in two hundred species becoming extinct every single day. The world cannot remain the way it is.
The economic pyramid (you have seen it on the back of the dollar bill, yes?)
We live in a global economy where the economic pyramid is wildly out of kilter.
While optimists use the image of a ladder, distribution of economic benefits are more usefully envisioned as a pyramid. When this pyramid is in balance, wealth is generated at the very bottom, and moves up the pyramid. Because there is virtually no trickle down of wealth, unless the inputs are made at the bottom, the lower layers simply atrophy and drop off the pyramid.
People, on the other hand, fall down the pyramid more readily than they climb up.
Also, when resources are inserted at a higher level then they circulate all the faster, having a shorter distance to travel.
Economic activity circulates faster at the top.
Over the last few decades more and more resources have been injected into higher layers, where they circulate very fast, giving the illusion of wealth creation, and more and more people fall out of the bottom, and wind up in homeless shelters, or in barrios, shanty towns and other informal constructions, with no health care, and no prospect of improving their situation.
The pyramid no longer looks like the one on the dollar. Right now the pyramid has an enormously wide, and very flat base rising very gradually until it suddenly curves upwards coming to a tower, with almost sheer sides and a pinnacle in the way far distance. More like a thumbtack than a pyramid. If this particular pyramid is to avoid falling over, is it essential to inject resources at the base, and to do this by way of a structural (i.e. permanent) change.
Microcredit is a very good tool to achieve this result on a global scale. IN the picture above microcredit is represented by the pool underneath the pyramid. People fall out of the economic activity represented by the pyramid, and into the broader wider microcredit economy.
In the United States there are many other options, partly because so many people here do have access to real resources which can be invested in a way that promotes real change. And also because the condition of the very poorest is desperate in widely varying ways from the poverty which more uniformly afflicts the rural poor in less industrialized countries.

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