The idea is defined as follows:

1. The study of economic and state systems at the edge of their normal social and economic function, including preventative measures to avoid destructive feedback loops and vicious cycles.

2. A consulting practice based on the scientific and historical understanding of collapse conditions, and responses to them.

Collapsonomics emerged and continues to grow on Twitter. If you aren’t on Twitter and have no idea what I’m on about (good on you!), then you can read a summary and more about it at http://collapsonomics.org.

I think collapsonomics is a nice idea and good way of framing the seriousness and nature of the problems we face. I think it offers a good starting point for people looking for practical solutions to the status quo, and I hope that it evolves to make the desired plan of action as clear as the description of the problem.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

It’s pretty similar in terms of clarifying the situation as the presentation I linked to in my first ever post on this blog. I have to say it leaves the viewer with a rather hopeless ending, without making any attempt to suggest what could be done to help with the situation! Maybe someone will make a nice video about green new deal ideas soon…

All media coverage I’ve witnessed surrounding the economic turmoil has been incredibly boring. The fact that there is a “lack of credit” has been repeated endlessly in myriad ways. Gordon Brown and the economists we come into contact with through most of the Western media are only capable of talking about how to reverse this situation because it’s what their experience has taught them is a suitable response.

Europe (and France especially) are slightly more progressive calling for regulation of the financial system but there has been no thinking or analysis that inspires a creative response to the challenge that faces us. Media commentary gets as far the rational fear of protectionism internationally and then dries up.

Despite both sides of the Atlantic using the phrase “green new deal”, investment in energy reduction and clean energy generation is not happening on any meaningful scale, at least not in the UK, as this article explains.

Money is being ploughed into the economy to feebly attempt to increase liquidity whilst no-one is articulating properly which sectors need to grow as a result. The language of the media (literally this is quote from Newsnight on Monday night) is that “saving the world” is what will happen if we go back onto the path of endless growth, but failing to mention which sectors will grow, except of course that magically “things will go back to how they were before”.

Despite the fact that switching back to credit-fuelled growth is looking increasingly unfeasible anyway, it is the consumption that drove our previous system which is causing the climate to be disrupted. Remaining on an economic growth-based trajectory of CO2 is pretty much guaranteed to ruthlessly destroy “the world” as we know it in terms of it being an inhabitable place for large numbers of humans. The language being used in the mainstream is astonishingly lax and inconsistent given that the severity and causes of climate change are now widely acknowledged.

Sectors of the economy that reduce CO2 and make our use of energy more efficient should be helped to grow, and they should be funded by responsible regulated finance within the context of overall massively decreased borrowing, including against national debts. Our whole way of life has to change dramatically and we must embrace technological change to cushion the return to a much more localised economic system. Doing this globally by finding the right technologies and innovation policies, and avoiding outright protectionism, is the only hope we have to get through this.

I am not attending the G20 protests tomorrow, but I know a lot of people who are, and I am there in spirit with those of them who understand the challenges faced in articulating a well-thought-through set of economic policies. Too many “anti” people don’t understand that calling for the end of protectionism like the Common Agriculture Policy is essentially endorsing a free market approach to global trade where we ship food around the world at high-speeds using dirty fuel. Instead we should all become sufficient from our own resources, but without resorting to punitive protectionism that threatens stability.

My view of the G20 leaders is not that they are evil or slaves to any particular ideology. Just that so far they have proved themselves entirely incapable of coming up with anything near an acceptable response to these vast challenges.

In the meantime, I recently came across this video which explains in a pretty straightforward way what has been happening to the global economic and financial system recently. The end is pretty poignant, especially coming from a US Republican, and I can only hope that a healthy dialogue emerges as people understand that we’re all in this together:

Thanks to Schmoo on the run for this.

So far all of the policy responses to the meltdown in inter-bank lending have been aimed at increasing the liquidity of markets, at ensuring that capital continues to flow around the world with the speed and global reach that has characterised the last twenty years of capitalist growth. As the viability of this perpetual growth paradigm has unravelled over the last couple of years, and the economic interdependence of all developed economies has been shown to be a double-edged sword, individual countries have started looking at what they can do to look after number one: to ensure that jobs are created at home, and that local economies survive the turmoil.

From the perspective of dealing with climate change, promoting localisation is obviously key, and is something to be welcomed. But how to actually engineer that localisation in an economic sense is rarely addressed satisfactorily.

Since the end of the Second World War, the United States has been uniquely influential in global economic development, and since the fall of the USSR in 1989 its shaping of, and tacit collaboration with, institutions such as the IMF and the World Bank have allowed it to dictate economic policy, to the extent that pretty much every other country follows their lead (apart from random outcasts like Cuba). And the same is true when it comes to engineering the protection and promotion of local markets.

The economic stimulus package passed by Bush just before he left office was designed to get capital flowing on international markets. The idea was to inject some life into the US economy, and by extension the rest of world’s, because of how cloesly-knit all of the investments are between multi-national companies listed on American stock exchanges. But because the problems with the economy go so deep, and in fact the very success of Wall St previously was built on the high levels of incredibly over-vauled assets, trying to stimulate markets so that they went back to ‘business as usual’ was never going to work (there is no ‘business as usual’).

As this realisation has permeated the minds of US congressmen and women, and as Obama prepares to pass another vast stimulus package (which amounts to a ‘new deal’ of sorts, a fair chunk of which can be legitimately called ‘green’), a more pragmatic approach has taken hold. Domestic markets to secure jobs for domestic workers are being seen as crucial to short-term stability. This is the basis of the concept of ‘protectionism’ - using national economic and fiscal policy to protect domestic markets. Protectionism is fundamentally opposed to the idea of a ‘free market’ and for the last twenty years, the prevalent political classes have spoken out against it.

The argument against protectionism goes something like this:

Restricting foreign access to domestic markets is not fair on businesses who have potential for growing internationally because of the superiority or cost effectiveness of their products and services for end users. It shouldn’t matter where in the world goods are produced. By allowing the market to decide which ones get bought and sold, we will encourage efficiency and healthy competition. Unlike communist or socialist modes of economic organisation, capitalism was seen to consist of this fundamental freedom - the flow of goods and captial would not be restricted by tariffs being placed on imported goods, or subsidies given to domestic industries just because they happen to be based on home soil.

Now in practice, many supposedly ‘laissez-faire’ capitalist nations have historically engaged in some level of protectionism without acknowledging their hypocrisy. In the EU, the Common Agricultural Policy is an important example (those of you old enough - unlike me! - will no doubt remember the image of piles of food in warehouses in Europe juxtaposed against starving Africans in Ethiopia around the time of the first Live Aid; the reason the food wasn’t being sent to the starving masses was because it would be an anti-protectionist measure that would potentially harm European farmers, despite the obvious waste). In the US, protectionism was/is employed for the steel industry amongst others, whilst foreign economic policy and collaboration with the IMF and World Bank meant that developing countries could only access aid if they completely opened their markets.

Despite the anomalies mentioned in the previous paragraph (and there are infinite more examples where the reality of free market capitalism fails to live up to the rhetoric), in general the last thirty years or so has seen very open markets worldwide, and that’s what we mean when we talk about ‘neo-liberal economic growth’ as kicked off by Margaret Thatcher and Ronald Reagan. The last time that there was actually proper widespread protectionism was in the 1930s, following the 1929 Wall Street Crash. Back then, when the US took the decision to start protecting its home markets in response to financial turmoil, pretty much every other country followed suit in a kind of domino effect which led to lots of fragmentation, and a prolonged depression.

This week, Obama’s $800bn fiscal stimulus package is being debated by the US Senate, and the crucial aspect that relates to protectionism is the ‘Buy America’ clause. This proposal puts forward the idea that all steel used as part of construction programmes (which will be crucial to providing jobs) will be sourced from the US only, thereby also supporting ailing domestic steel industries. This is the first time since the financial crisis began that such an explicitly protectionist measure has been put forward, and if it is passed it is very difficult to see how other developed economies such as Europe can fail to follow suit. It would potentially be the end of a neo-liberal economic system, and a return to one where individual economies trade less with each other, and instead rely on their own industries. The latest from the Senate is that ‘Buy America’ is being ‘watered down’.

This is an important moment, and in what form it is passed will make a big difference to the next few years as we continue down this rocky road we have embarked on. The challenge is to identify the risks of the approach, but also to look at the difference between the ultimate objective (more stable, localised economies where people have jobs and prosper) and the means used to get there (a bold economic move that risks causing substantial disruption to international efforts to react in unity to financial turmoil). Whilst the objective is laudable (massively decreasing international trade and localising economies is good in most people’s eyes, especially when you consider the carbon savings it could bring), the means are very risky.

So what on earth is the alternative? How do we localise economies without resorting to protectionism? Unfortunately I do not have the answer. But I believe it is very important to speak in these terms, especially for those who consider themselves on the progressive left side of the political spectrum. The political spectrum itself has been shot to shit anyway in the last twenty years, and especially in recent months as banks have been nationalised all over the shop in the name of increasing capitalist liquidity. Without acknowledging the fact that we really need to think in new paradigms, and that it’s nowhere near as simple as sitting on the left (economic intervention) or right (laissez-faire capitalism), we won’t get anywhere.

If I was to try and suggest some radical alternatives to the path that Obama and the rest of the new administration seem to be considering, I would say that utilising the Internet as a way to maintain openness in as many senses as possible (even if that is not in economic terms) is important. I haven’t even touched on the currency consequences that would clearly be part of the fall-out from undertaking protectionism, but it’s become clear to me that using the dollar as the basis of global economic stability is not a great idea.

So what could take the place of the dollar? Surprise, surprise: carbon. Using carbon reduction as the benchmark on which we measure how effectively and efficiently we are localising economies will allow us to maintain a global focus. It will also help us identify which goods and services can be traded without incurring high fuel costs, and high carbon emissions. The Internet is the obvious platform to help us do this detailed bench-marking, in different ways and for different sectors. It won’t be straightforward, but it will give a clear focus for a green economic recovery.

Apart from the obvious fact that has been stated many times before - that once an economic force is put into motion is generally tends to continue - there are various intricacies of recent developments that I have failed to follow in depth. Something else that I realised over the last few weeks is how little I have gone elsewhere to see who else is writing on this subject. A particularly well-thought through post which basically chimes with my reading of the situation can be found here. Its clarity on the degree to which conventional economics renders us completely screwed is impressive, but it would be nice if it made some suggestions as to some vague alternatives.

I don’t know whether the name ‘CynicusEconomicus’ relates to the fact that the author of the blog is cynical as hell, but recently I have been considering my own fluctuations between cynicism and idealism. Interestingly, I think being cynical and brooding about the numerous dark clouds on the horizon illuminates various trends in the world to the point where it becomes clear what to do next. And there the idealism comes in: is it even possible to change the inevitabilites we see around us?

The answer is that we may as well give it a bash. Lots of people would refer to people like me (commercially astute young professionals who see the economy as the sub-set of the environment rather than something that exists in a separate realm of logic) as ‘ethical’ for attempting to address climate change and localise economies in the name of well-being. In that sense I suppose I’m relatively idealistic (I think a way better world is possible) and I would feel far more unhappy (not that I am ecstatic all of the time) if I was only focusing on the negative trends that can be observed all around us. Investing in an explosion of green jobs to decarbonise our economy would make a lot of people feel a lot happier, and it would be a stunning journey to embark on.

Then comes the question of what to spend my time doing: analysing and wallowing in the shitness of the current situation, or trying to build the constructive mindsets and radically different institutions capable of delivering the alternative vision? There’s only so many hours in the day, and I can see why individuals such as Mr Cynicus Economicus are more than capable of spending all of their time documenting the downfall of our existing financial institutions, and discerning how the ‘real economy’ will follow (something very hard to predict, hence the need to spend the time sorting out the messiness).

Pragmatism and my rather erratic nature dictates that I’ll probably continue with my combination of cynicism of idealism, whilst attempting to keep up with the hectic cycle of events in that strange place called ‘the global economic system’. One thing that I have realised is that the more people understand the need to take some level of personal responsibility for imagining a new world, the better, and those who understand the macro-economic trends will hopefully begin to feel less cynical as a result…

One of my recent posts received a comment from someone who writes another blog called ‘Surviving the global crisis’, and I’m not sure whether I support phrasing the issues in those terms. There’s always a risk of being melodramatic about the potential of global economic collapse (it’s often better to take a more light-hearted approach: my housemate recently told me that he’s decided to hoard milk and cheese in order to survive if the price of food dramatically increases). Also, apart from increasing job losses, and the bailing out of the banks (which has manifested itself in a very abstract way to most people who aren’t geeks like me), calling the current situation a ‘crisis’ does seem a bit exaggerated.

The reason I originally decided on the title ‘dealing with the global crisis’ is because of the fact that when the wheels that started creaking into action in 2007 with the sub-prime mortgage crisis, policy-makers had a chance to pro-actively decide how to respond. I thought it important to make clear that tackling the issues head-on is the best approach, rather than continuing the vicious circle of reacting to markets and trying to prop-up failing economies and trends within them.

Interestingly, since 2007 a series of events have unfolded that in retrospect seem quite obvious (boom and bust capitalism and all that). Now we are entering another phase of the process, and as the Bank of England reduce interest rates to their lowest level ever, politicians are still reacting by attempting to stimulate spending. Because of the lack of imagination and decisive action to change the design of the systems that have led us to this situation, it seems that we will continue down a similar path that will make the crisis worse, neglecting to consider the need to de-materialise our society and value happiness over shopping.

This is a long-term crisis, and one that needs calm consideration, not panicky retreat to the safe haven of consumer spending. Head of Selling Development at John Lewis today described the fact that the department store has increased its sales by 27.4% on this time last year as a “truly inspirational result”. If there is anything I am not inspired by, it is sales figures. I would be dismayed if the way our handling of this crisis is assessed continues to be based on whether or not we can get people to spend money.

Obama recently fleshed out some of his plans for the US economy, and whilst I continue to advocate his plans for a ‘green new deal’, it is slightly disappointing to witness the very conventional language he is using. He makes some valid points about how the economic situation could get “dramatically worse”, but there’s nothing particularly new about trying to get consumers to spend their way out of the crisis. The potentially doubling of the budget deficit to $2 trillion is staggering, and whilst I completely endorse some of the spending (on clean energy infrastructure and energy efficiency), there needs to be a wider vision on what a new economic system will look like.

In the Guardian today, Simon Jenkins writes about how “economic forecasting has collapsed in ignominy and if there were any justice the profession would be sacked en masse”. However, when he says “this recession will pass”, he fails to discuss how, and is essentially playing at being an economic forecaster himself. Where is the vision from these commentators on what we actually need to do about the crisis as it continues to unfold? Do we want to be back where we were two years ago when unbridled capitalist growth was not making us happy and was most certainly destroying the eco-system that sustains us? There is criticism of the politicians, and derision of those over-reacting to the situation, but there is little past cynical commentating from those writing in the mainstream media.

We need to work to fill the void that is continuing to expand as policy-makers fall back on conventional (redundant) wisdom. We need to look closely at the economic and political structures required to deliver a more stable low-carbon economy into the future. Otherwise we will oscillate between blind panic on the one side - despite most of us not being impacted by the ‘crisis’ in our daily lives - and on the other side we’ll continue to look for comfort in the spending cycles that have got us in the mess in the first place. The closest I have seen to this kind of analysis is recent comparison of the fiscal approaches of the spenders (Brown, Obama) and the savers (Merkel in Germany being the most prominent). More on this later.

We need to be bold and decisive in deciding what to spend money on (I’m talking about public spending here), and how it relates to the wider system of capitalism (or a new alternative) that we tacitly endorse through our behaviour, both as consumers, and more importantly as part of our global society. Unfortunately, without flagging up the threats that face us if we continue to react short-sightedly it’s unlikely many people will take notice to the kinds of suggestions people like me are making. And so whilst I don’t want to be melodramatic, dealing with the crisis is the best thing we can do at the moment.

Should we build more coal power stations? from Jamie Andrews on Vimeo.

A possible argument laid out against this approach is that developing countries rely on the CDM (and other ‘flexibility mechanisms’) for assistance with climate change mitigation and adaptation, especially to finance technology transfer. This is in effect using ‘off-setting’ to fund developing countries technology needs, and it is the only mechanism currently on the table that links developed countries emissions reduction with finance for those less well-off. There are alternatives.

By auctioning permits to pollute “upstream”, that is as close to the point of fossil fuel production as is feasible (as discussed previously), significant revenue can be generated. Oil and gas companies are incredibly profitable, and forcing them to buy permits to pollute through auction could yield significant funds for mitigation and adaptation in developing countries. These funds would exist independently of flexibility mechanisms such as the CDM and allow target-setting for national economies to be much clearer, and more directly linked to job creation.

It’s clear that significantly advanced economies such as China need to be brought into a global agreement with increasingly stringent emissions reductions targets. However, whilst off-setting prevails in global cap-and-trade markets, and clean technology wavers on the periphery of developed countries’ fossil-fuel based economies, no example for true clean development is being set.

The key phrase here is ‘technology transfer’. It is a funny one, because all discussion on the subject at the UNFCCC (where I am now) makes the assumption that developed countries have already installed the necessary technology for a massive infrastructure overhaul towards energy efficiency and renewable energy in their own economies. With new coal-fired power stations being built all over the developed world, this is clearly not the case. There are countless excellent ideas for clean technology breakthroughs that have not moved from concept to market in the developed world. Clearly this internal developed world transfer must occur in tandem with the transfer between developed and developing worlds. Nowhere is this made explicit, and subsequently most political discourse on the subject lacks credibility.

Effective knowledge-sharing and commercialisation of clean technology intellectual property must happen globally. As energy efficiency and renewables are significantly rolled-out we can pre-empt potentially protectionist economic policies from emerging. We can continue to collaborate internationally, not by the developing world buying loads of plastic crap from China, but by jointly developing and implementing a huge infrastructure shift towards a cleaner world.

The G8 are very worried about the risk of countries raising tariffs and engaging in protectionism to buffer their economies from further shocks. Taking action on climate change, and helping developed countries move away from superficial service-based economic activities, deals with this risk. For specifics on the kinds of jobs that will be created, see George Monbiot’s critique of the recent Climate Change Committee’s report. Rapidly localising economies without resorting to protectionism is the key challenge in ensuring a stable world, both economically and in terms of the climate.

The economic logic that needs to be employed during this paradigm shift is not necessarily neo-classical, but is nonetheless valid (see for example this report from the New Economics Foundation). A lot of discussion about financing action on climate change talks about hypothecation, or ‘ear-marking’ funds from one particular activity (e.g. auctioning permits to pollute) for a specific purpose (e.g. building new wind-farms). This debate takes focus away from what is really required.

The Keynesian approaches emerging in response to the collapse of the financial sector render any discussion of hypothecation largely irrelevant. Significant funds need to be mobilised, and if we follow historical precedent for financing a ‘new deal’, it doesn’t matter whether these funds come from a particular tax revenue. In essence, government spending will significantly exceed climate-related revenue because the task will be to create jobs just as much as to mitigate climate change.

Having said that, for the sake of fiscal responsibility (of which the developed world has been lacking in recent history), it would make sense to identify funds. A domestic approach to this question that has a firm grounding in current government debt-financing measures, is the idea for ‘enercgy bonds’ as proposed by Tim Helweg-Larsen. The budget deficit blow can of course be softened at the international level by an innovative market mechanism close to the point of fossil fuel production, and as part of a global deal on climate change as identified at the beginning of this article, and in great detail by Oliver Tickell in Kyoto2. All this needs more thinking about (and discussing by parties to the UN), and I welcome comments to this post.

It goes without saying that all of the above objectives will be greatly helped by policy-level engagement from the corporate sector, and in particular shareholders of multi-national companies (and here I would note initiatives such the Carbon Disclosure Project and in the UK, The Prince of Wales’ UK CLG). The economic problems facing countries around the world are very similar and interdependent. The above analysis applies to all of them and given the truly global nature of climate change, it’s clear that time is ripe for visionary and courageous action by ministers everywhere.