How long can an unsustainable economy grow?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at:, or follow me on Twitter.

Interesting, but wrong:

During the good times, “we always wanted to grow just a little more than we otherwise could.” There was always a reason why, if a little bit of growth was good, more would be even better. It was very easy to justify various kinds of mischief — from annual deficits to artificially low interest rates — in order to wring just a little more growth out of the economy. This is true whether your goals were motivated by left wing thinking or right wing thinking.

Very consistent with the mindset of The Patron Saint of Strong Towns Thinking, Nassim Taleb, Sedlacek suggests that our economic policy of recent decades has been to sell stability in order to buy growth. This is what I alluded to in the Brainerd example I started this piece with. We’re already unstable, yet we’re prepared to commit half a generation of projected revenues for the slim chance that we are going to be able to experience some growth today. I’ve described this concept in some detail in the Growth Ponzi Scheme series.

These policies — nationwide reflecting down to the local level — have the effect of amplifying growth during the good years and then accelerating downturns in the difficult years. This is why an economy can grow really fast from 2001 through 2008 and then suddenly collapse.

…The antifragile approach does not outperform the growth economy or even the resilient economy during the good years. In times of extreme affluence such as America experienced after World War II, sticking to the antifragile approach — especially after two decades of depression and war — was not going to happen. Our natural human inclinations overrode our time tested wisdom. In many ways, I understand that.

There are lots of phrases here that can be re-written in an older and more conventional form, and then the essay boils down to “too much debt is bad” or “too much of the wrong kind of debt is bad.” I’m sure reasonable people can agree that financial speculation often leads to wild booms and crashes. However, financial speculation is associated with periods of slow growth, so it is not true that a society “sells stability to buy growth”. If one merely wants to reign in the kind speculation that leads to booms and busts, then there is no tradeoff between growth and stability. The era of financial repression (the 1930s to the 1980s) was an era of above average growth. “Financial repression” means that the bankers and investors are forced to invest in sustainable, socially useful endeavors.

There is the long term meaning of “sustainable”. The historian Christopher Hill says that the recession of the 1620s was caused by the high price of coal. Fernand Braudel says that the growth of Europe in the 1500s was fueled by wood, but the wood supplies were exhausted by the early 1600s. This implies that all growth since the early 1600s has been dependent on fossil fuels. That suggests that the era of “unsustainable growth” has been going on for a very long time.

More so, what is sustainable? Is it sustainable to live in a city, where no food is grown? A city is not sustainable. It can only survive by constant efforts to bring food in from the surrounding land. Humans have been living an unsustainable lifestyle since the formation of the first cities, 5,000 years ago.

But then, is anything sustainable? Eventually the world will end. Even if humans had never built cities, they would have eventually gone extinct.

It might be best if we all start with the assumption that everything in this universe is unsustainable, but eras of stability can be carved out through sufficient effort and wisdom. Then the question becomes how to achieve that effort and wisdom.

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