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review 2014-07-22 08:40
The End of Growth
The End of Growth: Adapting to Our New Economic Reality - Richard Heinberg

The title of the book states its content. The Club of Rome wrote on the limits of growth; now, Heinberg argues, we've reached them. Our economic system is based on continual growth of the GDP. If that growth is driven by cheap energy, and cheap energy is at an end as easily accessible carbon fuel sources deplete, it's time to prepare for the collapse of world economy.

 

In my <140 character review of this book on Twitter, I called it "feisty", and I stand by that. Heinberg makes a point to speak of future projections as given, and I could see why. The "we'll be in trouble IF we don't act now" rhetoric has been employed since the 70s and it failed to mobilize change fast enough to avoid the present situation. It's time to say, okay, we are up shit creek without a paddle NOW. This WILL happen. What are we going to do to minimize the losses and suffering that are going to result from our decades of excess, and from the bursting of the biggest bubble in history?

 

The style makes for captivating reading, even if it makes the text seem slightly less academic, especially since Heinberg then eagerly promotes the Transition Network. There's something depressingly cultish about the idea of depending on a grassroots citizens' movement for sustainable living, which must base its functioning on the assumption that human beings are not terrible. I would have put more stock on a plan to recreate economy in a way that makes sense to the people in power, who cannot be expected to act out of selflessness: the CEOs and politicians, who would not be where they are now if they were not driven by the pressure to grab advantage where they can see it. Citizen organizations are essential, but they can only do so much, especially in a short time frame.

 

In many ways, this book was educational, and neatly covers the recent financial crisis and the evolution of financial operations in the past few decades in an accessible style. I could recommend it just based on those chapters. Well worth a read.

 

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text 2014-06-16 10:28
Economic growth around the world by Financial Blog Corliss Group

The World Bank's most recent Global Economic Prospects (GEP) report, released this week, says a global economic recovery is underway, underpinned by strengthening output and demand in high-income countries.

 

Global GDP growth in 2014 will be 2.8 percent and it is expected to rise to about 4.2 percent by 2016, according to the report, which the World Bank publishes twice a year.

 

Average GDP growth in developing countries has reached 4.8 percent in 2014, faster than in high-income countries but slower than in the boom period before the global financial and economic crisis of 2008.

 

Demand side stimulus or supply side reforms?

 

The global economic slowdown that struck in 2008 was caused by a financial crisis that resulted in large part from the bursting of an enormous, fraud-ridden mortgage lending bubble in the US.

 

The crisis led to varying responses in different countries. The GEP report's authors said that in general, developing countries privileged demand stimulus policies over structural reforms during the past several years.

 

For example, in 2008 to 2009, China implemented a four trillion-renminbi ($586 billion) stimulus program as a direct response to the slowdown in global trade caused by the global financial crisis.

 

Critics pointed to over-investment in China as a risk to continued fast growth. The country is now struggling to contain a real estate bubble of its own.

 

The World Bank wants China and other emerging countries to refocus on structural reforms.

 

"A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis," the bank's chief economist, Kaushik Basu, has said. "In brief, now is the time to prepare for the next crisis."

 

The World Bank's mantra: Fiscal discipline and structural reforms

 

Yet the World Bank is well known for nearly always prescribing fiscal "tightening" - or cutbacks to government expenditures - and "structural reforms."

 

What is the rationale for public expenditure cutbacks? And what does the World Bank mean by "structural reforms?"

 

The World Bank consistently urges policymakers to prevent annual deficits from growing faster than the rate of GDP growth. Rising debt-to-GDP ratios mean that an increasing share of the public budget is devoted to servicing debt, leaving proportionately less money available to pay for government-provided infrastructure and services.

 

However, sometimes countries fall into recession when households, in aggregate, attempt to pay back previously incurred debt faster than they take up new debt. In the jargon of economists, this is called "deleveraging."

 

For example, Spanish households have been attempting to "deleverage" on a net basis since the collapse of the country's real estate bubble in 2008.

 

Ray Dalio, founder and CEO of Bridgewater Associates, the world's largest hedge fund, says there are good ways and bad ways to achieve deleveraging. He calls these "beautiful deleveraging" and "ugly deleveraging."

 

Dalio explains that deleveraging reduces the circulating money supply and leaves less money available to buy products and services.

 

Under those circumstances, he says, governments sometimes have to step in to supply missing demand. They do this by raising and spending a great deal of money to make up for cutbacks in household spending and business investment. The aim is to prevent a self-reinforcing recessionary spiral from taking hold.

 

There are three ways to raise the necessary money: borrowing (generally from large savings pools, such as pension or insurance funds), raising taxes on the relatively wealthy, or getting the central bank to print money.

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text 2013-10-13 00:36
World Bank sees Afghan economic growth tumbling 10 percent in 2013

Source

 

(Reuters) - Afghan economic growth, largely reliant on international aid and security spending, will tumble more than 10 percent this year as foreign troops withdraw and endemic corruption and violence sap development, the World Bank said.

 

Afghanistan ranks among the most corrupt nations in the world and international aid donors have threatened to cut funds unless there is a crackdown.

 

Norway has already announced a reduction in its planned aid over Kabul's failure to tackle graft and violence against women.

 

President Hamid Karzai's government also faces a deteriorating security situation ahead of elections next April that is hindering plans to develop Afghan natural resources, the World Bank said in its South Asia Economic Focus report.

 

"Afghanistan sticks out in terms of the size of its slowdown... mainly driven by increased uncertainty stemming from the political and security transition," the report said.

 

"Continued violence, economic crime and systemic corruption also have undermined progress."

 

Economic growth is expected to reach 3.1 percent this year and 3.5 percent in 2014, down sharply from 14.4 percent in 2012, the report said.

 

In a major blow to Afghan hopes for economic independence, Chinese investors have demanded a review of a landmark three billion dollar deal to produce copper amid security concerns.

 

A smaller but symbolically important oil project in northern Afghanistan has also ground to a halt.

 

The government's failure to improve tax collection is also a major factor behind the weakening economy, the World Bank said.

 

At a donors' conference in Tokyo last year, the Karzai government promised to increase tax revenues by about five percent to 15 percent of national output by 2016.

 

"The current decline in revenue therefore poses risks not only to long-term fiscal sustainability but also to the achievement of the Tokyo... targets," the report said.

 

Delegates from 80 nations and international organisations pledged in Tokyo 16 billion dollars in aid over four years, but tied the funding to a much stronger effort to combat corruption.

 

Another threat to growth is a deteriorating outlook for agriculture, a key sector which accounts for a quarter of the Afghan economy and which benefited from an especially strong harvest last year.

 

Most foreign forces are due to withdraw from Afghanistan by the end of 2014, leaving security entirely in the hands of Afghan forces.

 

Rising casualties among the Afghan forces and a high desertion rate have cast doubt over their ability to manage on their own.

 

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review 2012-08-07 00:00
The End of Growth: Adapting to Our New Economic Reality
The End of Growth: Adapting to Our New Economic Reality - Richard Heinberg I am torn about this book. It was a bit of a downer pretty much the whole way through. I liked that it touched on the financial markets, but not really in any depth. The same could be said for the entire book. I felt like "Limits to Growth" was a better argument for the end of growth concept, and I feel like his suggestions amounted to "go read these other resources". Still, and important topic to ponder.
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