The sky's falling, the economy is crumbling - run! run!

 I guess I am a little naive.  

With the Icelandic volcano, Eyafallajökull erupting and causing problems for air traffic because of microscopic ash particles, it seems we are deluged with comments from the media about how the economy is suffering.  Now, don't get me wrong, there are certainly elements of society who are bearing the brunt of this - the small scale farmers in Kenya, for instance, and the airlines are obviously not without cause for concern.

But is it really a huge cost to the economy? Money which would otherwise be being spent on air travel is being spent on hotels, car hire, trains, ferries and so on.  In many cases, more money is being spent by people trying to get home than they had already spent on their air fares.  More money being spent is good for the economy. Longer term, if the disruption continues, maybe people will find it harder to do business.  It seems unlikely that they will stop, however, and will have to find more efficient ways of meeting with people in other countries.  Greater efficiency is, I am told, good for the economy.

Some businesses might collapse, and that is not good for the employees.  I feel sorry for the Kenyan farmers, but is there really any good reason, at all, for Europe importing cut flowers from Africa?  Apart from supporting the people who grow them, of course, at the expense of the environment.  

It might, in the very long term, mean that I have to pay a lot more for a new computer.  It may well mean that organ transplants and the like cannot be delivered in a timely fashion, and that is a tragedy for those set to receive them.  But if the "chaos" continues (which is unlikely from this event, but new events may become more likely), we will have to adapt and cut down on the (currently rather excessive) amount of foreign travel.  Adapting means coming up with new solutions.  Innovation, I would argue, is good for the economy.

Insurance firms, who like to make large profits and pay out as seldom as possible as far as I can make out, while managing to get government hand outs if things start to look a little dodgy, will actually be contributing to the economy, when (if) they pay out for this sort of event.  They will be putting money back in the pockets of people who will then go and spend it.  True, there will probably then be less for over-paid investors to juggle and take their cut of while claiming to be an essential part of our pension plans, and the latter part of that may be a real problem.  Of course, if bankers didn't take such a large cut, it would be less of an issue to begin with.

Essentially, the economy only exists because money changes hands because we want (or occasionally need) things we don't have.  Unfortunately, capitalism, in order to fuel the personal greed of the few, has engaged in extensive PR campaigns to convince us to consume beyond our needs, and beyond a sustainable level.  Much of the 'money' in the economy only exists in the first place because we borrow it to buy things we don't need because someone spent money to convince use we would like them.  That money isn't real, and at some point, the unsustainability of the whole affair will mean that there will be a change.  Probably a catastrophic change (in the mathematical sense - a sudden change, not in the media-sense of 'oh my god it is so terrible'), but one which is overdue and which, honestly, will do us all good in the longer term.

In order to prepare for it, and in order to try to do as little damage to the environment as possible, why don't governments try to make their countries as self-supporting as possible?  Why is it that globalisation is considered a neat idea?  Grow, manufacture, trade, holiday locally - it cuts down on pollution, avoids risks from events like volcanoes, and reduces problems with poor working conditions in less scrupulous countries.  If you must transport things long distances, do so using renewable energy (sailing ships - great invention) - for almost everything else, there's the internet (which we can start powering more efficiently too, by the way, using micro-generation and by "following the sun").  If you really, really, desperately need (or want) a fish caught in a lake on a different continent, you should be prepared to pay enough to cover the real costs (including full carbon neutral offsetting).  Once the jet planes can fly again, of course.

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Comments

Economics

I agree with most of what you say in principle. And politicians always seem to make the mistake of saying getting more money into the "economy" when probably what they really are mean specific sectors of the economy, or into the Treasury or some such thing. I can't decide if it is meant to be deliberately confusing or not...

However, I suspect an economist's response to your suggestions would be there they sound an awful lot like "protectionism". To make local growth and manufacture viable for example we would need to impose tariffs (these might be the externalities you mention) on imports and this in turn would lead to a general decrease in trade as other nations imposed tariffs on our products in turn. So it would be difficult to get off the ground without a huge propaganda push (to which most people would probably be too cynical) or enforced consumption of nationally-produced goods, to support the new "market" in its early stages - and those would require a bigger (potentially more authoritarian) government, more public spending, etc.

Of course, this all implies a government-run top-down initiative when the more appealing solution (to me) would be for self-organised efforts at a community level. Unfortunately, those communities have to be in place already (which they certainly are not), and real communities tend to be detrimental to markets. As people tend to enjoy convenience, self-organisation would require years of work and effort before results were visible let alone capable or making us self-sufficient as a nation. That's not to say it isn't worth trying, just that it's hard to square this kind of effort with knowing how to vote and what to support in terms of the bigger picture.

Bringing in externalised costs into the pricing of certain commodities/services would at least raise awareness of their impacts and might even help if the money made its way back to say countries where water is diverted from natives to grow our food. But this would mainly mean that all the things people have become accustomed to would only be available to the rich - in any case, we're heading further into a plutocratic state of affairs. Unless, things miraculously get better, I think we could be looking at increasing radicalisation (and people won't necessary become "good" radicals).

Sorry, didn't mean this reply to be so long! Just some thoughts... Thanks for your clearly thought-provoking post!

Guy