Economic thinking is incomplete, it takes the perspective of a hunter gatherer in a new unpopulated environment. This is a result of its deeply introvert attitude, as it has only one motivational drive profit. Every modern economic activity happens in the artificial context of bank financing. Projects will always go to banks to ask for a loan in order to build capital to do whatever it tries to do. There are exceptions once a company or individual can amass enough cash. Whatever activity is done with cash directly can be very disruptive, as we have seen with Tesla and Apple in its haydays.
To drill down to what an economy is about we would define it as a process of combining three factors to generate wealth for people. These are :
- Energy -> muscle energy, electricity, steam pressure, solar heat, fire
- Skills -> brain power, intricate mechanisms, computer power
- Materials -> all stuff that grows, walks around, flies or lies around or can be dug up etc.
Wealth = Energy + Skills + Materials
Originally it was a human being that combined skills and energy to shape materials into whatever it needed. fundamentally a human being doesn’t need much more than food (energy) and a place to live to exist. Humans existed for milions of years just eating and being in all kinds of ways.
Recently we have seen the introduction of coal, oil, gas and before that of wood being burned. They are a source of energy. Used in machines one creates a source of wealth independent of humans. The machine can incorporate human control skills, like the governor on a steam engine, or the movements of sowing in a sowing machine. These mechanically implemented skills where transferred to all kinds of media until today they are mainly heald on silicon in computers.
Developments in AI are pushing the complexity of skills that can be represented in computers close to human skills. Autonomous robots that would create wealth that benefited humans would be the ultimate positive outcome. Right now autonomous bots that kill humans are the most advanced type though. This is mainly because wealth can be defined negatively, in the absence of consumption of resources by an adversary.
Modern economic thinking has been biased because of the desire for banks and fossil fuel companies to make a profit. and as they where on the top of the credit food chain they have been able to keep it this way until today. The economy does not strive for general increase of wealth, and it does not consider the context in which it operates. It only looks at the parameter of profit, which ensures security of banks, because when everyone wants profit, there is continued money shortage, and bank credit will remain in demand and a controlling factor of new activities.
The Transtion to the Roboeconomy
Renewable energy are changing the economic dynamics because they can be owned by individuals, companies or the state. Because most people don’t understand the occupying role of banks these ‘assets’ are currently mixed into the fossil based economy, loaded with debt by banks and thus owned and their existence managed by them. Privately owned renewable resources without debt are a threat to the credit hegemony of banks and fought. Ultimately this will be a losing battle and all individual owners of renewable energy resources will become creditors to the roboeconomy.
You would think the replacement of fossil by renewables does not change the lack of consideration of the economy for the environment, but it does, even if it is not the final answer. This is because renewable energy resources are still sized to the actual demand. This means there is no ‘economic pressure’ like with fossil energy. In the fossil economy banks can always take more fossil fuels out of the available resource pool or try to. They simply create credit and the fossil resources can be controled by the recipient of that credit. When this happens it means profit for the bank so this is why all kinds of projects are being pushed and why “economic growth” is the main goal of governments dominated by the fossil economy. There is even an 18 month lead time before profit or demand is to be expected. These kind of rules where made up to drive fossil fuel use expansion for decades. With renewables there will be no pressure to do more, at least until we have 100% replaced fossil fuels. This “economic pressure” also means we could save enormous amounts of emissions right away by stopping economic activity that has insufficient benefits, or is are simply wastefull (like 80% of holiday air travel).
Credit in the Roboeconomy
Capitalism used to mean the management of production resources to maximize wealth. This included everything that would not be consumed, so machines, labour, skills. The way it was allocated could be directly or through trade using gold and silver backed currencies. With the arrival of fossil fuels this became a limit on development, as the extention of credit was limited by the amount of gold and silver (a problem already addressed with fractional banking). So the gold and silver standards where abandoned and today a US dollar is not backed by anything, at least so it seems. Now money is considered to be capital, and banks can print dollars and hand them over to allow projects to go ahead.
The fossil based economy depends on cooperation between oil companies and banks. This cooperation can be managed even if none of the players is explicitly aware of it
This only works because the credit buys fossil fuels or some other form of energy (renewables are still caught ni the same debt based credit system). This is not evident to most people but it is true. You can buy a running shoe, but if the money you buy it with does not allow the manufacturer to buy new plastic for more running shoes, and if it doesn’t allow the supplier of said plastic to buy the oil it needs to make the plastic, the manufacturer would be a fool to accept the money. Every product in our fossil based economy has a fossil fuel cost, often many types, and the money needs to be able to buy that fuel, and this is possible of a fundamental deal made with fossil fuel companies who gain only very little from it. Credit is carboncredit.