Living on Slippery Slopes

Futurist Robert Theobald (1929-1999) reckoned we were indeed living on slippery slopes. He was concerned that the free market capitalist model upon which major world economies was/is being run were leading us headlong into crises not only of economic proportions but also of moral, spiritual, ecological and social dimensions and he believed it to be of paramount importance that, in order to avert total collapse and catastrophe

WE needed to focus on building what he referred to as 'resilient communities'. He believed we needed to augment a 'Healing Century'.

Robert wrote and published many fascinating essays and books and perhaps I should write a series of articles in which I cover some of his very interesting ideas.

Rather than condense the warnings about deflation he airs I'd like to publish here one of his essays titled 'The Dangers is Deflation'. It is printed with the permission statement added at the end of my article;

"Every month, after the price indices are announced, economists engage in a round of statements which have become a ritual. They demand that we remain vigilant against a rebirth of inflation. They do this despite the fact that there has been a steady fall in rates of consumer inflation and an actual decline in prices at the producer level.

It was argued that unemployment could not fall below six percent in the United States without a flare-up of prices. Now unemployment is below five and still the dreaded consequences have not arrived. But there is still little willingness to recognize that conditions have changed dramatically. Consequently, the theories of the last half of the twentieth century have to be totally rethought.

I am reminded of the statement made about generals in the days when battles between the rich countries still took place -- that they were always fighting the last war and did not see how weaponry had forced shifts in tactics and strategy. Similarly, economists are always using theories designed for one period of history to explain events in another. It is remarkable that the credibility of either profession survives their errors.

Two factors are wrestling inflation to the ground. One of them is the effects of computerization and digitalization. They are now pervasive throughout the economy. They are not only cheapening products but they are dramatically reducing the cost of the systems on which economic production and distribution depend.

The second is the way in which the rich countries are increasingly exposed to competition from overseas. The pressures do not come only from lower-priced goods produced using very low-cost unskilled labor. They also result from direct competition from high-skilled labor in overseas countries which can directly undercut costs.. Salaries of computer professionals in such countries as India are about one-tenth of those in the rich countries and the fact that they work abroad does not undercut their effectiveness.

The real threat for the future is deflation -- a world in which prices decline rather than increase. Given that inflation has been set up as such a bogeyman in past years, one might assume that deflation would be benign. In fact, it would open up many profoundly difficult issues.

The first of them is that despite the inequities of inflation, it makes economic growth far more probable. People want to buy "now" to beat rising prices. Companies that take on debt have to pay back what they borrowed in dollars that are worth less. Indeed, this was the mechanism which was used to reduce national debts to a tolerable level after they rose during the World War II years.

Deflation has exactly the opposite effect. If prices are going to be lower in the future, it makes sense to put off purchases. Debt will be more expensive to repay rather than cheaper. In addition, once the markets recognize that prices will fall rather than rise, interest rates will fall. This will mean that people with fixed amounts of capital will find their incomes cut drastically -- a problem which has already emerged in Japan.

At first sight, there is an obvious "positive" answer to this dilemma. This is certainly the answer which will be advanced by economists, politicians and most communication gatekeepers. Growth can be encouraged and the limits which have been so far been assumed can be greatly exceeded. We could return to the "glory" days of the fifties and sixties when standards of living rose so rapidly.

If one widens the picture, however, it is clear that this answer is not positive but negative. I can only list three reasons here. First, standards of living are now so high that more and more people are changing their priorities away from their quantity of goods to their quality of life. Second, it is clear that today's patterns of growth will widen even further the gap between the rich and the poor. This is already the pattern in the United States and Great Britain. Commitment to the same strategies would have the same consequences in Europe. Third, and most crucial, there is already clear evidence of stress on global systems. There are emerging crucial shortages of land and water. The world's climate is becoming more extreme. This has led to very rapid increases in weather-related losses by the insurance industry. Further rapid growth threatens the ecological systems on which we all rely. Such ecological space for growth as does exist must be reserved to provide reasonable standards of living to the rest of the world's population.

Humanity has no choice but to change its goals if it hopes to survive through the 21st Century. The current stress on maximum economic growth is a dead end. It must be replaced by commitments to ecological integrity, effective decision-making and social cohesion based on social justice.

Fortunately, a great many people are aware of this challenge. Changing the focus of attention in the culture toward its massive challenges and away from short-run issues should be a primary focus of our attention"

"This material can be freely forwarded and printed with the following credit line:

"Robert Theobald has been working on fundamental change issues for 40 years. His latest book is Reworking Success. (New Society Publishers) He was recently listed as the 7th most influential futurist by The Encyclopedia of the Future."