A regenerative economy is decreasing in consumption, but increasing in the stock of natural resources and other capitals. Natural capital is depleted as the economy grows beyond a sustainable level, so in the long-run periods of economic growth and economic regeneration will be balanced. During periods of economic decline, it is possible to regenerate capital assets, re-localize economies, invest in regenerative agriculture, and take greater responsibility for our resource use.
Following the Covid-19 recession, many will be calling for a Green New Deal. There is a good reason for this. The 1920s and 2010s were quite similar economically. The roaring 20s were known for overleveraged investment, as we ‘doubled down’ following the crash of 1920. The 2010s are not yet widely characterized as a period of financial risk-taking, but as they say, hindsight is 2020. Since 2008, public debt has more than doubled to above $20 Trillion and private debt has rebounded to 150% of GDP at $31 Trillion[i]. The Federal Reserve has enacted costly policies to avoid recession and stabilize the economy while maintaining low interest rates; these policies have benefitted banks and maintained the availability of credit. Since 2008, auto loans have increased by 40%, student loan debt has increased by over 160%, non-housing consumer debt has increased by over 60%[ii], while corporate debt has also rebounded to an all-time high of $10 Trillion[iii]. This debt increase would be less dramatic if it were not building on consistent debt increase going back to the 1940s. Total US debt is now above $70 Trillion. The graph below shows private debt as a percentage of GDP. The recessions in 1915 and 2008 are marked by small peaks; in the 1930s this was followed by a huge spike. This seems to be where we are headed, particularly if the US government does not take on this debt.
Rates of inequality were similarly high before both crises, but if we truly are following the path of the Great Depression, it will get worse before it gets better. Recessions tend to exacerbate preexisting social vulnerabilities. During the Depression, many who worked in the agriculture or labor industries were left helplessly unemployed, while the well-to-do were left unbothered.
Following the Great Depression the New Deal was launched. This focused on relief, recovery, and reform. While the New Deal was a success in many ways, ultimately the government debt was not balanced until the economy grew once again, through the second world war, and along with this growth came a massive increase in energy use.
Today, the US no longer has the resources, the space, or even the demand for projects that took place in the mid-20th century. We do need new technology, but this technology should help us off the hamster wheel of consumerism by extending product lifecycles and reducing waste, rather than bringing about the newest consumer revolution. The benefit of such technologies will be maximized if they are publicly funded, unpatented, and available for cheap – not made to boost GDP.
One possible win-win is to promote local economic development and skill building through service-learning corps offered through state colleges. State colleges can serve as hubs of local economic and civic coordination, and to map possibilities for sustainable localization of supply chains. In Fall of 2020, Regenerate drafted a plan for a Learning Corps in the state of Vermont. Read about it here.
Rather than a vision based on green Industry, the obvious vision for a 2024 GND is one focused on health: the health of our planet, the health of our food, and the health of our people.
[i] Perkis, David F. , David. “Making Sense of Private Debt.” Economic Research – Federal Reserve Bank of St. Louis, Mar. 2020, research.stlouisfed.org/publications/page1-econ/2020/03/02/making-sense-of-private-debt.
[ii] Richter, Wolf. “The State of the American Debt Slaves, Q4 2019.” Wolf Street, 8 Feb. 2020, wolfstreet.com/2020/02/07/the-state-of-the-american-debt-slaves-q4-2019/#comments.
[iii] Lynch, David. “Corporate Debt Nears a Record $10 Trillion, and Borrowing Binge Poses New Risks.” The Washington Post, WP Company, 29 Nov. 2019, www.washingtonpost.com/business/economy/corporate-debt-nears-a-record-10-trillion-and-borrowing-binge-poses-new-risks/2019/11/29/1f86ba3e-114b-11ea-bf62-eadd5d11f559_story.html.