Tuesday, October 25, 2005

Market economy failings: warning signs appearing

Many agree with the efficacy of the basic market economy model (goods’ and service’s prices are set by sellers, and increase with demand and decrease with competition) in generating a living standard

However, many also see with dismay the downside of this way of organizing our daily lives: extraction and dumping of huge amounts of resources, high levels of fossil fuel use, greenhouse gas emissions etc.


Forgetting the luxury consumption side and concentrating on the must haves, we can see that market economy models in themselves is challenged to provide what people need when it is not in abundance. (see diagram)



The diagram below shows how the more expensive water is the only solution available to poor people in developing countries, as only the well-off have access to piped water. So it is the poor who have to pay more for this must have resource. To quote the World Bank (the source of the diagram) “On average, water from piped network operators (PNO) costs 1.5 times more than that from a formal utility, whereas, water from a point source (PS) costs, on average, up to 4.5 times the utility and, finally, water from the mobile distributors (MD) can costs up to 12 times more than the utility..”



In fact, since the 1800s there has been a rapid expansion in the number of poor people on the Earth, both in sheer numbers and percentage (read unable to purchase acceptable living standard)



A number of warning signs are appearing in Sweden: recent reports say the health of elderly people is getting worse, as is the general health of young people. Employment is at a standstill, and there is no hope in sight for job creation, rather an increase in outsourcing leading to an increase in GDP but decrease in employment.

For young people especially, both health and job prospects are at a low point.

Energy prices have also been in the debate. A group of tenant owner cooperatives and building owners, has been threatening the privately run utility, Fortum, with reprisals. After being privatized recently the company has raised prices for district heating, reaching an all time high of 25% above average.

What is particularly worrying is the impact of the end of cheap energy on this system. If it fails when GDP per capita is good, what will happen when GDP reduces as a result of the effects of spiraling energy costs? Will the average worker be turned into an energy slave, forced to pay more and more of their income on utilities and finding it harder to make ends meet just for the basics?

Working with social economy makes one aware of the need to focus on ways of producing the basics: food, energy, shelter and clothing. These can be produced independent of the market economy if necessary, by developing local, collaborative solutions of the kind supported by the COGS complementary currency.

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