Last Sunday, the group of leaders of the world's biggest economies, known as G-20, agreed on a timetable for cutting budget deficits and halting the growth of their debt. The agreed timetable is not exactly a deadline. The G-20 spelled out a need to cut government deficits in half by 2013 and stabilise the ratio of public debt to GDP by 2016. Appalled by the Greek sovereign debt crisis, the European leaders are afraid that if they fail to put their financial houses in order, the whole continent might go down the drain, first with the collapse of the euro, followed by economic depression. But whether these countries can actually meet the deficit and debt reduction targets is another matter.
The Americans are not happy with this stance. But they had to go along with the flow. Before the G-20 summit, US Treasury Secretary Timothy Geithner warned that withdrawal of stimulus measures too soon could derail global economic recovery. In the long term, nations will need to cut back on their deficits, but in the short term the stimulus packages must continue, otherwise the double-dip recession threat will harm recovery prospects and also worsen employment, he argued. US sovereign debt is approaching 100 per cent of gross domestic product.
After the conclusion of the G-20 meeting, Paul Krugman, an economics professor at Princeton University and a Nobel Prize winner, attacked the deficit and debt cutting measures in his weekly syndicated column. He warned that the European move to withdraw the stimulus packages could cause the global economy to slump into a real economic depression similar to the Great Depression of the 1930s. Like Geithner, Krugman urges the world's largest economies to keep interest rates low and to spend their way out of the current quagmire.
Even with their seemingly sharp difference of opinions, the G-20 leaders and their American critics, including Krugman, are caught in the same trap. They believe that economic growth is infinite and that prosperity on this planet can continue forever to serve the increasing need for employment. This economic thinking is fundamentally dialectical. Societies and wealth develop and increase through a dialectic process of thesis, anti-thesis and synthesis. The thesis of normal growth conditions is usually followed by a recession, or a revolutionary or technological breakthrough, which serves as an anti-thesis. After muddling through, there emerges a synthesis of renewed growth on a higher plane. Hence, prosperity and opportunity can be expected to renew themselves constantly through time and adjustments.
But if you are a subscriber to the Buddhist belief of "watta" or "cycle", you will question this dialectical concept of ever-increasing progress. In watta, things come into being, try to hold on to their status for a while (from a fraction of a second to billions of years) before passing away, only to start the process of coming into being again - to repeat the unending cycle. When things start over again, they might have to start afresh without the old legacies. In this case, a world economic system that has come into being, and is now trying to hold on to its status, might have fallen into depression - after which, renewed growth is impossible. The world might have to create a new order, which will be more balanced and in tune with the limited resources of this planet.
I do believe that we are approaching the end of an era marked by overproduction, over-consumption and massive debt creation. There is no way out because, in order to continue growing, the G-20 - and everyone else - must continue to create more debt. At the same time, industries cannot produce more because consumers, who have already over-consumed, are up to their necks in debt. They cannot buy anything, because they have nothing to buy with. The only way to sell more goods is to export them to Mars. In the meantime, some governments have resorted to money printing to bail out the banking systems and to finance the deficits.
The answer to this global economic problem is to explore the phor phiang economic model. We should not produce more than our ability to consume. We should not print money from thin air. We should not create more indebtedness. We should not aim for growth but rather for the maintenance of a way of life in which each society tries to live in harmony with nature.