THE BLOG

This Generation Will Be Poorer Than Our Parents Unless We Change Our Economy Now

15/11/2015 19:32 GMT | Updated 15/11/2016 10:12 GMT

Our generation is the most important in human history. For millions of years, the actions of humanity bore little effect on the future but humanity will have to live with the consequences of our generation's actions forever. Yet we have a problem. This generation could be the first generation since the start of the Ice Age to be poorer than our parents.

Why is this? The answer is neoliberalism - the dominant economic ideology in the world. It preaches deregulation of markets, lower taxes, smaller state and profit before all else. The effects of this could not be clearer - it leads to inequality, environmental degradation and inevitably, economic ruin. It was this ideology that led to the financial crisis of 2007-8 and it's going to get much, much worse.

The size of the economy, or productivity, is a function of capital and labour [Y= F(K,L) where Y is productivity, K is capital and L is labour]. Capital is basically anything which aids production but isn't labour - it could be a factory, machinery, land, or natural resources for example. And therein lies the problem. If natural resources are all used up and are non-renewable, the amount of capital in the economy decreases. If all other things remain equal, productivity must decrease.

So what solutions are there? I'm not suggesting we shouldn't use resources which we need to make our lives better (although it should be noted that while some resources such as fossil fuels maker our lives better in the short run, in the long run their combustion could result in global economic collapse) but when we use these resources, we must invest in new forms of capital which makes the economy sustainable in the long term. This is another of neoliberalism's failings.

Neoliberalists believe that government's role should be as small as possible and it should therefore not get involved in things like investing in the future of the economy - they believe this is the role of the private sector which is guided by markets. But look at what has happened when things are left up to markets! In reality this has led to impoverishment of entire towns - just look at what happened to the proud industrial towns when the coal mines closed! There were no more jobs for people in those towns because no one had taken the responsibility to invest in forms of capital which would've avoided these places from spiralling into a deep depression.

Neoliberalism has caused destruction in former proud industrial towns and threatens to do this same all over the world. Livelihoods will be destroyed, ecosystems will be wrecked, entire countries will be on their knees whilst an unscrupulous elite profit. We must use the funds available now from the consumption of non-renewable capital to invest in tomorrow's technology, renewable resources and mechanisms which support organisations which serve a social purpose rather than relying on short term profit maximisation. We need an economy that works for the people, not the other way around.