John Coulter

John Coulter is an Australian engineer and economist resident in Beijing and a research fellow at Tsinghua University.
John Coulter, Consumption isn't what it's cranked up to be, is available online, as edited by China Daily for publication at http://www.chinadaily.com.cn/bizchina/2009-04/23/content_7707872.htm

unedited version
John Coulter, Consumption isn't what it's cranked up to be

The word consumption used in economics and now in a politics as a panacea to the global financial crisis is unscientific and anachronistic.  A road map to so-called recovery based on consumption is like a journey on a flat Earth.  It was reasonable previously to say we consume food and energy and other resources, and that businesses first of all produce them for consumers.  But any scientist knows energy cannot be produced or consumed, and the same for every atom of oxygen, every atom in H2O water, in food, and all material resources.  Energy and matter are transformed, and the amount on planet Earth, with the exception of sunlight, is finite.

The number of atoms can be counted.  In the air, water and land we deal with, 10 km up, 10 km down, an appleskin layer round the Earth, the number is a 5 followed by 49 zeros.  It is a fixed number. It is not going to grow.  Unless we are stuck by a sizable asteroid.  Even then, it would probably be rock, not chocolate or gold or ice (that would be nice – we need water)  and would almost certainly not contain elaborately transformed gadgets we could copy.

It is no secret that food and water flow through the human body, and we can deal with it.  A factory is also analogous to an organism that has inputs and products.  Now that many parts of the globe are crowded with factories, and now that we realize apart from inputs of solid and liquid raw materials, we have an entirely equal output of solids, liquids and gases, it is scientifically objective to appreciate that as throughputs.

The global financial crisis has writers and speakers grasping for a concept they term the Real Economy.  This presumably means a concrete set of goods and services, admittedly so complex that it can only be aggregated and accounted for in money equivalents. That is fine for hamburgers, cars, houses and bridges.  But Bernie Madoff swindled $50 billion, AIG writes off $5 billion in a quarter, a stimulus package of about a $1 trillion? How many hamburgers is that and where do they come from?  

If the economy is now a mindset of financial solutions, hope is in vain.  The word we should be grasping for is humility.  At the Boao Forum the President of Mongolia was one speaker who struck on this theme.  What conventional economists call consumption and growth needs to be appreciated as wise and economical, and yes, humble. throughputs.  The majority of political leaders would be horrified if accused of pushing blind consumption and growth, but the distinction can be lost when it is repeated unthinkingly by others.  Gambling casinos are a great money spinner for business, but on a net global scale are horrible.  A million internet bars averaging a hundred youths punching at computer games can show as growth for a while, but are more like that other growth, the euphemism for cancer.

Economists soothsayers now talk of financial cycles, as if they could predict the bottoming out and upturn (heard
these terms lately?)  China has had oracle bones predicting production outcomes for 5000 years.  The real cyclic upturns are not magical or predestined but discoveries of technologies – bronze, iron, paper, gunpowder, steam engines, scientific chemistry, penicillin, plastics, and yes, computers and www.  It seems nice to throw the shells down and say what is coming next.  Safer to know what season is next, and be skeptic on snake oil.

The analogy of the human organism for modern economic production is useful in two levels of understanding.  Firstly, consumption is balanced with outputs. Not one atom disappears, if we account for exhalation of carbon from carbohydrates mixed with oxygen from the air, and we adjust for any increase in body weight.  Secondly, the human body experiences growth from babyhood to adult, but can only do so by thoughputting AND sorting the goodness of food and oxygen, in part into even higher and more complex flesh and blood, and hopefully brain, but in greater part as excrement. Scientist summarize the phenomenon as inexorably increasing entropy (shit happens). 

Precisely the same phenomenon for industries.  The economic product is termed a good and so-called consumers will pay for it.  But every factory output is in aggregate net negative.  When we discover this about our body, we do not get shocked and refuse to eat. It is managed. By primitive people, and in cities of over 10 million people.  Hopefully well-managed, and of course at a cost.  Chinese municipalities in the past few years manage this amazingly well.  Yesterday and today Shanghai has 17 million eating and shitting a kilo each and the throughput is managed well.
  
And there is one final acknowledgement of throughputting, which needs to become part of our perspective.  The human body does not live in isolation, but in a wonderful complex set of cycles of planet purification, of water, oxygen, other elements, and balanced temperature.  We did not need to understand until advances in the Industrial Revolution impacted on Nature, first in localities and now globally.  A turning of the corner on ideas occurred in an article in Nature in 1997, estimating the value of the annual services of Natural Capital (the services Earth provides free to the Real Economy) is about double Global GDP.  No way we can pay back, we are just depleting it.  There is no way our air and ocean can purify the CO2 that comes from 18 billion tonnes of fossil fuel burned just in 2008. It is like 10 people living and smoking in an elevator for a week.  You want to try thoughputting all that?

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