Systems Inside Systems

It continues to be difficult to focus on sustainability while the financial markets are so turbulent. But the importance of systems thinking grows as the crises deepen. Herman Daly, who has for many years seen limits to growth rooted in the real coupling of our economic system to the natural world, recently offered his always deeply thoughtful views on the present situation. For us who at this point in life rely largely on our hard-earned assets, his words are not terribly reassuring.

Growth in US real wealth is restrained by increasing scarcity of natural resources, both at the source end (oil depletion), and the sink end (absorptive capacity of the atmosphere for CO2). Further, spatial displacement of old stuff to make room for new stuff is increasingly costly as the world becomes more full, and increasing inequality of distribution of income prevents most people from buying much of the new stuff—except on credit (more debt). Marginal costs of growth now likely exceed marginal benefits, so that real physical growth makes us poorer, not richer (the cost of feeding and caring for the extra pigs is greater than the extra benefit). To keep up the illusion that growth is making us richer we deferred costs by issuing financial assets almost without limit, conveniently forgetting that these so‐called assets are, for society as a whole, debts to be paid back out of future real growth. That future real growth is very doubtful and consequently claims on it are devalued, regardless of liquidity.

There's not much I/we can do about what has happened, but we can certainly stop trying to put Humpty Dumpty back together when we need something fundamentally different. Resiliency in the system has largely disappeared. When this happens in complex systems, they often move into entirely new states like the one I believe we are about to enter or have already moved into. Further the old ways of thinking and managing are not likely to work. They may, but that would be a lucky outcome. We, like Einstein said in different words, have to stop thinking (and acting) is the same old ways that put us in the predicament in the first place.

Unfortunately for us, the political system, also complex, is stretched to the breaking point and none of our present leaders or those vying to be the next one can tell the truth or even ask the right questions.