Ecological Crisis and the Fallacy of Economics: For Profit or for Mankind?

Xiaoming Guo 郭晓明

The earth’s resources are limited, but human demands are unlimited. This is the biggest contradiction facing human beings. The solution to this contradiction lies in human beings overcoming their own greed and vanity in order to avoid the black hole of infinite demand. If the mainstream consciousness that dominates human civilization still favors vanity and greed, human beings will repeat the fate of the extinction of the ancient Loulan Kingdom and the extinction of the Easter Island civilization. To avoid the fate of extinction of human civilization, we have to start by correcting the fallacies of economics.

Let’s talk about demand-driven economic development first.

During the Great Depression in the 1930s, on the one hand, milk was poured into the sea because no one bought milk, no one had money to buy milk, and selling milk did not make money, and on the other hand, unemployed workers lined up to receive relief porridge to sustain their lives. The economic crisis of capitalism is a crisis of overproduction. Society has production capacity, but there is no market demand for commodities produced. Therefore, stimulating economic recovery requires market demand. Hence the Keynesian theory of insufficient demand. The Great Depression was the least economic economy. Economics is the study of the efficient allocation of resources. Pouring milk into the sea is not an efficient resource allocation. Workers are unemployed and human resources are idle. This is not an efficient allocation of resources. Factories shut down and assets sit idle, which is not an efficient allocation of resources. With the market economy allowing the invisible hand to allocate resources, comes the great depression of resource waste and idle resources. What is the problem with this Great Depression? It is not the lack of resources or the lack of productivity, but the wrong distribution mechanism of the wealth produced. Allowing the market to distribute wealth leads to polarization where the poor have no purchasing power and leads to insufficient demand. Therefore, to solve the problem of the Great Depression, the distribution system needs to be reformed. If the market distribution mechanism fails, the government tax will be redistributed again. So with Roosevelt’s New Deal, Roosevelt introduced medical insurance and social insurance, allowing the government to redistribute wealth to maintain the basic survival needs of the poor. This is the policy of communism. Unemployment benefits are distributed according to need. According to the principle of communism, from each according to his ability, to each according to his need. Only those who can be employed can do their best, and those who are unemployed cannot do their best. The social welfare system is distributed according to need. If you are too poor to make ends meet, the government will give you food stamps and social security checks. The government has distributed money, market demand has increased, employment has increased, idle assets have been revitalized, and government tax revenue has increased. That’s how America got out of the Great Depression. According to Keynesian theory, government fiscal policy is counter-cyclical. During the Great Depression, the government borrowed and issued money to drive the economy with demand. When the market demand comes up, the excess production capacity will be restarted.

Economists are happy that Keynesian theory is so effective, and they have the theory of a demand-pull economy. Even if there is no overcapacity, as long as demand increases, production capacity will expand and supply will come up. In this way, the Western theory of economic development has become consumption-driven economic development. As long as you consume more, the economy will rise. Food stamps issued by social welfare are a necessary requirement of life. The consumption and demand created by the market economy are not necessarily necessary for life, or even harmful to life.

For example, the Opium War opened up China’s opium market. This opium demand and opium consumption saved the trade deficit of the British Empire and allowed China’s silver to flow out. This demand for opiates is harmful demand. Although such demand stimulates the economy, it is harmful to both human beings and society. This economy of bad demand still exists today. One of the wars leads to the need for arms. This is the demand-driven economy driven by the US military-industrial complex’s dominance of US foreign policy and causing global unrest. The military-industrial economy not only does not produce utility for living but also consumes resources and destroys property. An economy in which the demand for arms is driven by war is an immoral economy. Another example is the insurance industry in the United States. It is a demand for patients to see a doctor, but half of the cost of seeing a doctor is paid to doctors and hospitals, and the other is paid to the employment of insurance industry personnel. Why bother? The insurance industry and the financial service industry have doubled the overall burden of healthcare costs in society. The cost of this distribution system is too high. I sold insurance. It is clearly written in my insurance policy: more than 40% of the insurance money is used to pay the policyholder’s compensation, which means that more than half of the customer’s insurance money is used for the insurance company’s profits and costs. Of course, I worked selling insurance. I need to survive, and I need income. Of course, my income from selling insurance comes from the insurance premiums paid by policyholders. But obviously, this kind of economic system arrangement is very uneconomical. For health care, you have to double the cost to the financial services industry. What’s more, when doctors see a patient now, they basically look at the test results. Although the test results may reveal a trend, they can still be classified as normal. There are basically no medical care measures, and medical measures are delayed until the illness gets worse. This is the market demand that the pharmaceutical industry needs. If the disease is not serious, expensive medicines will have no market. Doctors only prescribe pain relievers for minor ailments. When I first arrived in North America, watching an advertisement for painkillers on TV was also a kind of culture shock. The painkiller counters of supermarket pharmacies are full of beautiful things. Painkillers do not cure the disease but make you ignore illness.  Doctors and pharmaceutical companies need the market demand of ill patients. The most commonly used painkillers are knee joint painkillers. When the knee joint is worn out, it hurts. If it hurts, walk less and rest more to let the joint recover. This is the body’s own self-protection mechanism. But the doctor prescribes painkillers, so that you continue to wear the joints without knowing it, and you will have joint replacement surgery after the wear is exhausted. Therefore, although North American medical equipment and medical technology are very developed, the demand for medical treatment has never decreased. In Canada, you can make an appointment for a checkup up to one year later. Many diseases will either heal on their own or worsen by the time the appointment time comes. Therefore, I am more used to getting some medicines from Chinese pharmacies in Chinatown. It is best to eliminate diseases in the bud, and that is also good for patients, not for the pharmaceutical industry. If the health care system is good, the overall health level of people should be getting higher and higher, the number of people seeing a doctor will be less and less, and the demand for medicine will be less and less. To evaluate the quality of medical conditions, one indicator used by many think tanks is the number of hospital beds per 1,000 people. Does everyone lying in a hospital bed mean that the medical conditions are good? Could there be no demand for hospital beds? The demand-pull economy is a very dubious theory. Yes, the economy is pulling up, but for what? Is this effectively allocating resources? Or is it a waste of resources? Preventive treatment is the best medical system, but it is a system that reduces the demand for medical treatment. Is this considered economic or uneconomic? Obama campaigned on health care reform, saying that the cost of health care is a serious burden on the US economy. However, if you trade stocks, you know that pharmaceutical stocks are usually blue chips, and one of the hot spots for strong economic growth is the pharmaceutical industry. Especially the elderly are often in life-long drug-dependent condiction. In a capitalist society, the “effectiveness” mentioned in the effective allocation of resources refers to the effectiveness relative to the profitability of capital, the effectiveness of the level of profit, and the effectiveness of investment returns. This kind of effectiveness treats people as a resource and a resource for capital profits in the service industry, so it is called human resources. In a capitalist society, patients are the resources of the medical industry. The more sick you are, the greater the market demand, the greater the rigidity of demand, and the more lucrative the pharmaceutical industry will be. The more patients and the sicker they became, the more the pharmaceutical industry thrived. Not only has the pharmaceutical industry developed, but the medical insurance industry is also developed. Not only is the medical insurance industry developed, but the information technology industry serving medical insurance is also thriving. It can be seen how much economic growth has been driven by the demand for medicine caused by the reduction in people’s health. Maintaining the sub-health of the whole society turned out to be the leading industry of economic growth.

Of course, increasing demand to stimulate the economy is not a bad thing. The creation of many demands is human progress. For example, Emperor Qianlong didn’t have a mobile phone, so he never watched TV. Television is a demand created by the radio industry, and cell phones are a demand created by the communications industry. It is a good demand to enrich healthy life and improve living. One thing is certain, consumer demand is an important content of economics, and living is an important content of economics. Economics must include production and living. From this point of view, it is logical that demand drives economic development, which is to improve living standards to raise production levels. Americans have a high cost of living, but their standard of living has not risen proportionally because of the rigid living costs of the financial services industry, such as auto insurance, medical insurance, housing insurance, and even mortgages, which are all necessary expenses. Once demand becomes rigid, the financial industry is highly profitable. The United States is a society of financial capital, a society in which capitalist society has entered the stage of financial monopoly. The financial industry dominates the economy, and the marketing and profits of the financial industry come from people’s production and life. Production and life have become a profitable resource for the financial industry and a profitable market for the financial industry. All the profits of the financial industry come from production and life, which means that the increase in the profits of the financial industry is the increase in the cost of living. Now the fastest way to get money is through financial innovation, launching various wealth management products, various insurance products, various credit products, various trading methods, and so on. The financial industry, the arms industry, and the pharmaceutical industry expand market demand by reducing the overall health level of the people are cancers in the global economy. They are industries that are profitable for capital but do not contribute to the improvement of people’s living utility.

Excessive consumption is bound to lead to excessive development of resources, excessive use of resources, and excessive consumption of resources, leading to ecological damage, environmental pollution, and climate change. In order to stimulate the economy, for capital gains, food additives are added for marketing. When I lived in China before going abroad, I would have diarrhea and vomiting if I ate too much. Diarrhea and vomiting are the body’s own regulatory functions to ensure human health and prevent obesity. However, in Western fast food chains, as well as buffets, no matter how full you eat, it is rare to vomit and have diarrhea. Because vomiting and diarrhea will cause customers to dislike that kind of food, which will affect marketing. Fast food is convenient to meet the fast-paced life of society, but it must be something added to make you eat a meal when you are not in a hurry, and you will not vomit and have diarrhea when you are overeating. In addition, there is the fad created by advertising and the media, not eating as if you are sorry for yourself, and as a result, obesity is a social problem in countries above middle income. As a result, it has stimulated the weight loss industry, the medical industry with high blood pressure, high blood sugar, hyperlipidemia, the gym industry, and so on. This whole set of consumption-driven economies has nothing to do with giving full play to people’s potential, achieving people’s self-realization, and other positive life goals. On the contrary, people are addicted to material consumption, and shopping has become a kind of hobby and fashing. No matter whether there is a consumption need or not, go to a big shopping mall. Life is fettered in the vicious circle of consumption for consumption’s sake. Durability is no longer an indicator of product quality, but non-durability is an indicator of product quality because products have to be replaced after a period of use, so as to maintain strong consumption and maintain a prosperous market. When Microsoft Windows is upgraded, it does not support old printers, so you have to buy new printers. Paying the phone bill every month is not for using the phone yourself, but for maintaining channels for telemarketing.

Well, back to the fundamental principle of economics: the efficient allocation of resources. Economic activities include production and living, including production and consumption. The management of the company is very economical, minimizing the waste of resources and utilizing all possible applications of resources. This is consistent with efficiently allocating resources. However, in the field of life and consumption, we see a lot of waste and idleness, or consumption prevents people from sublimating from the low end of Maslow’s pyramid to their self-realization, but traps people at the bottom of Maslow’s pyramid Endlessly increasing consumption. Isn’t it necessary to effectively allocate resources? Why do we only care about making the best use of all resources within production, but don’t care about the effectiveness of resources in consumption? Marketing creates market demand and encourages customers to buy not what they need, but what they want. How to make customers want this and that? It is fashion, which is to create fashion trends. Trends are short-lived, and there are new fashions every year. Before clothes are worn out, they will become outdated and unfashionable. It’s time to throw it in the garbage and buy new fashionable clothes, otherwise, it would be embarrassing to wear it, and it would be shameful to wear old antiques that no one wears. A car is for maintenance and insurance most of the time, and just a small fraction of the time is in driving. Most of the time a car is an idle asset, an idle asset that company management cannot tolerate. But for most car owners, this is the norm.

Why does this phenomenon occur? Why does the economics of effectively allocating resources, the economics of production and life being economic activities, only focus on making the best use of resources in the field of production, but turn into wanton waste and squandering in the field of consumption? There must be something wrong with this economics, and this strange economic phenomenon must be caused by economics going crazy. However, if we carefully examine what resource allocation efficiency is, we will find that the stingy management in the production field and the excessive consumption in the living field all stem from one driving force: capital profit. To produce more products with fewer resources is to effectively allocate resources and increase profits. However, the source of profit, after all, comes from the production activities of processing resources, and the profit does not come from consumption or life. The capital accumulated over hundreds of years must be profitable, so more resources must be spent to produce goods, useful, useless, and even destructive goods, and only then can profits be produced. The splurge in the consumer sector is driven by profit. The whole Western culture is a consumer culture. Christmas has become a shopping festival, and society creates a kind of pressure. It is not in line with social morality not to buy gifts on Christmas, and it is not in line with social morality not to buy flowers on Valentine’s Day. You have to spend, you have to buy gifts and flowers, and you have to ask the opposite sex to have a big meal. Capital profit is the inherent law of capitalist society. Capital gains trap people at the low end of Maslow’s pyramid. Material desires are hard to satisfy. There is always consumption demand, which can never be satisfied. Capitalism is destroying the planet, it is destroying society, and it is destroying humanity.

A truly rational economics, a science that allocates resources effectively, must be a knowledge of making full use of resources in both the production and living fields, and in both the production and consumption fields. The full utilization of resources should be emphasized in the field of production, and the full utilization of resources should also be emphasized in the field of life. This is the economics that human beings need. This economics must take the full development of human beings as the criterion of effectiveness, not the profit of capital as the criterion of effectiveness. This effective allocation of resources must be people-oriented, not profit-maximizing. This necessitates a critique of consumer economics, the economics of endlessly increasing consumption. Pull people out of the quagmire of material desires, climb to the top of Maslow’s pyramid, make society healthier, make life more meaningful, and achieve the best use of talents. Only resources in the field of life can be used for a positive society and life. Stop depletion in the environment and stop the damage to the ecology is the foundation of sustainable development. The effective allocation of resources based on the health and improvement of life is a socialist economy, not a capitalist economy.

Economics has gone crazy. Economics makes the efficient use of resources only happen in the field of production but not in the field of life. The saving of production and the waste of life make human demand for resources endless, destroying the environment and deteriorating the climate. In order to effectively deal with climate change and protect the ecological balance, it is necessary to raise the socialist awareness of people all over the world. The profit-maximizing capitalist market economy is destroying the earth and destroying human beings. A healthy society is a society separated from materialistic life. is a meaningful life. In order for economics not to go mad, and for economics to develop sustainably, it is necessary to take the road of socialism. Only socialism can save the earth and save mankind.