*This article was originally written for Seb Bunney’s newsletter exploring what it means to be free in an increasingly not-so-free world. If you find it interesting, subscribe for free here: The Qi of Self-Sovereignty.

I’m guessing you’ve heard the common financial jargon pushed by economists that “GDP growth is good”? It’s a phrase I hear repeatedly, with the promise of a better life and increased prosperity. Central banks, like the US Federal Reserve, even set targets for GDP growth, aiming for a steady annualized increase of 2%.

But… have you ever stopped to think about what this so-called GDP growth really means?

Recently, I read the incredibly fascinating book, “Sacred Economics” by Charles Eisenstein, which I recommend to anyone interested in the subject, and it got me thinking…

In its simplest form, GDP is “the total monetary or market value of all the finished goods and services produced within a country’s borders.”

The premise underlying “GDP growth is good” rests on the assumption that:

Given GDP is comprised of monetary transactions and that rational parties only engage in transactions when they perceive them to be of value, as GDP grows, we should witness more transactions, leading to increased value creation.

This begs the question: is this assumption entirely accurate?

Let’s take a step back for a second and look at lending and borrowing—a major component of GDP.

In a world where borrowing and lending exist, we find ourselves stuck between a rock and a hard place. When we lend money to someone, we must be compensated not only for lending but for the risk of default and the impact of inflation. After all, we need to be incentivized to engage in lending activities. Why would we lend if there were no potential reward?

To address this challenge, every loan is comprised of principle + interest, with interest being the incentive for those with excess capital to lend. This interest rate ensures the borrower repays more than the original loan amount. However, in order for us to fulfill our obligation of repaying more than we borrowed, what must we do? The answer lies in achieving growth. By fostering growth, we empower our future selves to generate the resources necessary to honour our debt.

And this is where our predicament comes in…

We resort to borrowing because we often lack the immediate funds required. Therefore, in a debt-based system, the total liabilities in our financial system surpass the total assets at any given moment. Put differently. There are more outstanding debts and obligations than dollars in circulation.

Consequently, a debt-based system relies on growth to sustain functionality. Without ongoing growth, the system faces collapse as debtors will fail to meet their obligations, resulting in widespread defaults.

This brings us to the question: Where does this increased productive capacity come from?

Beyond the typical explanation of inflation reducing the burden of debt by devaluing currency, there is a more profound answer: the monetization of everything within our reach.

In our ever-burgeoning world, the relentless pursuit of economic growth and the need to service mounting debt has led to the monetization of virtually everything around us, from tangible assets to intangible experiences. We must drive monetary growth in areas where monetary exchange previously did not exist. For example:

• Entertainment and media: Community events, local performances, and shared cultural activities used to provide free entertainment. However, the expansion of the entertainment industry, the development of media platforms, and the introduction of subscription-based models have led to the monetization of entertainment through ticket sales, subscriptions, and access fees.
• Communication: In earlier times, people relied on public spaces and community gatherings for communication. However, the advent of telecommunication networks, mobile phones, and internet services has led to the monetization of communication through phone bills, internet subscriptions, and various communication devices.
• Water: Historically, water was often obtained freely from local sources such as wells or rivers. However, with the rise of bottled water companies and the privatization of water resources, access to clean drinking water has been commercialized.

Circling back to the topic of GDP, it becomes evident that the ongoing monetization of every facet of our lives is essential for its continuous growth.

This reliance on monetization stems from the fact that GDP is measured in dollar terms. For an activity to contribute to GDP, it must involve a monetary transaction. Without such an exchange, the activity essentially goes unnoticed within the GDP framework.

And here lies the problem: we often assume that GDP growth automatically translates to societal well-being and improved quality of life. After all, why would individuals engage in exchanges that don’t provide value to each party involved?

However, this perspective fails to consider that although a party will only perform an exchange if the exchange is of value to both parties, what if that exchange previously would not have required the exchange of money?

To illustrate this, consider the example of the Parks Canada Discovery Pass, priced at $72.25. This pass provides access to the stunning national parks of Canada. While purchasing this pass may offer significant benefits, not long ago, access to these parks was free and open to all. We have transitioned from a scenario where access was freely available to one where we must pay $72.25 annually. This raises an important question: Are we really benefiting in the quest for GDP growth via monetization?

In our relentless pursuit of economic growth to fulfill mounting debt obligations, we find ourselves on a path where the monetization of previously free and accessible aspects of life becomes increasingly prevalent. Gradually, the very foundations of our existence become commodified as we are compelled to pay for what were once open and available basic necessities. This transformation is driven by the insatiable demands of our debt-based system, which perpetuates a cycle where growth becomes imperative.

With this in mind, it is crucial to consider Goodhart’s Law as we reflect on GDP growth:

“When a measure becomes a target, it ceases to be a good measure.”

Applied to GDP growth, this means that by targeting GDP growth, we inadvertently promote the monetization of every aspect of our lives. As a result, GDP growth no longer serves as a measure of prosperity and well-being… if it ever truly did.

To end… considering the unintended consequences and pressure individuals face to constantly monetize everyday behaviours, services, and resources to meet their debt obligations, I am contemplating my stance on lending. I am pondering whether a more effective approach exists to address this situation.

Are there alternative methods that can alleviate this burden? Could we explore new ways of supporting individuals and fostering financial stability without relying solely on traditional lending models?

Thanks for taking the time to read this issue of The Qi of Self-Sovereignty. I hope you found it insightful.

I always welcome feedback and thoughts. So, do not hesitate to respond to the newsletter email, comment on the article or reach out via Twitter.

Seb

The future is bright!