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Debt traps are worse than mouse traps

Do you know how many years' income you will spend on your home or car loan before it's paid off? How many years of work you'd have saved with a smaller house or car, paid off more quickly? The cost of debt is huge, but we're trained to ignore it.

We're deluged with advertising to increase our outflow into other people's pockets. "Zero money down"? Great, until "down" becomes "out". Big print on credit card offers sound great. But the small print often ends up costing us 20-30% interest - on everything we charge, not just our balance. High school graduates are deluged with credit card offers (or get equally big student loans) so they start out with both feet in the debt trap.

Twenty percent of all family, business, and government expenditures go to the cost of borrowing instead of paying when we buy. That's up to 10 years of our lives spent working off interest payments to the banks! Some borrowing is needed, but a lot is pure laziness and brain-washed thinking. Take Oregon highways for example. The state takes in a certain amount every year from gas taxes, and pays out the same monies for highway maintenance. It's revenue-financed and makes sense. But then someone smart in the legislature (a banker, maybe?), said, "Let's set up a highway trust fund." Borrow money to fix the highways!

Umm . . . what about paying it back? Now highway repair ends up costing twice as much - the repairs, plus as much in debt service over 20 years. And it's harder to pay that off while paying for ever ongoing repair needs. So we borrow more and get caught in the debt trap.

Hooray, though - our local sewer district had a huge debt when it was set up. But they decided to pay it off and stay out of debt, to budget and save for upcoming expenditures. Good job! Compare that to other agencies, with ongoing capital expenses, that borrow to pay them, and pay on 20 years of debts every year.

What do we get from debt? Our foolish economic theories say we get the use of the car while we're paying for it. But they're hiding the whole story. Financing a car means we probably end up financing the next, and the next, cuz we're always busy paying off the old loan instead of saving (what's that word??) to buy the next one. So we buy ten cars over our life, and pay interest for 50 years. Change just one thing - how we got the first one. Go without, walk, use the bus or a friend's car, or buy a real junker the first time around, then save to buy each car. We would be saving and receiving interest all those 50 years. Money ahead, rather than behind. The inconvenience cost was 1/10th what the economists say, and savings are about 15 times as great.

Let's look at the real cost to buy things via plastic. Using credit cards, with a balance, maybe 18% interest, plus 2.5% for merchant fees, plus 20% or more for income taxes on the money we used. Using a debit card there are no interest fees, but still merchant fees plus 20% income taxes. With ATMs, and average $50 withdrawals, fees might be 3%, plus 20% income taxes. Paying cash, only the 20% income taxes. Barter eliminates that 20% cost. And giving time and stuff back and forth, there is a "feelgood" gain instead of cost. If we share fun work with others, "feelgood" gain increases significantly. In other words, the price of "money" can range from a cost of 40%, to a benefit of probably a similar amount. Put that yet another way. With just a wee bit of attention to how we use money, we'd have a day off a week to go fishing! Or save the world.

How to ease out of the debt traps? First, decide to do it! Start with two credit cards - one only for purchases you're going to pay off each month, so you don't pay interest on everything. Go online to find low-interest credit cards. Check out interest rates on an equity loan or HELOC rather than using 18% credit cards with ongoing balances. Tell your city, county, and districts governments to budget and save, not borrow. Pay cash. Trade time, energy, and stuff with friends. Set up a personal finance course at your high school. Pass a "no unfunded mandates" law to prevent budgetary surprises for our communities.

You'll be surprised how good taking such a pro-active stance for your pocketbook and your community will feel.


© Tom Bender. Tom Bender is an architect (among other things) and one of the founders of the "green architecture" and “sustainability" movements. His "Factor 10" economic principles have been endorsed by the European Union, the World Business Council for Sustainable Development, and the United Nations Environmental Program. He is the author of Environmental design primer, Building with the Breath of Life, and Learning to Count What Really Counts: The Economics of Wholeness. www.tombender.org

 

 
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Sink or swim sustainability

by Cate Montana

AMATUKU, Tuvalu - Midway between Australia and Hawaii a delicate chain of reef islands and atolls circumscribes a large inner lagoon. With its coral reefs, beaches, warm climate and sunny skies, Tuvalu matches most people's vacation ideal. As the only nation in the world voted above reproach for human rights violations by a panel of observers in June 1998, it is also one of the most peaceful.

The fourth smallest nation in the world, Tuvalu's Polynesian population lived harmoniously on its 10+ square miles of land mass for almost 3,000 years. But now there is trouble in paradise. Rising salt water tables and ocean flooding are rapidly contaminating the soil, making it difficult to grow taro, the nation's indigenous vegetable crop. There is no fresh water available - only what can be cached from rain. Much of the population uses the lagoon for its bathing and toilet facilities. The country has to ship its commercial waste to landfills in Fiji and New Zealand.

Although Tuvalu has an international airport - an abandoned World War II American airfield that was constructed in 1942 - to build it, a sixth of the country's land was paved over and nearly half of its coconut trees were destroyed. The Japanese bombed the islands during the war, creating further damage. The coconut palms could not be successfully replanted, the indigenous copra industry faltered, and the war left the islanders with a dependency on imported food, oil and other commodities that could only be shipped in at enormous cost from larger islands like Fiji, New Zealand, and the mainlands. It also left a residue of chemical pollution, un-defused bombs, abandoned equipment, and a sunken navel ship in its waters.

Last but not least, Tuvalu is extremely vulnerable to changes in sea level and storm patterns. An estimated sea level rise of only 8 inches - which some sources predict within 50 to 100 years, could make Tuvalu uninhabitable. If the current global warming forecasts are accurate Tuvalu could well be the first nation to fully pay the price.

When French filmmaker, Gilliane Le Gallic, came to the islands in 2004 to film the acclaimed documentary, Trouble in Paradise, she saw through the threats to the potentials. The epitome of vulnerability, Tuvalu, due to its small size, consumption needs, and traditional relationship with nature, was also a perfect candidate for becoming the first country to deliberately restructure itself to work in harmony with the environment. Le Gallic imagined Tuvalu as an environmental showcase for the planet.

After completing the film, she came back to the islands and formed a ten year plan called Small is Beautiful (SIB) and set about funding a sustainability model for the nation. "I couldn't do a film and then just go and let these people drown," says Le Gallic. "I thought Small is Beautiful would be a positive and concrete thing to make Tuvalu a model for the rest of the world."

With funding from ADEME, the French Agency for Environment and Energy Management, FONDS PACIFIQUE, and Alofa Tuvalu, Le Gallic pulled together a team of implementation partners, including Dr. Sarah Hemstock, a biologist from the United Kingdom specializing in energy and carbon flows and climate change, Pierre Radanne, former president of ADEME, and environmentalist Christopher Horner, co-director of Trouble In Paradise. The team coordinated with the government of Tuvalu and Tuvalu Maritime Training Institute (TMTI) to develop a micro-model for sustainable development using renewable energy.

Tuvalu had already been the scene of a failed national photo voltaic initiative in the 1980s. Between lack of funding and little technical capability amongst its citizenry, the country couldn't keep the original PV systems going. Taking the hint, SIB initiated a "micro-model of the model" on the islet of Amatuku to develop immediate Renewable Energy Technology (RET) implementation of two biogas digesters, a small coconut biodiesel plant, a small windmill and ancillary PV systems.

"These are [mostly] low-tech solutions," says Hempstock. "Biogas is a technology that's over 150 years old. So people know about the technology and you can train people at the community level to use the technology and to maintain the technology and then transpose that into their own communities to become more autonomous.

"The PV systems put in in the early 80s - they were selling coconuts to pay for basic maintenance. But when it came to a new system [or major repairs and replacement parts] it just didn't work. Tuvalu ... in my opinion, would never be able to cover the capital costs for any initiative like that."

Biodigesters, on the other hand, are found by the thousands in the rural areas of China, India and South America as well as in agricultural areas in Western nations. These simple structures are partially buried in the ground, and provide anaerobic decomposition of vegetable matter and waste material from both animals and humans. They produce methane gas usable for cook stoves, and a high nitrogen end product that can be used as fertilizer. Small local wind generation and PV systems would supplement rather than try to replace the major energy source which is currently oil. Small biodiesel plants would work locally using coconuts and other available plant materials to create biodiesel that could be used in generators and ship's engines. Because Tuvalu is a 100% oil dependent country, this would help defray the high import costs of oil.

Currently, the first biodigester which runs off the manure from 35 local family pigs has been installed in Amakutu. The gas produced supplies a community kitchen that serves 25 people. The second biodigester, which will be supplied by the waste from TMTI students and faculty at the Institute, is being built. A training program for women has been established with teachers and technicians from TMTI and Tuvalu's other schools, and the simple technologies are spreading.

"It's mostly women that do the cooking and the housework," says Hemstock, "so they can see the benefits of biomass and using the biogas for cooking and for domestic purposes. It makes sense to approach the women first in training them as technicians ... because men are more mobile. If you train women you get more chance of them sticking around and working with the community."

Giving Tuvalu an edge

The Amatuku micro-program is designed to reinforce the competitiveness of Tuvalu toward other pacific islands such as Fiji, by creating a central National Maintenance and Training Center on renewable energy which will be the first one in the Pacific area. At a national scale, implementing the SIB program using renewable energies will increase energy efficiency and decrease oil imports. It is also designed to reduce pollution & green house gases entering the atmosphere as well as protect Tuvalu's energy supply from the whims of the international market.

Using biogas digestion will help reduce waste and pollution, run-off and contamination from organic waste, including human & animal sewage, therefore preventing land, sea and groundwater contamination. The slurry produced from the digestion process can be used to improve soil quality and fertility, or can replace soil in areas where soil is heavily contaminated.

The re-introduction of copra production for biodiesel will have many multiplier effects. It will provide income to outer islands; reduce oil imports; increase biodiversity by replacing old coconut trees and re-foresting degraded areas; provide timber as old trees are cut and replaced; provide a carbon neutral energy source; and provide much needed jobs in rural areas.

The planned integrated bioenergy and agricultural extension plan will increase the amount of food produced in Tuvalu while decreasing the amount of waste. Where land and soil is scarce, compost will be used to extend the "family gardens" project, and help decrease the amount of household income spent on food.

SIB and the Amakutu micro-model have been enthusiastically received in communities. "It took awhile," says Le Gallic. "Not to make them interested, because it is their future and they are interested. But they were not that aware of the threat when we went there the first time. Now they are. It's a big shock. They're still digesting the information."

They're also trying to figure out why the world doesn't seem much interested in their plight, and why such massive programs as the Kyoto Protocol's Clean Development Mechanism (CDM) is failing them. CDM allows industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. But because Tuvalu's impact on climate change is so minute, it doesn't qualify for CDM assistance.

"As Tuvalu is going to be the first nation that is affected as a whole nation by the effects of climate change, I think that's a bit of a travesty," says Hemstock.

One of the hopes from the SIB program is that Tuvalu's managers and implementation partners will be able to follow up on the Amatuku micro-model and reproduce it, not only as a sustainability model in other islands of Tuvalu, but in the Pacific region and then the rest of the world. Walking the walk and not merely talking the talk just might strengthen Tuvalu's case when it comes to future global climate change negotiations.


For more information: alofatuvalu.tv and tuvaluislands.com

 








   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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