As part of the New Economy 2.0 series
By David Korten
When economic failure is systemic, temporary fixes, even very expensive ones like the Wall Street bailout, are like putting a bandage on a cancer. We need to rethink and redesign the economic system. The failed system we must put behind us was designed by economists. For the New Economy system design we best look to ecologists.
The differing perspectives of the economist and ecologist are exemplified by the authors of two books that appeared in 2008 as the financial crash was playing out: Jeffrey Sachs, Common Wealth, and Gus Speth, The Bridge at the Edge of the World. These books present nearly identical statements of the need to address growing environmental stress and end extreme poverty. Their recommendations, however, are miles apart.
Jeffrey Sachs, once described by the New York Times as “probably the most important economist in the world,” takes the existing growth-centered economic model and institutional system as givens. He prescribes a solution based solely on modest adjustments in public budget allocations. Sachs’ world is defined by flows of money as both end and means.
He calls for modest new investments in existing technologies to sequester carbon, develop new energy sources, end population growth, make more efficient use of water and other natural resources, and jump-start economic growth in the world’s remaining pockets of persistent poverty.
In a 2007 lecture to the Royal Society in London, Sachs made clear his belief that there is no need to redistribute wealth, ask the rich to reduce their material consumption or redesign our economic institutions:
I do not believe that the solution to this problem is a massive cutback of our consumption levels or our living standards…, and I do not believe … that the essence of the problem is that we face a zero sum that must be redistributed.
Far from calling for a restraint on consumption, Sachs projects global economic expansion from $60 trillion in 2005 to $420 trillion in 2050 and estimates the world’s wealthy nations can eliminate extreme poverty and develop and apply the necessary technologies to address environmental needs with an expenditure of a mere 2.4 percent of the projected midcentury economic output.
Sachs never looks upstream to ask why the current economic system is driving toward social and environmental collapse. Nor does he ask why we need or want a global economy seven times as large as its present size if we can stabilize population and meet needs of the poor with a modest budget reallocation. He says nothing about what forms of consumption might continue to multiply without placing yet more pressure on already overstressed natural systems or how increasing consumption of the world’s most extravagant consumers by seven times might increase their happiness.
Gus Speth, the ecologist who founded the World Resources Institute and for 10 years served as Administrator of the United Nations Development Program, starts by taking an upstream look at systemic causes of environmental and social breakdown and sees a need for thorough cultural and institutional transformation to address foundational questions of values and power.
Speth presents compelling evidence that although there has been a slight decrease in recent decades in environmental damage per dollar growth in GDP, GDP growth always increases environmental damage. He further demonstrates that beyond a modest threshold, more physical consumption does not increase happiness. It seems such possibilities never occurred to “the most important economist in the world.”
Speth calls attention to the importance of social movements grounded in an awakening spiritual consciousness that are creating communities of the future from the bottom up, practicing participatory democracy and demanding changes in the rules of the game.
He recommends replacing financial indicators of economic performance, such as GDP, with nonfinancial indicators of social and environmental health. And he endorses calls to revoke charters of corporations that grossly violate public interest, exclude or expel unwanted corporations, roll back limited liability, eliminate corporate personhood, bar corporations from making political contributions and limit corporate lobbying.
Tinkering at margins of the failed economy guided by the same mindset that got us into our current mess will not get us out. Economists led the way to creating an economy that mimics a cancer. To create an economy that mimics Earth’s biosphere, we best turn for guidance to ecologists.
About David Korten
David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine, co-chair of the New Economy Working Group and a founding member of Business Alliance for Local Living Economies (BALLE).
About New Economy 2.0
Visionary economist David Korten introduces a national conversation series, New Economy 2.0, on CSRwire Talkback based on his acclaimed book, Agenda for a New Economy, 2nd edition. For the next several weeks, Korten will summarize the main points and key lessons of each chapter of his book, leading from a dissection of what went wrong in the “phantom wealth Wall Street economy” to the presentation of a vision of a world of real wealth Main Street economies that support strong middle class societies, honor real market principles and work in partnership with Earth’s biosphere.
New Economy 2.0 envisions an economy in which life is the defining value and power that resides in people and communities. It contrasts with the popular New Economy 1.0 fantasy of a magical high-tech economy liberated from environmental reality and devoted to the growth of phantom wealth financial assets.
The arguments presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine Web store.
Talkback Readers: Can we “grow” ourselves out of the environmental and social crises we face? Share your insights on Talkback!