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Our current economic system is unsustainable. Its fundamental elementsunlimited growth and endless wealth accumulationfly in the face of the fact that the Earths resources are clearly finite. The destructive effects of this denial of reality are wreaking havoc on our ecological and social systems. But what is the alternative? We need to go beyond simply fixing problems as they arise, or even as we anticipate them, and offer a comprehensive new economic model. It is a moral ...
Our current economic system is unsustainable. Its fundamental elementsunlimited growth and endless wealth accumulationfly in the face of the fact that the Earths resources are clearly finite. The destructive effects of this denial of reality are wreaking havoc on our ecological and social systems. But what is the alternative? We need to go beyond simply fixing problems as they arise, or even as we anticipate them, and offer a comprehensive new economic model. It is a moral imperative.
Today the main object of business activity is to make a quick profit, the quicker the better. The main object of contemporary statecraft is to make societies ever richer. To what end, and with what effect on individual and social virtue, we no longer ask, and scarcely dare think about. Keynes was the last great economist to hold economics in some sort of relation to the "good life." But already the language available to him to talk about the relationship sounded threadbare. What, in fact, was the connection between being rich and being good? Keynes was troubled by such questions but could make little progress in answering them. It became sufficient to keep the existing system of wealth creation going, because its collapse would be more horrible than its success.
— Robert Skidelsky
TO CONSIDER WHAT THE purpose of the economy is, it may help to begin with a small snapshot of an economy working in right relationship.
When members of the community of Woodstock, New Brunswick, organized the Woodstock Farm Market in the 1970s, they made a few rules: local producers selling their own produce only, and no produce from wholesalers allowed. Right off, however, the organizers had to make some exceptions that seemed fair and consistent with the spirit of the market. For example, if your neighbor had extra strawberries, it was okay to put them on your table as a favor. And they would allow one particular vendor who brought fresh fish from the Bay of Fundy to set up a table, as the townspeople really wanted fresh seafood, and what he brought was as "local" as seafood was going to get.
Baked goods, jams, jellies, and pickles had to be homemade. Craft items had to be locally made, as well. The emphasis on local production was not only a matter of providing opportunity for local growers, but an effort to help build an ecologically sound local food system. Many growers who sold at the market ran small-scale, environmentally respectful operations. In many cases, vendors favored organic methods. The market also served as an information exchange network on sustainable practices for local conditions.
Sometimes, "local" got stretched pretty far if the product was not already offered by an area vendor. For example, a family from the next county brought in lawn furniture made from native white cedar. A vendor of ready-to-eat foods came from a considerable distance; his German sausages were a big hit. The market manager constantly had to work with the board of directors to make decisions on what fit within the guidelines and what made sense for the organization's development.
The founders wanted their market to be a place for direct selling by the producers. When peddlers who didn't meet the criteria asked for space, the Woodstock Market had to refuse them, and explain why. Sometimes they would set up just outside the market to take advantage of the crowd, and then the market manager had to confront them with an argument about purpose and fairness. Sometimes they refused to leave. The town backed up their farm market managers in these instances, and before long the word got around. Most people respected what the market was trying to do and found the rules reasonable.
Then the Woodstock Farm Market ran into pricing issues. Each vendor was free to set the prices for produce offered. But the members said, let's be fair about it. When various crops come in, let's check with each other on what we consider a fair price and pretty much stick with it. It does make sense to set different prices for differences in quality, and maybe do a little markdown or make bulk deals at the end of the day. But beyond that, if we try to outcompete each other we all lose. We will informally school new vendors in our ways of market pricing.
Occasionally someone set a price that undercut the rest, especially when tomatoes came in. The manager talked it over with the price-cutter and usually got cooperation or maybe a compromise. If not, word spread, and the price-cutter soon found the market to be a rather uncomfortable place to do business. Some didn't care, but then they usually didn't last long. Members eventually came to know each other and wanted everyone to sell enough to make it worth coming back. So they cooperated.
The story of the Woodstock Farm Market is the story of an economic market. But it is also the story of how the purpose of that little market economy grew from the community and folded back into it. That is a market that is embedded in the norms of the community and sees that community in its ecological context.
Simple questions often have unexpectedly complex answers. "What is the purpose of the economy?" is such a question. Getting the purpose of the economy right is important. It enables people to orient their engagement in the economy. When, as individuals, we buy things, invest our money, or barter and trade, or when as a community—local, national, or international—we adopt the rules and policies that govern the economy, that's the time to ask ourselves whether we are helping to achieve the economy's purpose, and, especially, what that purpose is.
At first blush, in light of conventional wisdom, the economy's purpose may seem to be obvious: to provide ever-increasing wealth through unlimited economic growth. If we work toward this purpose, we are told, then society, community, and the environment will all be well-served. Borrowing from the future and creating huge debt loads to ensure economic growth is no problem, because growth will ensure the ability to repay the debt—whether in rich countries like the United States or developing countries selling off their resources in return for international loans. According to this mainstream economic analysis, community issues like health and education, as well as care of the environment, can only be addressed by wealthy societies; so the first priority is always to concentrate on that economic growth. This is an answer grounded in wrong relationship.
Right relationship leads to a very different answer to the question "what is the purpose of the economy?" Isn't it reasonable to think that the purpose would focus on the well-being of communities and the individuals who make them up? In a whole earth economy, the purpose of the economy is to preserve and enhance the integrity, resilience, and beauty of the whole commonwealth of life. A whole earth economy is not necessarily a no-growth economy. It is an economy with other priorities: providing rich and fulfilling lives for both individuals and communities, but without pushing toward extreme wealth and advantages that destroy social and ecological well-being. The Woodstock Farm Market, as well as the many markets and community cooperatives like it, has the flavor of right relationship.
Where Did "The Economy" Come From?
To see why the economy needs to orient toward a new purpose, it helps to remember where the concept "the economy" came from. The economy, as it is now understood, began relatively recently. Before the eighteenth century, farmers, tradesmen, craftsmen, and other businesspeople sold, traded, and bartered their goods and services within well-defined social contexts. Economic activity took place within the social order and as part of social life. That economy was closely tied to the fluctuations of the local environment and climate. The Woodstock Farm Market would have felt right at home in the eighteenth century.
During the course of that century, the economy broke away more and more from its ties to communities, the local environment, and the social order. Land ownership became a more powerful basis for asserting economic might, industry and manufacturing began to take off as a result of technical innovation, a larger and increasingly wealthy elite started accumulating enormous financial power, and long-distance trade expanded significantly. Although banks have existed for thousands of years, the era of modern banking began only in the late eighteenth century. Money and all its baggage—borrowing, interest, credit, speculation—took on a more central role in providing the means of life. More and more, society and the environment became subservient to wealth accumulation and expansion of the economy.
Out of this transformation arose the idea of the self-regulating market. Such a market is assumed to take care of the negative side effects of the economy and to work for the common good all by itself. Belief in a self-regulating economy became a significant factor in the disruption and reconfiguration of social and ecological relationships during the Industrial Revolution. The market economy that began its modern expansion in the nineteenth century undercut relationships and concerns that did not feed into its growth and financial power. The increasingly influential brokers of the market economy lobbied government officials with the message that the market was the true and best engine of progress, and that it was therefore fitting for the market to have power and control over the entire range of social and ecological relationships. As the market economy arose, the artificial entity called the corporation arose, as well, and over time the corporate duty to maximize shareholder profits increasingly has overridden the accountability of corporations to society.
By the end of the nineteenth century, belief in the moral supremacy of the market reached a peak, especially in North America. Social Darwinism was the prevailing philosophy: The people with the most money and power were seen to reflect a perfectly normal and acceptable form of "survival of the fittest." This was the heyday of monopolies and union-busting, of the robber barons, John D. Rockefeller's empire at Standard Oil, and the like—what is called "laissez-faire capitalism," with all its excesses and social upheavals that led to the founding of labor unions and the strengthening of Socialist movements.
At various times and places, societies rebelling against laissez-faire capitalism have demanded regulation to protect people, communities, social institutions, and the environment from the market's harsh brutality. Labor laws that created minimum wages, restricted working hours, prohibited child labor, and protected the right to unionize stemmed the concentration of power and money of the robber barons of the early twentieth century in the United States. Antitrust laws did their part, too. Social security, socialized health care, and environmental protection laws also arose eventually to place limits on market forces. Almost miraculously, the wise decisions to create publicly managed national parks and forests and wildlife reserves arose in the United States around the same time that the great monopolies of the Gilded Age were peaking in the early 1900s. Yet, then and now, the push for an unregulated market has remained a strong current in the global economy, especially in the United States and other wealthy countries.
The notion that economic growth was a crucial social and political necessity gradually took hold, particularly in the period following World War II, and explicitly at the start of the Kennedy Administration in the United States in 1961. It has held on ever since. It rested in part on carefully worked out theories that Paul Samuelson synthesized in the 1950s and 1960s and that became the standard of the profession. All the predictions of standard economic theory rest on assumptions, and market failure is what happens when these assumptions turn out to be false—as they nearly always do. Correcting these failures provides a robust role of government. Too robust by far, it seems, for many who stand to gain from the market. Free-market ideology virtually ignores the well-grounded claim in standard theory that government intervention is needed to address market failures.
Yet free-market ideology has regained dominance in the Western world since the early 1980s. Laissez-faire capitalism, or market fundamentalism, is the belief that there is no reasonable alternative to a virtually unregulated market for understanding economic relationships, engaging in productive economic pursuits, and, ultimately, promoting the common good. This, however, is not science, and is not even economics: It is analogous to a religious faith. According to this creed, governments should do nothing other than define property rights and enforce contracts.
The "laws of economics" on which market fundamentalism claims to be based have their origin in the particular set of property and social relationships that were current when Adam Smith and other moral philosophers were studying the economy systematically in the eighteenth century. Not only have market fundamentalists terrifically distorted Smith's analysis of how to run a proper economy, but the "laws" he and other early theorists "discovered" were particular to the political economy of their time. They were not laws encoded in cosmic nature for all time and circumstances. This distinction is important. Understanding that the economy is dependent on circumstances and not governed by contrived "laws of nature" is a liberating insight. It makes people realize that they can choose alternatives, and it makes clear that our current circumstances require a different approach.
In seeking a whole earth economy, the choice is not between market fundamentalism and standard theory—for both are oriented to growth, irrespective of ecological impact, as a primary objective of economic policy.
A saving grace of the economics profession is that some frontline economists have understood this problem and are working out the terms of reference for a steady-state or negative-growth economy that may well be needed to provide for long-term ecological and social well-being. The first great step toward building a whole earth economy is to unlock the mental straitjacket that market fundamentalism and its public-policy advocates have decreed to be the only rational way to think about the purpose of the human economy. Within the larger scientific framework of a whole earth economy, many of the insights of standard theory, unlike those of market fundamentalism, find a congenial home.
The Social Heritage of Providing for Human Needs and Desires
Understanding how goods and services were made available to people before the invention of the modern market economy is the easiest way to envision the potential for a whole earth economy. The starting point for building this vision is to acknowledge that the baseline purpose of the economy is to provide access to the means of life, which also means asking the question: What is life all about? Biologists tell us that human nature is built on basic desires to reproduce, to ensure basic security and comfort, to display possessions and wealth as a means of obtaining and keeping mates, and to cooperate and associate with like-minded people.
Of course, there are many ways to express and satisfy those desires. Obviously, humans also engage in complex moral, aesthetic, and religious behaviors. The economy reflects the way that people individually and in community go about providing the means to these activities. What, then, distinguishes the community-oriented economy of the Woodstock Farm Market from the ruthless economy of the pyramid schemer, the oil speculator, or the junk-bond dealer?
The Woodstock Farm Market, like many traditional economies, provides access to the means of life within a context of ecological sensitivity and mutually supporting social behavior. Cooperation in mutually beneficial economic dealings is the ethical root of society. The key elements of this kind of cooperation are respect and reciprocity: respect for other people and for the environment, reciprocity in the form of the give-and-take that leads to mutual satisfaction in the form of fair treatment. From the earliest human societies of nomadic hunting and gathering groups, providing access to the means of life was framed by a code of reciprocity: If you share some of those roots you found, I will give you a cut of the antelope I just brought down. Inequities and conflict certainly occurred. But without an underlying sense of fairness, in which social relations were continually rebalanced, as they are in chimpanzee and many bird societies, our ancestors would not likely have proceeded very far on the great trek of human evolution.
Excerpted from Right Relationship by PETER G. BROWN GEOFFREY GARVER KEITH HELMUTH ROBERT HOWELL STEVE SZEGHI Copyright © 2009 by Peter G. Brown and Geoffrey Garver. Excerpted by permission of Berrett-Koehler Publishers, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Posted October 26, 2009
Many books decry human greed, describe the degradation of the environment and end with a few short pages recommending reform. This isn't that type of book. Instead, from the first page, Canadian environmentalists Peter G. Brown and Geoffrey Garver agitate for a revolution in the way people use natural resources. They present an admirably solid case that the relationship between the Earth and the global economy must change, and soon. Whether their idealistic prescription (global governance institutions?) is realistic, however, remains to be seen. getAbstract recommends this book to leaders who seek a fresh perspective on sustainability and the economy.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.