Crises and Opportunities: A Manifesto for Change

Piecemeal fragmented strategies cannot address the pressing challenges facing humanity today. Economic theory has to be radically reinvented to squarely face the reality of rising unemployment, widening inequalities, growing ecological threats, frustrated social aspirations and unmet human needs. Monetary and fiscal policies are too crude and insufficient to steer the essential change of course required to address multidimensional demographic, ecological, economic, political and social crises. New values are needed to guide policy formulation and new institutions are needed to support peaceful social evolution and inclusive, equitable development in an increasingly globalized and interconnected world.

If challenges are opportunities, then never before have the opportunities been so great; for never before has humanity faced challenges comparable in magnitude and complexity to those that have emerged in recent times. Today, we stand both witness and participant in a multi-dimensional global crisis impacting all major aspects of global society, imposing severe constraints on our ability to meet the growing needs and rising aspirations of the human community in an effective, harmonious and equitable manner. The signs of deeper crisis are most evident at a number of specific pressure points:

  • Ecology: Deepening ecological crisis driven by unbridled economic growth, soaring energy consumption and mispricing of natural capital, generating serious concerns over anthropogenic climate change, severe damage to terrestrial and ocean biodiversity, increasing water scarcity, rising energy costs, and depletion of resources.
  • Employment: Structural unemployment crisis of ominous proportions driven by massive demographic changes within and between countries, pricing and incentive systems biased toward investment in technology and physical energy over human capital, and a global realignment of economic activity, leading to the alienation of growing numbers of youth and chronically unemployed older workers.
  • Finance: Persistent and recurring financial and banking crisis driven by inadequate regulation and oversight, based on unquestioning faith in the efficiency and effectiveness of unfettered markets, leading to a growing diversion of financial resources for speculative, non-productive purposes and undermining the stability and growth of the real economy.
  • Food: Periodic food commodity crisis driven by rising food prices, declining efficiency and productivity, depletion of scarce soil and water resources, and diversion of arable lands to non-food energy crops.
  • Poverty: Enduring poverty crisis in both developing and developed countries driven by a growing divorce between economic growth and human welfare, and aggravated by rising levels of unemployment, income inequality, food and energy prices.
  • Security: And finally, as a result and aggravating factor, an emerging crisis in social stability, cohesion, physical and social security arising from the widening gap between human aspirations and available opportunities, leading to alienation, social unrest, crime and violence, and serving as fertile soil for the polarization of society and rise of fundamentalism.

These pressure points share several striking features. First is their mutual interdependence. Each magnifies the severity of the others and is in turn aggravated by all the others. Second is their common origin. Each can be traced back to similar underlying factors and “root” causes. This is the major reason why each of these multiple crises defies effective remedy by piecemeal strategies. The true source of the problem lies at a more fundamental level in the present value system and structure of modern society, and will only lend itself to permanent remedy when understood and addressed from a deeper and wider perspective. Third is the fact that they are all anthropogenic in origin. All are the expression of human ideas, values and actions, not inalienable laws of Nature, which means that all can and can only be rectified by a change in our ideas, values and actions.

A better appreciation of root causes will provide a platform for insightful debate and more effective remedies. Approaching the multiple crises from a common perspective and addressing multiple pressure points at their common underlying roots will lead to solutions that are both more effective and more lasting than those resulting from a fragmented approach. Only then can we hope to reconcile these complex economic, ecological, social and political factors and to forge a coherent strategy to promote security and welfare for all human beings, present and future.

With political leaders, the media and the general public preoccupied by the intensity and immediacy of the financial, economic and employment crises, concern with the potentially catastrophic ecological crisis has receded from the public mind. By addressing the whole gamut of issues in this larger framework, environmentalists can redirect attention to the underlying factors that are the root cause and only viable remedy for the preservation of our natural systems.

An integral perspective constitutes the starting point, but in order to translate it into usable, practical results, we need to examine the ruling ideas and values that govern the present system, the theoretical constructs and policy framework on which it is based, the social institutions through which it functions, and the structures and laws through which it is governed. These constitute the essential sources of the current problem as well as the principal instruments for building a better world. Striving to formulate a broad conceptual framework for resolving the global crisis may appear far removed from the everyday problems and available policy options, but ultimately, it is an essential step in defining a viable change of course that will lead us out of the present fog of confusion into a better future. The objective of this paper is not to provide all the answers, but rather to present a diagnostic framework, a road map, a manifesto for change, and to highlight key points where systemic changes can and should be made, which in combination can radically alter future outcomes for the good of all humanity.

1. Ideas can Change the World
The current crises confronting humanity today reinforce the importance of values as the essential basis for global social progress. Unregulated markets that serve the few at the expense of the many, undemocratic institutions of global governance, rising levels of inequality, unsustainable exploitation and destruction of our natural resource base, rising alienation of human capital from productive employment and rising levels of social instability are signs of a social fabric increasingly divorced and insensitive to the welfare and well-being of large sections of humanity. At the root of the multiple crises confronting humanity today is a crises of values that must be resolved before there can be any hope of lasting solutions to the problems facing humanity.

The history of human development is commonly described in terms of advances in technology, but this is an overly-simplified view that disregards other transformative agents of change. The catalytic impact of the Club of Rome’s report, The Limits to Growth, on global awareness of the environmental challenge is sufficient proof that ideas can change the world. Ideas possess a transformative power. Social evolution is propelled by the perception of new possibilities, the formulation of new ideas and the adoption of new values which release and channel human energy for higher levels of accomplishment. Agriculture, specialization of labor, property, markets, cities, money, banking, democracy and the internet are examples of new ideas that have transformed the way we live and work together. Human political, economic and social rights are a catalog of values which have radically altered the fabric of social relationships, leading to the progressive emergence of the individual as the pioneer and creative leader of social development.

Values are not merely utopian ideals. Values define us and the institutions we create. The power of values derives from the fact that they contain the quintessence of wisdom acquired by successive generations regarding the essential requirements for higher levels of human accomplishment. Thus, it has taken millennia for humanity to realize that freedom creates the most dynamic environment for the emergence and productive expression of human capacities so essential for development, creativity and prosperity. At the same time, it is values that define the balance between the rights and responsibilities of the individual and the collective, so essential for social stability, productivity, harmony and continuity. Values define the balance between present and future generations and the place of humanity as an integral part of the natural system.

The time is ripe for a new narrative, new metaphors and a new storyline for humanity. We are advised to seek the remedy to the prevailing social ills not merely in technological fixes, but in a re-examination of the fundamental ideas and values on which the current system is based. The limits we confront are mental limits – limits to our perception, understanding, imagination, idealism and values.

A consideration of values compels us to ask seminal questions: What kind of world do we want to create for present and future generations? What are the fundamental premises and values on which it should be based? Any serious attempt to formulate a more coherent and cohesive social framework should begin by examining the values that have driven human progress over the last few centuries and by identifying emerging ideas and values with the power to break the limitations of existing structures and forge a more effective synthesis of human capabilities and resources.

2. Need for New Theory
Adoption of new values compels us to reject the Newtonian conception of economic theory based on intractable laws of nature. The first economists were moral philosophers seeking to design a better social system to meet human needs, not scientists in search of some immutable laws of economy. Economy is a human activity intended for a specific purpose. Production of things, application of technology, multiplying money, and even growth itself are merely means to an end, not ends in themselves. There can be only one legitimate aim of economic activity to promote the maximum welfare of all human beings over time. We need to re-examine current economic theory to see where it fails to promote optimal human welfare and how it can be altered to better suit human needs.

The laws of economics are governed by human values, choices, policies and institutions which can and do evolve continuously over time. Current economic concepts and theories date back to the beginning of the Industrial Revolution and were serviceable during a period when increasing production was the primary means for overcoming scarcity and human want. Continued reliance on outmoded ideas poses a serious threat to the future of humankind.

A triple divorce has disconnected economy from the fundamental role it is intended to serve. First is the widening rift between production and employment. The aim of raising labor productivity has given place to the obsession with eliminating labor altogether from the production process, creating a world with ever growing production capacity, while severely limiting the number of people with the purchasing power necessary to avail of it. Second is the rift between finance and economy, a divorce of financial markets from the real economy, which they were originally intended to serve. The consequences of this separation have been growing for decades.

Over the past forty years, the world has been wracked by more than 400 financial crises, destabilizing economies and impoverishing people around the world. Money and financial markets have become ends in themselves, channeling capital into speculative investments and depriving the real economy of vital resources. We need to recall that the fundamental purpose of financial markets is to support the real economy and promote human welfare.

Third is the rift between economy and ecology. The blind pursuit of unbridled growth, more production and consumption without regard for the consequences is like a cancer, rapidly destroying the ecological foundations on which human life depends.

New economics must be founded on rational thought rather than fundamentalist dogma. The neoliberal philosophy that underlies efficient market theory is just another name for the law of the jungle. Our aim is not mathematical accuracy but human welfare. The validity of economic axioms must be judged solely in terms of their capacity to promote real-world benefits for human beings. How far economics has strayed from its original and valid purpose is indicated by the fact that two Nobel prizes have been awarded for theories applied in computerized trading programs responsible for destabilizing financial markets and disrupting the entire world economy. The only meaningful measure of efficiency is that which most effectively utilizes available material and social resources to meet the needs of all human beings, present and future.

Economics is presently based on a false system of accounting that assumes all growth is good and all forms of growth are equally good. Current measures regard the economic benefits of war, pollution, crime, rising oil prices, terrorism, epidemics, natural calamities, water scarcity and deforestation as equivalent to activities that promote better nutrition, housing, education, healthcare, physical comforts and conveniences, social harmony, recreation and enjoyment. Nations today are blindly groping, as the medieval traders of Europe did before the invention of double-entry bookkeeping enabled them to clearly distinguish credit vs. debit transactions. Is the world truly richer today because it spends $60 billion a year on bottled water, largely as a result of increasing concern regarding the availability of good-quality drinking water? By that logic, pricing clean air as a result of growing air pollution would make us richer still.

Newton’s laws of motion may be divorced from human notions of value, but the laws of economy are firmly based on the notion of value and the process of valuation. Prices reflect the perceived value of materials, time, people, products, leisure, knowledge, power, status, convenience and enjoyment. Here too, we are employing false measures. It is highway robbery to price water, oil and other non-renewable resources at the financial cost of extracting them, to price forest timber at the cost of cutting it down, unmindful of the consequences; or to price nuclear energy without regard for the full risks of catastrophic events such as Fukushima, and the full cycle investment costs to society of managing decommissioning and waste disposal.

The concept of public and private goods is based on the idea that the individual and the collective have different terms of reference and standards of value which need to be balanced and reconciled. What serves the one may be to the detriment of the other. Maximizing technology and minimizing labor or diverting financial resources from the real economy into speculative monetary instruments may appear to be of good value to the businessman, but may generate high costs to society in terms of unemployment, income inequality, social welfare expenditure, crime and social alienation. Depleting non-renewable, fossil fuel energy resources may appear to be of good value to industry, but may generate high environmental costs to global society and future generations.

Equally important is the need for a reassessment of the role of money as a social organization and of monetary policy as an instrument for economic regulation. Money is a unique human invention, which like language and the Internet, facilitates exchange, interrelationships and productive collaboration between human beings. But current monetary policy and monetary regulation are veiled by esoteric doctrines, sacred principles and opaque decision-making that obscure real world analysis and open debate regarding their medium and long term impact on human welfare. Econometric models based on mathematical algorithms cannot be relied on to choose what is best for humanity. The validity of the oft cited tradeoff between price stability and employment must be open to discussion and empirical assessment. The need for new values and new thinking must also penetrate this shadowy domain.

A major shift is needed to re-engineer our economies: questioning the assumptions that underlie current economics; altering the system of metrics by which we assess progress to ensure that our valuations reflect the real contribution to human welfare and embed the full costs, direct, indirect and inter-temporal; eliminating the irrational, unsustainable, inequitable and often uneconomic ways in which we deploy, utilize and consume resources; and changing the policies by which we establish the relative prices of various forms of capital – natural and social. We need to review our concept of growth and revamp growth models to ensure they meet the needs of both present and future generations, with particular attention to the future of work and the maintenance of our high-value natural systems.

Most important of all, we need to dispel the misguided belief that we have run out of options and are truly helpless against the intractable laws of nature. The limitations we face today are limits imposed by our values and concepts, not the limits of human potential for accomplishment. A careful analysis of present assumptions supports the view that new theory can lead to the development of far more effective systems for meeting human needs. The criticality of circumstances will compel us to implement radical changes sooner rather than later – the sooner the better.

Ian Johnson, Secretary General of the Club of Rome; Fellow, World Academy of Art and Science.
Garry Jacobs, Chairman, Board of Trustees, World Academy of Art and Science; Vice President, The Mother’s Service Society

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