The Economy is very much the de facto bogeyman of the twenty first century: the Pulveriser of Watertight Portfolios, the Marauder of Mortgages, the Bane of Banking. However, as a monster of our own design we really only have ourselves to blame for our present misfortunes. No doubt Mary Shelly would have thought it hilarious.
The trouble lies in the fact that modern-day capitalism is largely based on nineteenth century models that are entirely reliant on a simpler, seemingly larger world where physical capital was scarce and natural capital abundant. Things are no different today: our society traditionally gathers resources through systematic depletion of fragile or otherwise limited resources. In the distant past such an approach made sense; the world was effectively an expansive, fertile wilderness — particularly in the time of our hunter-gatherer ancestors. For the longest period slash and burn was a genuinely viable economic model.
Our current economic approach no longer makes much sense, given how it consistently fails to offer meaningful solutions to the growing crises of today’s world. Sustainability issues aside, one may venture that the present model does not take into account the things that really matter to people — such as being part of a community, building meaningful relationships, or enjoying a fulfilling career.
Economists suggest that global society should prepare itself for persistent economic turmoil, a future where instability is the norm rather than the exception, along with the twin heads of rising unemployment and unresolved accumulations of bad debts — and no credible safeguards to prevent future debacles.
As we continue to wring our hands over exactly what we’re supposed to do, our population and consumption levels are still increasing. After all, the monster is designed to grow at any cost, even to the detriment of its creators.
How did it come to this? How do we stop it? How do we stop ourselves?
Our species is naturally expansive. We are programmed to survive, to grow, expand and evolve. One trait that makes homo sapiens different from other species is how fast we have achieved our dominance over the globe, using our complex brains and tool-using limbs to barge aside any competitors in less than a blink of geological time.
Another important trait that developed alongside our physiological advantages was our ability to transfer information, first vocally (through language and song) and later by keeping records on durable materials that are preserved for later reuse — be they carved into bone or stone, painted in caves, or written on parchment. Homo sapiens owes much of its success to the production, preservation and evolution of external information mechanisms. Such skills give us a distinct advantage over other species. In the game of species, we hold the aces.
And yet the monster took us by surprise. As we encountered the boundaries of sustainability in the second half of the twentieth century we increasingly began asking ourselves questions concerning the state of our world:
What are the consequences of uninhibited expansion?
How resilient is our environment?
What are the effects of a consumption-driven economy?
What are the limits to growth?
Common responses to such questions often involved denial, or shifting of responsibility:
The effects are limited or temporary.
We don’t have enough data.
Earth’s climate is naturally unstable.
Politicians and businesses will fix our problems.
Let’s place our trust in our leaders, our technology, our economy, our gods.
The Friedmanian doctrine — coupled with the shareholder value concept and stock option plans — has proven to be a powerful argument in favor of legitimizing ever-increasing returns and private income for shareholders and managers. The 1970s and 80s witnessed the rise of investor capitalism in Western industrialized countries that fundamentally changed business — for the worse. In those heady times institutional investors became the default business owners, managing their holdings largely for short-term profits, proudly listed in quarterly reports. The business of business is profit.
No wonder then that many of us consider business as being disconnected from overall society, unwilling or unable to direct its productive capacities to more constructive uses.
A good starting point for rebuilding business is to reassign economics to its appropriate status as a subset of society, not its center. For example, businesses should transform themselves into stewards — an ethic that embodies responsible and sustainable management of available resources that are common property or belong to an external party. Many business leaders already understand that transforming the present economic system and creating a sustainable business model will serve their long-term interests. Ultimately, business organizations need to embrace the role of stewardship with the implicit knowledge that they are not the real owners of the natural resources they use and occupy. The world is too small for such delusion.
Of course, rebuilding our economic models will not be easy. It will be a messy and painful process that will undoubtedly change the way we view and inhabit the world.
Either way, the monster must be tamed.
Part of the text was derived from the 50+20 Agenda, which will be launched at the UN PRME 3rd Global Forum during the RIO+20 summit.