For the Love of Money

David C. Korten

Those of us who seek to intervene in policy debates in favor of economic justice and environmentally sustainability are regularly assured by the world’s power brokers that they are fully committed to these goals so long as economic growth and the expansion of free trade are not compromised by governmental restraints on the market. So sacred have growth and free trade become in our modern culture that only rarely do we find the courage to ask why they should be given precedence over the needs of people and nature. Indeed, why should we consider accelerating growth and trade to be of any importance at all except to the extent that they serve people and nature?

When the proponents of growth, market deregulation, and free trade tout their benefits, it is well to bear in mind what some of the most outspoken of these proponents really have in mind. Take this account from a recent issue of Forbes magazine.

As disillusion with socialism and other forms of statist economics spreads, private, personal initiative is being released to seek its destiny. Wealth, naturally, follows. The two big openings for free enterprise in this decade have come in Latin America and the Far East. Not surprisingly, the biggest clusters of new billionaires on our list have risen from the ferment of these two regions. Eleven new Mexican billionaires in two years, seven more ethnic Chinese.

Taking a slightly more populist view, Business Week presented its own special report titled “A Millionaire a Minute,” providing this breathless account of what the free market has accomplished in Asia.

 Wealth.. . . Now East Asia is generating its own wealth on a speed and scale that probably is without historical precedent. The number of non-Japanese Asian multimillionaires is expected to double to 800,000 by 1996. . . . East Asia will surpass Japan in purchasing power within a decade. . . . There are new markets for everything from Mercedes Benz cars to Motorola mobile phones to Fidelity mutual funds. . . . To find the nearest precedent, you need to rewind U.S. history 100 years to the days before strong unions, securities watchdogs and antitrust laws.

Neither article made more than passing reference to the 675 million Asians who continue to live in absolute deprivation. So there we have it. In the eyes of two leading business journals, economic success is about creating millionaires and billionaires by denying workers the right to organize independent unions and giving free reign to securities fraud and the extraction of monopoly profits.

Most everyone is aware that we live in an unequal world. Few realize, however, just how extreme the inequality has become or how fast the gap between the poor and the super rich is growing. Forbes tells us the world now has 358 billionaires. Their combined net worth exceeds the combined net worth of the world’s poorest 2Ω billion people. This is but one manifestation of the extreme economic and social distortions created by the globalized free market economy idealized by business publications such as Forbes and Business Week.

Evidence is mounting that economic growth and free trade are not leading us toward economic justice and environmental sustainability. To the contrary, they are taking us in the direction of increasing economic injustice and environmental unsustainability. The debates over jobs versus the environment miss a basic point. Assuring everyone the means to meet their basic needs and achieving a sustainable balance with the environment are mutually supportive goals. Indeed, there are powerful theoretical arguments why, in a resource scarce world, neither is possible without the other. There is, however, an irreconcilable conflict between the goal of creating economically just and environmentally sustainable societies and embracing sustained economic growth, unregulated markets, and free trade as the organizing principles of public policy. The resulting policies are well suited to producing more millionaires and billionaires. They are ill suited to achieving justice and sustainability.

The Money Game

The world’s most powerful instrument of governance is not a government. Nor is it a global corporation. Rather it is a global financial system that is running dangerously out of control.

Each day half a million to a million people–primarily Western Europeans, North Americans, and Japanese–arise as dawn reaches their part of the world, turn on their computers, and leave the real world of people, things, and nature to immerse themselves in playing the world’s most lucrative computer game: the money game. As their computers come on line, they enter a world of cyberspace constructed of numbers that represent money and complex rules by which those numbers can be converted into a seemingly infinite variety of financial instruments, each with its own distinctive risks and reproductive qualities. Through their interactions, the players engage in competitive transactions aimed at acquiring for their own accounts the money that other players hold.

Players can also pyramid the amount of money in play by borrowing from one another and bidding up prices. Indeed, the money game players have been so successful in creating play money that for every $1 now circulating in the productive world economy of real goods and services, it is estimated that there is $20 to $50 circulating in the world of pure finance–”investment” funds completely delinked from the creation of real value. In the international currency markets alone, some $800 billion to $1 trillion changes hands each day–unrelated to productive investment or trade in actual goods and services.

Not only is the money game challenging and fun, the play money it generates can be exchanged for real money to buy things from people who work in the real world–lots of things. Unfortunately for the rest of us, though it is played like a game and the transactions involve nothing more than moving numbers from one electronic account to another through a global web of computers, the money game has enormous real consequences. Take the recent Mexican peso crisis as an example.

Mexico became touted as an economic miracle by attracting $70 billion in foreign money over five years with high interest bonds and a super heated stock market. As little as 10 percent of this money went into real investment. Most of it financed consumer imports, capital flight, and debt service payments. It also helped to create 24 Mexican billionaires. The bubble burst in December of 1994 as the hot money flowed out. Mexico’s stock market and the value of the peso plummeted. The resulting Mexican austerity measures and a shifting terms of trade between Mexico and the United States resulted in massive job losses on both sides of the border. U.S. president Clinton put together a $50 billion bailout package at taxpayer expense to assure that the Wall Street firms that held Mexican bonds would be repaid. The new link between the dollar and the peso made currency speculators nervous and the value of the dollar fell sharply against the yen. Not a penny of the bailout money went to the 750,000 Mexicans who would be put out of work by government imposed austerity measures or the million Americans expected to lose their jobs to NAFTA by the end of 1995.

These are real world consequences of an out of control financial system in which reckless young traders backed by the massive financial assets of leading private financial institutions send billions of dollars sloshing around the world in a high stacks gambling frenzy with an almost complete absence of oversight.

• At Kidder Peabody, a major U.S. investment house, a lone trader reported $1.7 trillion in phony trades over a period of 2Ω years before his superiors noticed anything amiss. During this period he claimed he had earned the firm $350 million in profits, for which he was rewarded with an $11 million bonus. Only later was it found that he had in fact lost the company $85 million on the few trades he had actually made.
  
  
• one month a 28 year old trader at Barings bank lost $1.3 billion on bad derivatives bets and forced a venerated 233 year old bank into bankruptcy.

The global financial system is wildly out of control and no one is tending the store.

Socializing Costs and Privatizing Gains

In a deregulated global market economy global corporations are accountable to only one master, a rogue global financial system with one incessant demand–keep your stock price as high as possible by maximizing short-term returns. One way to do that is to shift as much of the cost of the corporation’s operations as possible onto the community. The pressures involved make it almost impossible to manage a corporation in the larger community interest. Indeed, any publicly traded corporation that attempts to manage its assets responsibly will almost certainly be bought out by a corporate raider.

Take the case of Pacific Lumber Company. It pioneered the development of sustainable logging practices on its substantial holdings of ancient redwood timber stands, provided generous benefits to its employees, fully funded its pension fund, and maintained a no lay-offs policy during downturns in the timber market. This made it a good citizen in the local community. It also made it a prime takeover target.

Corporate raider Charles Hurwitz gained control in a hostile takeover. He immediately doubled the cutting rate of the company’s holding of thousand-year-old trees, reaming a mile and a half corridor into the middle of the forest that he jeeringly named “Our wildlife-biologist study trail.” He then drained $55 million from the company’s $93 million pension fund and invested the remaining $38 million in annuities of the Executive Life Insurance Company, which had financed the junk bonds used to make the purchase–and subsequently failed. Turning reality on its head, corporate raiders refer to this process of pirating a firm’s assets as “adding value.”

Once upon a time local communities looked to corporations not only as sources of jobs, but as well of tax revenues to help cover the costs of essential local infrastructure and public services. For example, in 1957, corporations in the United States provided 45 percent of local property tax revenues. By 1987 their share had dropped to about 16 percent.

Indeed, local governments are now forced by the dynamics of global competition not only to give most large corporations tax breaks, but as well to directly subsidize their operations with public funds.

The state of South Carolina in the United States has been warmly praised by the business press for its successful competitive bid for a new BMW auto plant. The company was attracted in part by cheap, nonunion labor and tax concessions. In addition, when BMW said it favored a 1,000 acre tract on which a large number of middle class homes were already located, the state spent $36.6 million to buy the 140 properties and leased the site back to the company at a $1 a year. The state also picked up the costs of recruiting, screening, and training workers for the new plant, and raised an additional $2.8 million from private sources to send newly hired engineers for training in Germany. The total cost to the South Carolina taxpayers for these and other subsidies to attract BMW will amount to $130 million over thirty years.

This is what global competition is really about–local communities and workers competing against one another to absorb ever more of the production costs of the world’s most powerful and profitable corporations.

Another tactic for externalizing costs is through “downsizing”–a process by which the U.S. Fortune 500 companies reduced their total employment by 4.4 million jobs between 1980 and 1993–a period during which their sales increased by 1.4 times, assets increased by 2.3 times, and CEO compensation increased by 6.1 times. Some observers claim that downsizing means the largest corporations are losing out to smaller, more agile and competitive enterprises. The claim has as much substance as the claim by tobacco company executives that cigarettes are not addictive.

While the giants are shedding people, they are not shedding control over money, markets, or technology. The world’s 200 largest industrial corporations, which employ only one third of one percent of the world’s population, control 25 percent of the world’s economic output. The top 300 transnationals, excluding financial institutions, own some 25 percent of the world’s productive assets. Of the world’s 100 largest economies, 51 are now corporations–not including banking and financial institutions. The combined assets of the world’s 50 largest commercial banks and diversified financial companies amount to nearly 60 percent of The Economist’s estimate of a $20 trillion global stock of productive capital.

Concentration of control over markets is proceeding apace. The Economist reports that in the consumer durables, automotive, airline, aerospace, electronic components, electrical and electronics, and steel industries the top five firms control more than 50 percent of the global market, placing them clearly in the category of monopolistic industries. In the oil, personal computers and media industries the top five firms control more than 40 percent of sales, which indicates strong monopolistic tendencies.

Downsizing is really about consolidating the firm’s monopoly control of markets, technology, and money in a small, well-paid headquarters staff. Everything else is contracted out to smaller firms that are forced into intensive competition for the firm’s business. The contractors–commonly located in low wage countries–compete by hiring workers at substandard wages under often appalling working conditions.

For example, the popular Nike athletic shoes that sell for US$73 to $135 around the world are produced by 75,000 workers employed by independent contractors in low income countries. A substantial portion of these workers are in Indonesia–mostly women and girls housed in company barracks, paid as little as 15 cents an hour, and required to work mandatory overtime. Unions are forbidden and strikes are broken up by the military. In 1992, Michael Jordan reportedly received $20 million from the Nike corporation to promote the sale of its shoes, more than the total compensation paid to the Indonesian women who made them.

An unregulated global market is shifting the financial rewards away from those who do productive work to those who control money and are successful at convincing people to buy what they do not need and often cannot afford. This goes to the heart of growing income disparities around the world.

The world’s most powerful corporations are also active in shaping public policy in ways that virtually forces us into a pattern of overconsumption that yields large profits to themselves at the expense of our quality of living. Evidence is mounting that to make our societies sustainable we will have to restructure our systems of production and consumption to largely eliminate:

• Dependence on personal automobiles;
• Long distance movement of goods and people;
• The use of chemicals in agriculture; and
• The generation of garbage that we cannot immediately recycle.

In each instance, we have an opportunity to substantially increase the quality of our living while reducing our burden on the environment. Why aren’t we doing it? Who wants to give over their living spaces to automobiles, take long business trips, eat contaminated foods, or live in a garbage dump?

One important reason we live this way is because it is profitable for politically powerful corporations. For example, the steel, automobile, construction, and oil companies have a major stake in policies that make survival without an automobile nearly impossible in most of our towns and cities. Chemical and agribusiness companies have had a similar stake in maintaining chemical and energy intensive agriculture systems that provide us with foods of dubious nutritional value laced with toxic poisons. Other industries benefit from encouraging our use of excessively packaged low durability products. So long as these corporate interests are allowed to dominate public policy processes, change is unlikely. Global civil society is mobilizing to reclaim the power that these interests have co-opted.

David Korten’s Website

William H. Calvin, a theoretical neurophysiologist at the University of Washington at Seattle, has written nine books, including How Brains Think and The Cerebral Code. But he also maintains a punishingly busy schedule as a researcher, investigating how brains work and evolve, and travels extensively on the lecture circuit. Readers would therefore also be forgiven for wondering why Calvin devotes so much of his precious time to following the study of climate change. This article, although written in 1998, is well done with good science and great illustrations. 

The Great Climate Flip-Flop

The answer, Calvin says, is that the evolution of the human mind is intimately linked to abrupt climate change: our brains seem to have begun their transformation from apelike to fully human just when temperatures on earth began their current trend of jumping rapidly — often within a single lifetime — between warm and cold. Calvin argues that in the context of brief environmental opportunities (periods of warmth) and hazards (sudden icy temperatures), survival for our ancestors became dependent on having highly agile, “jack-of-all-trades” minds. The flip-flop of climates, in other words, led to the evolution of brains that could themselves flip-flop abruptly between strategies for survival. In describing the minds that we have ended up with, Calvin is fond of referring to a passage by William James that appeared in The Atlantic Monthly in October, 1880. “Instead of thoughts of concrete things patiently following one another,” James wrote,

We have the most abrupt cross-cuts and transitions from one idea to another, the most rarefied abstractions and discriminations, the most unheard-of combinations … we seem suddenly introduced into a seething caldron of ideas, where everything is fizzling and bobbing about in a state of bewildering activity.

Creative thinking is now more important than ever. A central point in “The Great Climate Flip-flop” is that the greenhouse gases we pump daily into the atmosphere may well trigger an abrupt global cooling. But if we have helped to bring on such a problem, we are also the only creatures on the planet with brains highly enough evolved to solve it — and solve it we must, even if, as Calvin points out, it won’t make our brains any larger.

.  .  .

One of the most shocking scientific realizations of all time has slowly been dawning on us: the earth’s climate does great flip-flops every few thousand years, and with breathtaking speed. We could go back to ice-age temperatures within a decade — and judging from recent discoveries, an abrupt cooling could be triggered by our current global-warming trend. Europe’s climate could become more like Siberia’s. Because such a cooling would occur too quickly for us to make readjustments in agricultural productivity and supply, it would be a potentially civilization-shattering affair, likely to cause an unprecedented population crash. What paleoclimate and oceanography researchers know of the mechanisms underlying such a climate flip suggests that global warming could start one in several different ways.

For a quarter century global-warming theorists have predicted that climate creep is going to occur and that we need to prevent greenhouse gases from warming things up, thereby raising the sea level, destroying habitats, intensifying storms, and forcing agricultural rearrangements. Now we know — and from an entirely different group of scientists exploring separate lines of reasoning and data — that the most catastrophic result of global warming could be an abrupt cooling.

.  .  .

Stablizing our flip-flopping climate is not a simple matter. We need heat in the right places, such as the Greenland Sea, and not in others right next door, such as Greenland itself. Man-made global warming is likely to achieve exactly the opposite — warming Greenland and cooling the Greenland Sea.

A remarkable amount of specious reasoning is often encountered when we contemplate reducing carbon-dioxide emissions. That increased quantities of greenhouse gases will lead to global warming is as solid a scientific prediction as can be found, but other things influence climate too, and some people try to escape confronting the consequences of our pumping more and more greenhouse gases into the atmosphere by supposing that something will come along miraculously to counteract them. Volcanos spew sulfates, as do our own smokestacks, and these reflect some sunlight back into space, particularly over the North Atlantic and Europe. But we can’t assume that anything like this will counteract our longer-term flurry of carbon-dioxide emissions. Only the most naive gamblers bet against physics, and only the most irresponsible bet with their grandchildren’s resources.

To the long list of predicted consequences of global warming — stronger storms, methane release, habitat changes, ice-sheet melting, rising seas, stronger El NiÒos, killer heat waves — we must now add an abrupt, catastrophic cooling. Whereas the familiar consequences of global warming will force expensive but gradual adjustments, the abrupt cooling promoted by man-made warming looks like a particularly efficient means of committing mass suicide.

From IN CONTEXT–This paper was produced by the participants in the Asian NGO Regional Fellows Program held in Baguio, Philippines, in October 1992, under the joint sponsorship of the Asian NGO Coalition and the Institute for Development Research, with funding from the Ford Foundation. Participants included Chandra de Fonseca (Sri Lanka), Sunimal Femando (Sri Lanka), David Korten (US), Tony Quizon (Philippines), Sixto Roxas (Philippines), Bishan Singh (Malaysia), and Felix Sugirtharaj (India).

Coming Back to Life

David Korten, Editor

We in Asia have long defined our choices as between the Western capitalist system of economic theory and practice, and the theory and practice of Marxist socialism. It is ironic that while Marxist theory predicted the collapse of the capitalist economic system and presented itself as the single viable alternative to capitalist hegemony, its practice in the countries of Eastern Europe and Eurasia has collapsed in disarray. Now flush with a sense of victory over its fallen opponent, capitalism seems resolutely blinded to the self-destructive consequences of its own present path.

The evidence is mounting that both Marxist socialism and free-market capitalism have failed the majority of human society, and for strikingly similar reasons:

• They both built economic systems that celebrated the destruction of the living systems of the Earth.
  
  
• They both ignored the social and political consequences of concentrating economic power in unaccountable, centralizing institutions – the state in the case of Marxism and the transnational corporation in the case of capitalism.
  
  
• Both took a narrow, economistic view of human needs.
  
  
• Both equated growth in the economic output of the firm with improved human well-being and neglected the community as a natural economic unit. Both used essentially the same models of national income accounting.
  
  
• Both systems were basically Western constructs, products of Western thought and experience.

Neither system is a suitable guide for Asia, which is home to more than half the world’s people, as well as half the world’s 1.2 billion people who live in absolute poverty. Asia’s economic miracle has been a miracle only for a small fraction of Asia’s peoples and holds little real promise for the rest.

Asia faces a stark reality. The industrialism-consumerism model on which the practice of free-market capitalism has been based has depended historically on the ability of industrializing countries to colonize the resources of others. The scramble for the forests, lands, and minerals of Indo-China, Irian Jaya, and Papua New Guinea is already underway. Where will Asia turn once these are exhausted?

Furthermore, if only China and India, with a combined population of some 2 billion people, were to heed the call of transnational capital and Western governments to pursue the unsustainable Western economic model, they would surely push the global ecological system into collapse long before providing over-consuming lifestyles for even a fraction of their citizens.

Asia’s hope for the future lies in an alternative model of human progress. That model would combine efficiency of resource use with a rediscovery of life’s innate spiritual character and the inseparable spiritual connection of every person to nature and community.

We believe that the essential elements of an alternative model are at hand. The breakthrough in our own thinking came when we realized that what we were looking for was not an alternative theory of development, which almost inevitably buys into many of the assumptions of the prevailing growth model. The alternative we sought was a theory of sustainability, which begins from a wholly different set of premises.

Our theory of sustainability draws its premises from the critiques of the two failed dominant systems of economic thought and practice, insights from Asia’s rich cultural and spiritual heritage, and the wisdom of indigenous peoples. The emergent theory takes a holistic view of human needs. It at once identifies the roots of the ecological crisis and helps us to predict the conditions under which the dynamics of human social processes are most likely to work toward a balanced relationship between human society and the planet’s ecology.

BONDING SPIRIT, COMMUNITY, PLACE

Our theory of sustainability is grounded in the most fundamental of insights: that all life is an expression of a single spiritual unity and that the spiritual growth of the individual consists of advancement toward the full, conscious realization of this unity.

Spirituality, community, and a bonding to place or habitat are central values that have unified the Asian cultures over centuries. This was manifest in countless cultural norms, such as the injunction that when a tree is harvested, two must be planted. Where nature has been scarred, it must be given time and opportunity to heal. In these many ways, sustainability is integral to Asia’s cultural tradition.

A balanced and harmonious relationship between human communities and their natural environment is associated with a reverence for the spiritual unity of life and a strong bonding to community and place. Such communities almost universally develop cultural values that maintain a sense of continuity linking past and future generations to physical place.

HUMANITY’S SPECIAL GIFT

In addition to the gift of life shared by all of nature, the human species was endowed with the special gift of self-awareness. With this powerful gift, our species set out on a unique evolutionary course of social, material, and spiritual advancement as we consciously reshaped our relationship with the living Earth. Yet, as with all powerful abilities, this gift contained both creative and destructive potentials.

In his book The Dream of the Earth,(1) Thomas Berry refers to the dynamics of our consumer society as the supreme pathology of all history, a pathology in which humanity has virtually defined consumption as the highest human purpose. (2) He suggests we have lost our way due to the lack of a story that gives meaning to our existence. This is something a dedication to consumption can never provide. That story must give us a sense of our special role and purpose in life’s evolutionary journey.

The gift of awareness conveyed an awesome responsibility not shared by other species. To accept responsibility for life does not imply rejecting modern technology or returning to the lifestyles of those groups that continue to live untouched by the modern world. We are poised to reach for new levels of social, intellectual, and spiritual advancement far beyond the reach of previous generations specifically because of the current potential to meld both ancient and modern wisdom to this end.

However, to prepare the way we must replace the prevailing economics of alienation with its antithesis, the economics of community.

THE ECONOMICS OF COMMUNITY

Moving toward a sustainable human societies involves far more than making a few adjustments at the margins of the economy and investing in conserving technologies. It means creating a framework of economic institutions and management practices that anchor economic power in community and achieve a substantial degree of equity in power relationships.

An economics of community provides the foundation for an economic practice aimed at restoring a necessary balance in the relationships among people, place and community. Spirituality and community – not money – define the dominant binding ties in such an economics. The preservation of the long-term productive potential of ecological resources receives a high priority, and long-term returns to community take precedence over short-term returns to the individual investor.

ENTERPRISE-BASED ACCOUNTING

The economics of alienation is deeply imbedded in society’s dominant institutional systems and procedures. This includes the national income accounting systems by which gross national product (GNP) – the universal proxy for national well-being – is measured. One basic flaw of the GNP accounting system is that what it measures isn’t really national product. It is simply the aggregate product of the business enterprises from whose accounting records it is compiled. There is no accounting for gross natural product, or gross people’s product.

The firm is not expected even to be aware of, let alone manage, the external social and environmental costs of its production. This same externalization is carried all the way through the aggregation process. Consequently, GNP takes no account of such things as the loss of environmental resources or deterioration in the educational level of the work force over time – even though these represent clear losses to society.

The clean-up of the Exxon Valdez oil spill was counted as a net gain for the Alaskan economy, and the insurance payments for the bombing of the World Trade Center in New York showed up as a net gain for the economy of New York City. Thus both were good for the economy by current accounting practice.

Furthermore, GNP includes only the income and costs reflected in the income statements and balance sheets of business firms operating in the formal sector. Subsistence production, household labor, and the rental value of owner occupied dwellings are all excluded in most countries. This excludes a substantial portion of those activities on which most of the world’s people depend for their livelihoods.

COMMUNITY-BASED ACCOUNTING

Work on an alternative system of a community-based economic accounting system is well underway in the Philippines. This system takes the household and the community as the primary units of analysis and aggregation. The economic performance of firms would be addressed in subsidiary accounts that reflect their contributions to the community and those who reside in it. This approach represents an important step toward a practice of sustainability derived from the theory of sustainability outlined earlier. (3)

In this system the community unit defines both a citizenry and a habitat with definable characteristics of land, water, soil cover, vegetation, marine resources, and mineral resources. The citizens are classified by characteristics such as age, gender, occupation, education, and income levels. Each household is defined in terms of its bundle of economic needs, which the system compares with actual consumption.

The community balance sheet includes its natural resource as assets. Production processes, such as in agriculture, forestry, mining, fisheries, trade, services, create flows between asset or stock accounts, sectors, factors of production, and households or consumers. This provides the basis for a community-based double-entry accounting system.

The accounts may be organized according to a hierarchy of settlements – households comprising hamlets comprising neighborhoods comprising villages clustered around market towns clustered around an urban center. At all levels the community-based accounting system defines an economy that is inseparable from its habitat and defines an essential role for local government in the management of that economy and its underlying natural resource base.

A BASIS FOR LOCAL DECISION MAKING

Since the community-based accounting system accounts for both natural and human capital stocks, the social and environmental costs of economic activity are automatically internalized and highlighted. The clear cutting of a forest is reflected immediately in the reduction of relevant asset accounts.

Both the financial gains from economic activity and the consumption of the goods and services produced are allocated by household, so distributional outcomes are also integral to the system. It is clear who is capturing the returns from productive processes, what household needs are being met and what needs are not. Resource flows into and out of the community are also highlighted, thus providing a very different perspective on investment decisions than do conventional methods.

Many investment projects are highly profitable to a firm or individual, yet very costly for the community. Clear cut logging for export is a graphic example. Logging activities can produce enormous profits for individual firms and register positively in GNP without providing sufficient returns to the community in the form of wages and fees to compensate for losses from increased flooding and drought, soil loss, downstream siltation, and the costs of replanting.

Export processing zones provide another common example. They expropriate land, dominate local government decision making, enjoy tax holidays, demand fully developed infrastructure that must be paid for by local taxpayers, make priority claims on local water supplies and power generation, have few linkages to the local economy other than hiring labor at low wages, and contaminate local land and water supplies with their toxic wastes. The firms may generate handsome profits that go abroad, without compensating the community for its costs.

With a community-based accounting system, the full costs and benefits to the community are revealed so that investment proposals may be assessed accordingly. The community may then negotiate with outside investors and trade interests on the basis of a community balance sheet, exactly as a firm now decides whether to engage in a given market transaction based on the results anticipated for its balance sheet.

Community-based accounting supports application of the principle of subsidiarity – i.e., that each decision should be made at the lowest feasible organizational level – and its corollary that, to the extent feasible, basic needs should be met within smaller, more localized economic units.

This means that smaller units will seek trade with one another and with larger units only as the exchange offers clear advantages to the community over local production. Otherwise, the preference will be for local producers.

The community-based accounting system provides a tool for managing such choices in the community interest. This strengthens the link between the community’s well-being and the health of its local ecosystems. It also reduces external dependence and thereby the potential for exploitative alienation of its resources by external interests.

The effective application of the community-based accounting system demands broadly based community involvement. By establishing the concept of a local economy, the relationships of human interests to place and community take on new meaning. This in turn enhances awareness that the community’s ecological resource base is the foundation of its well-being over time. The community becomes deeply aware of the consequences of giving free reign to footloose capital and external trading interests seeking only to extract local value for export. Social practice based on an economics of cooperation and ecological stewardship is encouraged.

ACTION OF THE SPIRIT

Our dominant institutions are blinded to the deeper realities of the sustainability crisis by their own power imperatives. So long as this remains the case there is no prospect that they will provide the leadership we so badly need. Informed and enlightened citizen action is our only hope.

Replacing the action of financial calculation with action of the spirit goes right to the core of the transformational process. As that awareness builds perhaps our most important task is to encourage one another to trust our inner knowledge and to find the courage to act upon it.

———————————-

Notes

1) Thomas Berry, The Dream of the Earth, Sierra Club Books, 1988.

2) Note that in current practice economic growth, not consumption, is the higher goal. Consumption is only a means.

3) For further information contact Sixto K. Roxas, President, SKR Managers and Advisors, Inc., No.59 Hillside Loop Blueridge A, Quezon City, Philippines, tel. (63-2) 721-9096; 791-757; fax (63-2) 722-5547.

Reposted from IN CONTEXT

The following talk was given at the World Congress of the Systems Sciences and 44th Annual Meeting of the International Society of the Systems Sciences July 16-22, 2000 – Toronto, Canada.

(1950) “Progress is our most important product.” G.E. Advertisement
(1960) “The future lies ahead.” Mort Sahl (Comedian)
(1970) “The future is not what it used to be.” Kenneth Watt (Ecologist)
(1980) “The future will arrive sooner than we expect.” Lynton Caldwell (Political Scientist)
(1999) “The future may be cancelled.” Eugene Lindon (Author)

In the Year 3000

Peter A. Corning, Ph.D.

The title of my talk, ìThe Systems Sciences in the Year 3000,” is hyperbole, of course – an exaggeration for effect. Who knows what the world will be like even 100 years from now, much less in 1,000 years? For instance, who can predict the ultimate limit to human population growth, world-wide? Certainly not the demographers, who regularly adjust their forecasts and never seem to agree among themselves.

Or who – even as recently as ten years ago – could have predicted the Internet revolution. Not Bill Gates of Microsoft, who found himself having to scramble to catch the train. Even today, who can predict the long-term impact of the Internet and broadband communications, say in 10 or 20 or 50 years? And who would dare to predict what the stock market averages (the Dow Jones or the S&P 500) will be like even one year from now? Once upon a time it was commonplace to make ten-year stock market forecasts, but these have become a joke in recent years. Back in 1990 when the Dow was at 2900, the ìconsensus forecast” among market analysts for the year 2000 was a lofty 6,000. In fact, it passed through 11,000 earlier this year.

Some of the many wrong-headed technological predictions over the years are legendary and regularly circulate in e-mail messages these days:

• After evaluating the new ìtelephone” in 1876, Western Union concluded that ìthe device is inherently of no value to us.
  
  
• Lord Kelvin, the chemist and President of the Royal Society in 1895 declared that “heavier-than-air flying machines are impossible.”
  
  
• French Marshall Ferdinand Foch (just before World War One) concluded that ìairplanes are interesting toys but of no military value.”
  
  
• Radio pioneer David Sarnoff was told by potential investors in the 1920s that ìthe wireless music box has no imaginable commercial value.
  
  
• Or remember the skeptical Jack Warner, President of Warner Brothers movie studio in 1927, asking “who the hell wants to hear actors talk?”
  
  
• Then there was Thomas J. Watson, Chairman of IBM, in 1943: “I think there is a world market for maybe five computers.”
  
  
• And Bill Gates in 1981: “640K [of memory] ought to be enough for anybody.”

Far more significant, though, are the widely varying predictions relating to our global future – the ultimate fate of humankind. At this conference alone, we were offered two very different visions of the future. On the one hand, a multi-media plenary presentation warned us of a potential Armageddon – a war to end all wars in a very different sense from what the American President Woodrow Wilson promised after World War One – if we don´t radically change our course. In another conference presentation, however, we were told that human societies are being propelled by an energy-driven pulse – a steep parabola of fossil-fueled growth and inevitable, unavoidable decline – yet a ìprosperous” downsizing rather than a great crash is quite feasible.

In sharp contrast, a blithely optimistic vision is being touted these days by the best-selling author Robert Wright in a new book with a portentous title that was borrowed from game theory, Nonzero: The Logic of Human Destiny. Wright assures us that the current era is only the ìstorm before the calm.” A magnificent new structure of global prosperity and world government is being erected before our eyes, he says.

Predicting the future – the ultimate balm against the uncertainties of life – is a very ancient pastime. The Old Testament is full of inspired prophesies. In Western social thought, the philosopher Aristotle was perhaps the first to propose that human societies had an inherent direction or destiny, what he called an ìentelechy”. Later on, Aristotle´s vision was appropriated and re-packaged by various Christian theologians, though with a different end in view.

Much later still, during the European Enlightenment era, ìprogress” (with a capital ìP”) became the ìconsensus forecast” (so to speak). For example, the Marquis de Condorcet, one of the so-called Philosophes, turned the ideal of human progress into a sequence of ten developmental ìepochs”. Condorcet also had a grand vision – later adopted by Karl Marx – of a future utopia in which material inequalities, class differences and immorality would be eliminated. ìThe time will come,” Condorcet wrote, ìwhen the sun will shine only upon a world of free men who recognize no master except their reason, when tyrants and slaves, priests and their stupid or hypocritical tools, will no longer exist except in history or on the stage.

In a similar vein, the 19th century English polymath Herbert Spencer formulated a ìUniversal Law of Evolution” that encompassed physics, biology, psychology, sociology and ethics. In effect, Spencer deduced society from energy by positing a sort of cosmic progression from energy (which he characterized as an external and universal ìforce”) to matter, life, mind, society and, finally, complex civilizations. Spencer also envisioned a future in which industrial progress would lead to an end of wars and a withering away of the state.

Though the dream of being able to predict the course of the human career retained its seductive appeal in the 20th century, it has often seemed as if Cassandra and Pollyanna were at war with each other. On the one hand, we had prophets of doom like the biologist Paul Ehrlich, whose book The Population Bomb was a best-seller in the 1970s. Even more disturbing were the gloomy predictions generated by the Club of Rome´s Limits to Growth models, which produced an impassioned controversy.

On the other hand, ìfuturists” like Herman Kahn of the Hudson Institute were quite sanguine about having a world population of 15 billion or more, while the well-known anthropologist Raoul Narroll analyzed the historical trend toward ever larger political aggregates and concluded that the probabilities for achieving a world state ranged from the year 2125 (with a 40 percent probability) to 2750 (a 95 percent probability). Anthropologist Robert Carneiro came to a similar conclusion but used a different methodology. He projected forward the historical trend toward a decreasing number of independent political units and declared that, provided nuclear annihilation can be avoided, ìa world state cannot be far off.” It is a matter of centuries or even decades, not millennia, he declared.

Even the founding father of Sociobiology, distinguished biologist Edward O. Wilson, joined the futurist parade in a 1970s book coauthored by Charles Lumsden titled Genes, Mind and Culture, where he advanced what he called an ìautocatalytic” theory of cultural evolution. ìThe ultimate triumph of both human sociobiology and the traditional social sciences would be to correctly explain and predict trends in cultural evolution on the basis of their own axioms….Will the social sciences…be able to explain history more fully and perhaps even predict with moderate accuracy? We believe the answer is yes, at least on a limited scale….The prediction of history is a worthwhile venture.

All the evidence suggests the contrary. Forecasting the future is a very hazardous business, at least if you care at all about being correct. Some of these hazards were addressed at our conference, in one of our World Congress symposium panels. The bottom-line was that forecasting is useful, but we must always be prepared for the unexpected and the unpredictable. This symposium panel reminded me of one of the more memorable statements by the American President, Dwight D. Eisenhower, based on his experience as a wartime leader in World War Two. ìPlans are useless,” he said, ìbut planning is indispensable.

The problem with forecasting the future is that living systems are not exemplars of ideal types or slaves to linear forces but are messy, historical phenomena. The ìcaprices” of history are not simply quirks, anomalies or blips; they are not temporary road-blocks that can be got around. They are major causal variables, an integral part of the causal dynamics. In other words, historical processes require a science of history – a science that encompasses and integrates contingent, historical influences. Deterministic, law-driven theories of evolution – or of human history – are destined to fail.

Let me give you one illustration: The computer scientist/psychologist John H. Holland in his latest book, Emergence: From Chaos to Order (1998) asks: “How do living systems emerge from the laws of physics and chemistry? Can we explain consciousness as an emergent property of certain kinds of physical systems?” Holland, who is one of the leading figures at the Santa Fe Institute, concedes that emergence can be defined in various ways, and that many aspects remain “enigmatic”. He confines his attention only to the sub-set of systems that are “rule-governed” – like chess, he says – systems in which “a small number of rules or laws can generate surprising complexity.” Of course, laws don’t “generate” anything or “govern” anything. They identify regularities in relationships, and in the patterns of causation in dynamic processes; we characterize these formulations as “laws” because they allow us to generalize and make predictions.

But that aside, Holland’s example serves to illustrate the basic problem with a deterministic approach to explaining evolution, and especially complexity. Even in chess (to use Holland’s metaphor), you cannot utilize the rules to predict history – that is, the course of any given chess game. Indeed, you cannot even reliably predict the next move in a chess game. Why? Because the “system” involves more than the rules of the game. It also involves the players and their unfolding, moment-by-moment decisions among a very large number of available options at each choice point. The game of chess is inescapably historical, even though it is also constrained and shaped by a set of rules, not to mention the laws of physics. In other words, human knowledge, human creativity, and human folly are integral parts of the historical process, for better or worse.

Nevertheless, there is much to be gained by taking a long view and considering thoughtfully the problem of sustainability for future generations. If we cannot make unequivocal predictions, we can make many useful ìif-then” predictions based on specific contingencies. This, I believe, will be the primary challenge for the new millennium, and for the systems sciences. To use Alan Lightman´s image, we are like a speeding train without an engineer. It is time to climb aboard and seize the throttle.

One useful starting point for peering into the future is the concept of synergy. Each of us has an array of basic needs that must, by and large, be satisfied continuously. We cannot, for instance, do for very long without fresh water, or waste elimination, or sleep. Accordingly, each of us – individually and collectively – requires a synergistic ìpackage” of resources and suitable environmental conditions. A society that can reliably provide this package will thrive and possibly grow larger. But if even one of these needs is not satisfied – if any part of the package is deficient – the entire enterprise is likely to be threatened.

Over the course of the past 10,000 years, since the rise of civilization, many new technologies have been developed that enhance our ability to provide for our basic needs (and much more besides). But the Faustian bargain is that we have also become the captives of these technologies. I call it the paradox of dependency. The more valuable a resource or a technology is, the more dependent we become and the greater the cost of losing it. Thus, many of our technologies also amount to ìbasic needs” that are also vital to our survival. For instance, the very idea of a modern industrial society without electrical power, high-speed transportation and long-range communications is unthinkable.

These bedrock needs frame the nature of the problem we confront, and they allow us to make a great many contingent, ìif-then” forecasts. But that is all we can legitimately do. We cannot make unqualified predictions about the future because we do not, and cannot, know in advance all of the variables that will affect its course, including our actions, or inactions.

For example, we can safely predict that there will someday soon be an upper limit to human population growth. As the economist Herbert Stein has observed: ìIf something can´t go on forever, it won´t.” However, we can only guess what that ceiling will be, much less when and how it will be reached. If by some miracle we were able to institute rigorous world-wide population control measures, our ability to predict global population size would measurably improve.

Nevertheless, we still might not be able to anticipate the negative effects on population growth of such looming threats as global warming, pandemic diseases, monster earthquakes or climate-altering volcano eruptions. (When Mount Tambora in Indonesia erupted in 1816, its enormous dust cloud affected weather conditions – and crops – as far away as New England for many months afterward. The locals referred to it as ìthe year without a summer.”)

We can also observe many potentially serious future survival threats. If major steps are not taken to address these challenges, then the ultimate consequences are predictable. I will provide just one example – fresh water. As the New York Times noted in a recent editorial, ìthe most precious fluid on earth is not oil, but water.” With or without global warming , the world stock of fresh water is being depleted at a rate that will soon threaten our food supply; a major share of the world´s agriculture depends upon artificial irrigation. Drinking water and water for sanitation and industrial uses are also threatened. Even now, some 1.3 billion people (20 percent of the global population) do not have safe drinking water, and at least four million people die each year from water-borne diseases. Within the next 50 years, expected population growth is likely to impose a demand for a 50-100 percent increase in fresh water supplies, a staggering challenge. Yet we are currently depleting many of the lakes, rivers and aquifers that serve existing populations. For instance, the great Ogallala Aquifer, a huge underground river in the American southwest – once the size of Lake Huron – that many people in that region depend upon, will go dry in 20-30 years.

To make matters worse, so-called ìmegadroughts” are a thing of the future, regardless of global warming. We now know that, over the past 10,000 years alone, global climate changes have often led to prolonged droughts that far surpassed anything we have seen in recent centuries. Indeed, the collapse of many ancient civilizations may well have been caused by these severe, decades-long climate disruptions. Yet we are totally unprepared for a recurrence of this likely event.

Consider this: the state of California, with its rich soil, salubrious climate and the longest growing season in the world, produces 90% of the apricots, 87% of the grapes and avocados, 86% of the peaches, 83% of the lemons and strawberries, 80% of the artichokes and lettuce, 73% of the broccoli and 53% of the cauliflower grown in the United States, along with about one-third of the cherries and pears and a significant percentage of the nation´s oranges, wheat, rice and other crops. California also currently has a population of about 33 million people that is projected to grow to 49 million by 2025. Unfortunately, California is one of the areas that has been susceptible to severe megadroughts in the past. And, in a food economy that is increasingly global in scope, many other countries besides the U.S. could be hit with shortages and soaring food prices if another such megadrought were to occur in this state.

One solution might be for Californians to move to Canada. (I am being facetious, I hope.) But a more viable option might be to undertake a long-range development program that could ìfalsify” this prediction (to use the scientific jargon). Solar power is becoming increasingly competitive, and so are windmills. In the 1980s, when there was a burst of experimentation with new energy technologies, the most advanced windmills could produce energy for about 38 cents per kilowatt-hour. Now the cost is down to 3.5-5.0 cents per kilowatt-hour, and wind farms have been cropping up in such unexpected places as the Iowa corn belt. Within the next decade wind farming may become a major industry. Similar improvements have been occurring in solar technology.

So, if we let our imagination range freely, we can foresee a day in the not too distant future when vast arrays of environmentally-friendly solar and wind-powered energy generators could be coupled to improved water desalinization and purification systems. What now seems like a major threat – namely, a growing shortage of fresh water and future megadroughts – could in time evaporate (excuse the pun). But this outcome is not foreordained. The choice is up to us.

The biologist Garrett Hardin – who is famous for his classic article on ìThe Tragedy of the Commons” – many years ago penned what remains a profoundly important truth about the human condition:

We cannot predict history but we can make it; and we can make evolution. More: we cannot avoid making evolution. Every reform deliberately instituted in the structure of society changes both history and the selective forces that affect evolution – though evolutionary change may be the farthest thing from our minds as reformers. We are not free to avoid producing evolution: we are only free to close our eyes to what we are doing.

As the philosopher John Locke truly observed more than two centuries ago: ìHell is the truth seen too late.” I cannot predict that there will be another millennial World Congress of the Systems Sciences 1000 years from now, but I am an optimist. So I would like to invite your descendants to attend the 1044th annual meeting of the International Society for the Systems Sciences, a mere 50 generations from now.

However, the main point of my speech is that we need to begin planning for that event now. Our challenges are immense. But so are the opportunities, if we can seize them before it is too late.

About the Author

Peter Corning’s Website ISCS

My readers know of my respect for Daniel Quinn. You may be familiar with his story of Ishmael, but another of his books that is equally valuable is The Story of B.

B Attitudes

Blessed are those who refrain from exalting themselves above their neighbors in the community of life, for their children shall have a world to live in.

Blessed are those who listen to their neighbors in the community of life, for they shall escape extinction.

Blessed are those who refrain from imposing on others their “one right way to live,” for cultural diversity shall be restored among them.

Blessed are those who hunger and thirst for the survival of Leaver cultures, for they shall preserve a legacy of wisdom accumulated from the beginning of time.

Blessed are those who do not fancy themselves rulers or managers or stewards of the earth, for the earth managed to thrive for three billion years without any of us.

Blessed are those who do whatever they can wherever they are, for no one is devoid of resources or opportunities.

Blessed are those who awaken others as they have been awakened, for they are B.

Daniel Quinn’s Website