Sunday, January 27, 2013
Are we asking the right questions?
Only once in a while will I return to what I think is the central conundrum of business and economics today, growth. The vast majority of our society is probably only subcontiously aware of growth as the major driving factor of our current economic system. Those in the business and economics world are very aware that our system is about and demands growth. Then there is the very small group of progressive folks like those of us at BGI that want to create a truly sustainable world so that we, our relatives, kids and grand kids can actually have any sort of future at all, let alone one that is happy and hopefully equitable. However, I would say that even among us BGI types, growth is not something we are centrally concerned about.
We must realize that the human race is already living far beyond the carrying capacity of the island called earth that we all live on. Our population is scheduled to reach at least 9 billion by 2050, and if our economies and consumption/affluence levels continue to grow at their current pace or faster, we will be looking at needing, not the current 1.5 earths minimally required to keep us going presently, but more like 6 to 9 earths depending on who is calculating. If all 9 billion people of earth from 2050 wish to live at the same levels of affluence of the developed world, which is a legitimate desire, then we would actually need 20 times the energy and resources that we currently use! Ted Trainer says, "The problem of Third World deprivation cannot be solved unless the rich world reduces its consumption dramatically and lives on something like its fair share of world resource wealth. Yet its supreme goal is to increase its levels of production, consumption and GDP," in his paper titled "The radical implications of a zero growth economy."
So, the problem is that our economic system, which we have spread to almost the entire globe at this point, requires growth. Growth is how we try to solve problems like unemployment, poverty, ect. Growth is the goal we aim for. Growth is what is required by our financial system which is structured to extract ever increasing levels of ROI, which is what Marjorie Kelly says, "puts the squeeze on public corporations." Growth is the result of a system which magically creates wealth when a bank makes a loan using the fractional reserve system.
What should an economy strive for and measure and maximize? Purpose is definitely the right answer here (see Jill Bamburg's presentation at the recent BGI TEDx event), but even if our society was made up entirely of quadruple bottom line businesses, I think growth would still be an issue; capitalism requires it, our financial system requires it. In a recent book entitled "Enough is Enough" by Rob Dietz and Dan O’Neill, Herman Daly writes in the foreword, "Enough should be the central concept in economics. Enough means 'sufficient for a good life.'"
A system which is truly "steady state" or "no growth" will require radical changes. If we go back to Ted Trainer, he notes, "In the coming conditions of intense resource scarcity, viable communities will have to be mostly small, self-sufficient local economies using local resources to produce what local people need." I think that much of the "New Economy" movement has been driving in this direction if not explicitly for the reason of our little living way beyond the carrying capacity of the island earth problem. The movement recommends strategies such as place-based businesses which are truly rooted in a community and of an appropriate scale. Another strategy is in regards to finance; slow money, patient capital, and localized wealth creation and entrapment are reccomended. The strategy which my project team is most interested in is that of networks of mutually supporting worker owned cooperatives centered around a worker owned financial institution.
We are currently researching the Evergreen Cooperatives in Cleveland Ohio. The lens through which we arrived at this decision was actually that of income and wealth inequality, something our current economic structure creates with high efficiency. This strategy of building multiple worker owned cooperatives in a local community, serving industry sectors which can benefit from import substitution and are centered around the community's anchor institutions, is a promising one both from the social and economic standpoint. More in depth information about the Evergreen Cooperatives can be found at www.EvergreenToolkit.org.
I do not know if this strategy completely helps us to get to a steady state economy, but it is the best closest thing I have seen proposed and tried so far. Trainer says that in a new economy, "At least the main economic decisions would have to be made by deliberate social discussion, debate and planning...because this is the only logical alternative to leaving them to “free markets” and the owners of capital competing to gain." The network of mutually supporting worker owned cooperatives (also called Sustainable Community Economic Development) provides the infrastructure to create this kind of system made by "deliberate social discussion" and provides every member of the wealth producing mechanism ownership, governance and voice. I believe that this kind of radically democratic economic structure will have to be intentionally developed to suceed and displace the current system if we are to have any hope at acheiving real social and economic sustainability for the sake of the world.
Its also super exciting!
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Great post. Fundamentally the idea of exponential economic growth seems incompatible with a finite earth. From what I've read of it (and admittedly I have much more to learn - Beyond Growth is currently on my nightstand), it seems the steady state growth model could work, but the transition is the difficulty. Can companies compete effectively acting in a steady state model if others (i.e. their competitors) aren't? Are there certain industries that are better suited for this than others? And how does the ECC model of connected organizations best fit here? Is the ECC working for zero growth, or maybe s-shaped growth? And, could a regional steady state growth example pop up within our growth focused economy? Is that a reasonable interim goal?
ReplyDeleteAnd yes, keep asking these hard questions!
Owning our Future by Marjorie Kelly has been sitting on my desk, unopened. Thank you, Joel, for bring her back to your blog post. Your post prompted me to search out Marjorie’s blog contributions; she has a few. I found a few which she specifically addresses growth in ecological systems. She opens this post (http://blogs.worldwatch.org/sustainableprosperity/generative-economy/) with “What kind of economy is consistent with living inside a living being?” This analogy struck me: what if the organisms inside my body did not deploy a steady state management system? Would I explode? Indeed, for the greater good of all things living inside my body, there is a balance, a capacity to what my body can support. I believe her point, and the point Joel is making is our economic system is a subsystem within our ecology and our current dominant economic systems are not sustainable in the sense there is a carrying capacity to our ecology which these dominant economic systems fail to recognize. This leads to no-growth economy solutions. She poses the question, “Can we sustain a low-growth or no-growth economy indefinitely without changing dominant ownership designs?” For which she follow to say “That seems unlikely. Probably impossible. How, then, do we make the turn? How can we design economic architectures that are self-organized not around profit maximization, but around serving the needs of life?” She lays the constructs for a generative design system. “In ownership design, there are five essential patterns that work together to create either extractive or generative design: purpose, membership, governance, capital, and networks.” How does Wall Street fit into this pattern? She concludes this post by saying “Extractive ownership has a Financial Purpose: maximizing profits. Generative ownership has a Living Purpose: creating the conditions for life.” Truth!
ReplyDeleteInteresting subject, Joel. I feel like the observation about economists believing in infinite exponential growth is becoming a bit careworn, but you treat it well, and get into alternatives.
ReplyDeleteI find myself at a few questions:
1. What is an alternative financial system to our current one, in which we do not generate more money by lending? Is the suppression of money generation specifically necessary, for a steady-state economy? It seems like it might be, to prevent ongoing inflation.
2. Is growth in our current system actually necessary to prevent crippling inflation, as a result of a ballooning money supply?
3. Why, exactly, would the transition be difficult? I suppose I'm interested in the nuts-and-bolts, at this point.
Joel,
ReplyDeleteThank you for your post. After a week of intensive reading focusing on growth through strategy and marketing, I find your post a refreshing reminder of the realities of our situation. Although, I do ponder, what will be the catalyst, the change agent, which will allow us to move away from growth as the dominant driver and toward purpose? Can this be accomplished through a grass-roots effort, or will it take a cataclysmic event to shut-down large corporations, end their influence, and remove peoples’ choice about making sacrifices?
Cameron
Joel,
ReplyDeleteReally great post. The idea that we need this growth to sustain ourselves is is a strange commitment. It seems like have have gone down this road and it is hard to get off without seeming like a failure. Companies, banks, and individuals have set this expectation of growth. It is already instilled in us at an early age to in the form of the idea that we need to have a better life than our parents. And while I don't necessarily disagree with the concept of a "better life" I think we have misinterpreted this to mean financially in a better state. In fact, I believe that a generation before us had a better connection to community that the general population is missing out on. I agree growth needs to change but I wonder if it can happen with the definitions we use and the revolving system tat we are in.