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Clueless Economists, Smart Ecologists

To successfully address climate change and extreme poverty, the mindset of the economist must give way to the mindset of the ecologist.
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This is the eighth of a series of blogs based on excerpts adapted from the 2nd edition of Agenda for a New Economy: From Phantom Wealth to Real Wealth. I wrote Agenda to spur a national conversation on economic policy issues and options that are otherwise largely ignored. This blog series is intended to contribute to that conversation. —DK


Bangladesh traffic, photo by joiseyshowaa

David Korten says our world's environmental and economic crises won't be solved by merely tweaking traditional practices. Rather, we must redesign our economic system with an ecological perspective.

Photo by joiseyshowaa.

When economic failure is systemic, temporary fixes, even very expensive ones like the Wall Street bailout, are like putting a bandage on a cancer. We need to rethink and redesign the economic system. Unfortunately, such issues are generally left to economists, when we need the perspective of the ecologist.

The differing perspectives of the economist and the ecologist are starkly revealed by the authors of two books that appeared in 2008 as the financial crash was playing out: Jeffrey Sachs, Common Wealth, and Gus Speth, The Bridge at the Edge of the World. These books present nearly identical statements of the need to address growing environmental stress and end extreme poverty. Their recommendations, however, are miles apart.

Jeffrey Sachs, once described by the New York Times as “probably the most important economist in the world,” accepts the existing growth-centered economic model and institutional system as givens and prescribes a solution based on modest adjustments in public budget allocations. For Sachs, money is both end and means.

He calls for modest new investments in existing technologies to sequester carbon, develop new energy sources, end population growth, make more efficient use of water and other natural resources, and jump-start economic growth in the world’s remaining pockets of persistent poverty.

In a 2007 lecture to the Royal Society in London, Sachs made clear his belief that there is no need to redistribute wealth, ask the rich to reduce their material consumption, or otherwise reorganize the economy: “I do not believe that the solution to this problem is a massive cutback of our consumption levels or our living standards … and I do not believe … that the essence of the problem is that we face a zero sum that must be redistributed.”

Although there has been a slight decrease in recent decades in environmental damage per dollar growth in GDP, GDP growth always increases environmental damage.

Far from calling for a restraint on consumption, Sachs projects global economic expansion from $60 trillion in 2005 to $420 trillion in 2050 and estimates that the world’s wealthy nations can eliminate extreme poverty and develop and apply the necessary technologies to address environmental needs with an expenditure of a mere 2.4 percent of the projected midcentury economic output.

Sachs never asks why, if we can stabilize population and meet the needs of the poor with a modest expenditure, we should need or even want a global economy seven times as large as its present size. He says nothing about what forms of consumption might continue to multiply without placing yet more pressure on already overstressed natural systems or how increasing the consumption of the already big consumers by seven times might increase their happiness. It appears that such questions never occur to “the most important economist in the world.” 

Gus Speth, the ecologist who founded the World Resources Institute and for ten years served as Administrator of the United Nations Development Program, directs attention to the upstream system causes of environmental and social breakdown. He prescribes a thoroughgoing cultural and institutional transformation. His recommendations reach far beyond budget tweaks to address values and power.

Speth presents compelling evidence that although there has been a slight decrease in recent decades in environmental damage per dollar growth in GDP, GDP growth always increases environmental damage. He further demonstrates that beyond a modest threshold, more physical consumption does not increase happiness.

Big turnip, photo by Camille Sheppard Dohrn"Localization is the Economics of Happiness"
We know what makes us happy—but too often our economic decisions stand in the way. Interview with Helena Norberg-Hodge.

Speth calls attention to the importance of social movements grounded in an awakening spiritual consciousness that are creating communities of the future from the bottom up, practicing participatory democracy, and demanding changes in the rules of the game.

He recommends replacing financial indicators of economic performance, such as GDP, with non-financial indicators of social and environmental health. And he endorses calls to revoke the charters of corporations that grossly violate the public interest, exclude or expel unwanted corporations, roll back limited liability, eliminate corporate personhood, bar corporations from making political contributions, and limit corporate lobbying.

Tinkering at the margins of the failed economy guided by the same mindset that got us into our current mess will not get us out of it. The time has come for a profound rethinking and restructuring grounded in the living systems perspective of the ecologist.

[Next: War Against the Middle Class]


David Korten author picDavid Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

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More by David Korten:

  • System Failure? Look Upstream
    Why it's important to address our economic problems at their Wall Street roots.
  • A Real-Market Alternative
    As we look for solutions to our current economic crisis, the relevant distinction is no longer between capitalism and communism, but rather between Wall Street and Main Street. 
  • The Illusion of Money
    Real wealth or phantom assets? David Korten explores the difference between the kind of wealth that makes life better and the phantom wealth created by financial speculation.
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