The New Economy Challenge: Implications for Higher Education
Think of this as our final examination to determine whether we are a species worthy of survival. If there is to be a human future, we must reinvent ourselves and our institutions—and do so with all possible speed. This is the challenge with which our educational institutions must now engage.
We need a new vision for the human future that goes far beyond current policy proposals for adjustments in technology and market incentives. The values and institutions of the 20th century that led us to recklessly squander Earth’s abundance for the benefit of the few were shaped by an economic mindset that reduces all values to financial values and all human exchanges to financial transactions for private financial gain. This mindset gave us collapsing environmental systems, unconscionable inequality, and rule by global corporations that operate beyond the reach of democratic accountability.
Ecological Principles for the New Economy
The economic systems and institutions of the 21st century must be designed to serve three very different outcomes: ecological balance, shared prosperity, and living democracy. We properly turn to ecologists, not economists, for guidance. The underlying principles of the new economy are ecological principles. They are central to the ecologist’s intellectual frame, but alien to the financial frame of most professional economists.
- Ecological Balance: I call this spaceship management 101. The defining human imperative of our time is to bring ourselves into balance with Earth’s biosphere. This requires shrinking global GDP, starting with the most profligate nations while creating a planetary-scale economic system that mimics the structure and behavior of Earth’s biosphere. Listen closely, because the following is key: Earth’s biosphere is segmented into countless self-organizing local ecosystems, each locally rooted, locally self-reliant, and exquisitely adapted to its particular place on earth to optimize the use of locally available resources in service to life. We must similarly organize our human economies as subsystems of local ecosystems. To the extent that each local economy is in balance with its local ecosystem, the biosphere itself will be in balance.
- Shared Prosperity: As we act to reduce aggregate consumption and rebuild local economies that integrate with local ecosystems, we need to recognize that Earth’s bounty is the shared birthright of all living beings and learn to share it equitably for the benefit of all. It is the right thing to do and essential to our survival. It is also a necessary path to increasing human health and happiness. According to a massive body of public health research, societies that share wealth equally are healthier, have stronger families and communities, less crime and violence, and healthier natural environments than do less equal societies. Inequality creates psychological and emotional stress, including for those at the top, discourages sharing, and increases insecurity. Societies that distribute wealth equitably also tend to be more democratic and more resilient in the face of crisis.
- Living Democracy: In living democracies, popular sovereignty is integral to the fabric of community life. Living democracy is a daily practice of civic life. Living democracies celebrate and affirm diversity within a framework of individual rights, community responsibility, and mutual accountability. Their political and economic institutions support local decision making within a framework of cooperation and mutually agreed rules. Shared power, shared resources, and shared prosperity go hand in hand.
Redesigning the System
The defining structural characteristics of economies organized to support ecological balance, shared prosperity, and living democracy will be near mirror opposites of the structures of power and privilege that the current economy supports. Here are three key system design issues:
The Economics of Happiness
A ground-breaking commission of leading economists suggests that nations look beyond GDP.
- Indicators. We currently use gross domestic product (GDP) and corporate stock share price indices as the primary indicators against which we evaluate economic performance, and we manage our public policies to maximize their growth. GDP is basically a measure of the rate at which we are turning useful resources into garbage and stock price indices are basically a measure of the rate at which rich people are getting richer relative to the rest of us while doing no useful work.
We get what we measure, so we should measure what we want by assessing economic performance against non-financial indicators of the health of people, community, and nature. Indicators like the Living Planet Index and the Ecological Footprint promoted by the World Wide Fund for Nature are an excellent place to start.
- Money system. Our present economic system centralizes and monopolizes control of the creation and allocation of money in the hands of a very few private banks that use this power to finance socially destructive speculation, asset bubbles, loan pyramids, and corporate buyouts, and to force working people and productive Main Street enterprises into debt slavery. The official money system is the operating system of the economy. It can and should be decentralized, localized, and managed as a public utility comprised primarily of locally rooted nonprofit or publicly owned community banks and credit unions providing basic financial services and funding productive local investment. Financial speculation should be eliminated either by legal prohibition or through the imposition of confiscatory taxes. For all the attention given to financial analysis, the money system is one of the least understood aspects of modern society and it gets little attention in university programs. Understanding money as a system of power and the implications for society should be considered an essential foundation of education for responsible citizenship to which every student should be exposed.
- Business Enterprises. The global economy is organized under the control of global mega-corporations with internal economies larger than those of most countries, which are accountable only to absentee owners whose sole interest is financial return. The living economies of the future are properly organized around locally owned small and medium-sized living enterprises that root economic decision making in the community, treat profit as a means rather than an end, and define their purpose in terms of meeting community needs. Large corporations must be broken up and restructured as smaller worker- or community-owned businesses. Business schools that prepare managers to serve the financial bottom line of large corporations will need to reorganize to prepare managers for living enterprises.
When Money Rules
Modern money is perhaps the most mysterious of human inventions. It is nothing but a number of no substance or intrinsic worth. Yet in contemporary societies, money determines our access to virtually every essential of life. The decisions of those who control the creation and allocation of money determine the fate of nations and shape the booms and busts of economic life They determine who among Earth’s people will have food, shelter, education, and health care—and who will not.
It is all just numbers and creative accounting, but the system that generates and allocates these special numbers is the most effective and undemocratic of tyrannies, because its inner workings are largely invisible and therefore difficult for ordinary people to challenge. We may express outrage against the bankers who abuse the power the system gives them, but we generally take the system itself for granted.
The money system largely defies understanding, because it is based on illusions, beginning with the illusion that money itself is wealth and that people who make money are thereby creating wealth.
Economist John Kenneth Galbraith once famously observed that the process by which money is created is “so simple it repels the mind.” When you take out a loan from a bank, the bank opens an account in your name and enters the amount of the loan in its ledger. That becomes a liability on the bank’s accounts, offset by the corresponding asset of your promise to repay with interest. Two simple accounting entries and money magically appears from nowhere. This simple fact makes banking a very profitable business and is the key to the ability of the institutions of global finance to rule the world.
Mayer Amschel Rothschild, founder of the Rothschild banking dynasty, once famously said, "Permit me to issue and control the money of a nation and I care not who makes its laws."
Money created out of nothing, unrelated to the creation of anything of corresponding value, is phantom wealth. In the United States, Wall Street has built a whole industry devoted to creating phantom wealth. They call it financial innovation. It is a form of theft and should be treated as such. Understanding how this works is essential to fulfilling one’s civic responsibility in a democratic society, yet it is rarely addressed in existing university curricula.
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