(This concludes the Ten Principles for a New Economy series, based upon the New Economy Network publication Principles for a New Economy“. Part one and part two looked at the Ten Principles in detail; this post looks at four things a new economy should NOT be.)
The first two posts in this series looked at Ten Principles for a New Economy and how these could fit into today’s business environment. This last post looks at four things a new economy should not be.
The Ten Principles document states that:
“the purpose of an economic system is to organize human activities in ways that support healthy and resilient communities and ecosystems for both present and future generations”
It then goes on to describe how current global, regional, national and global economies have failed. In today’s language the economy is largely made up of for-profit businesses, so if there is any fault to be found in the economy then it also points to faults within how businesses conduct themselves.
These failures show that businesses, along with the wider economy, are currently:
Unsustainable
“They over consume and degrade the resources upon which their long term prosperity depends.”
Over-consumption is not just a question of wastefulness: it’s also a question of simply trying to grab as much as possible today without any thought of what is needed for tomorrow in terms of environmental, mineral and human resources.
The biggest trouble is that it’s impossible to second guess what long term prosperity will need. Sustainability by its very definition means that a precautionary principle needs to be adopted: if its not necessary, then don’t use it.
Sadly, sustainability is too often seen as efforts to offset emissions or reduce outbound waste. Rarely is it seen as as a need to reduce consumption, both in terms of business inputs and the sale of products or services to the wider business and consumer communities.
Until these fundamental points are tackled on an economic scale business, as a whole, will remain unsustainable.
Unfair
“They multiply financial advantages to those already advantaged at the expense of those most in need.”
The biggest flaw in capitalism is that it relies upon capital investment. Those who have the capital to invest can take the risks and reap the rewards, those who don’t, can’t. As a one off scenario this seems fair enough, but when it’s multiplied over decades or generations you realise that those with financial assets are more likely to remain wealthy, while those without are more likely to remain poor.
While this is not a class system as such it is still based on income and wealth, not merit and ability; this is profoundly unfair.
This is why I remain profoundly cynical about Bottom of the Pyramid marketing. It’s a nice idea to alleviate the absolute poverty rampant throughout the world, but it does so by reinforcing the unfairness in the system which condemned these people to destitution in the first place.
Unstable
“They lack resilience in a time of growing volatility and rapid social, political, technological, and ecological change”
The secret to resilience is that there should never be a single point of failure in a system. In economic terms this means you should not have institutions which are too big to fail and an economy dominated by one sector. Businesses need to support the economy by ensuring they don’t get so big that they destabilise the local, national and even international economies.
The standard reply to that would be “why can’t businesses get as large as regulations allow?” The answer is because that could well be irresponsible and I always thought CSR was about responsibility, not regulatory compliance.
Undemocratic
“The operate with inadequate democratic controls and accountability on the part of their most powerful organizations – corporations, financial institutions and governments”
The whole way Greece has unraveled demonstrates how profoundly undemocratic the institutions which make up an economy have become, including the government. The latest and most poignant example is the suicide of Dimitris Christoulas, a pensioner who saved privately all his working life only to find on retirement he had nothing to live on.
There is now deep mistrust of financial markets and governments running across the world from the highly paid chief executive down. The political ramifications of this are already being felt: the Pirate Party, which calls for greater government transparency and participation and the reform of most intellectual property rights, has spread around the world like wildfire. International affiliates are officially registered parties in over 20 countries, including the US, Russia and the UK , and it’s now the third largest political party in Germany and has won nearly 200 state and city councillor seats.
Business itself is only slowly reforming. Companies tend to be dictatorial in nature, with managers instructing employees in what they should be do: ownership is defined solely by financial investment and voting is generally in block form and uncritical.
So to the future….
Social accountability has to become embedded within both business and the economy. SRI and CSR should be watchwords to encourage the major players in the economy to look at how they can best create sustainable, inclusive, stable and holistic organisations which don’t pursue profit to the detriment of everything or anything else.
However the trouble is business, like politics, is inherently conservative and dislikes change when it’s not in its own interest. So it is that we have the slow baby-step by baby-step transformation which is so painfully slow it can almost make you cry.
Against this you have movements such as Anonymous and the Pirate Party which are taking direct action to reform the economic and political institutions they hold in contempt. Both of these movements have attracted widespread public support around the world and cannot be considered fringe groups by any means.
This is why proposals such as these principles are so vitally important. They move the debate away from the old, stale and largely defunct capitalist-socialist arguments of the last century and look to how a more sustainable, stable and inclusive economy can be built.
For businesses raised and grown in a capitalist environment this can be a challenging vision, but if they don’t reform soon they may find the pace of change is pushed along even faster.
Picture Credit: Rosie from the New Economy Network website.
Lucy is Editor at Corporate Eye
