Paper to Beyond Despondency Conference, Wellington, Mar 98

Alan Fricker, Sustainable Futures Trust,

30 Akatea Rd, Petone.

tel: 04 589 1575, fax: 04 589 0447

email: frickera@actrix.gen.nz

Stripped of its finery economics is about how we exchange our surpluses, whereas as a science it has somehow been transformed into an economics of scarcity where everything is expressed in monetary terms. Now that money has come off both the wheat and the gold standard it is valued only against itself. Thus it chases its tail and constitutes around 90% of international transactions. The third party to an economic transaction is the earth, the Great Mother, which in Jungian psychology is an archetype. If we suppress an archetype the shadows emerge. We have created the shadow of scarcity, the polar shadow of which is greed. This is fuelled by the dominant world paradigm based on rationality and self-interest. We have conveniently forgotten the paradox of cooperation Rational, self-interested individuals will not act to achieve the common or group interests. Fortunately we are not always rational and will cooperate when we really come to know and trust each other and have the power and resources to implement solutions. This is a foundation to an economics of abundance - of labour, goodwill, and renewable resources, even though the latter now occupies a tenuous position. Alternative world views are emerging to facilitate the change in mind set, from George Soros through Richard Douthwaite to Ken Wilber.

Stripped of its finery, economics is about how you and I make transactions. But it goes beyond the transaction itself. Where our association is close the transaction is part of a developing or ongoing relationship. Even distant transactions should (in most cases do) reflect win/win situations. Historically this is because we exchanged our surpluses - be they food, goods, or services that were surplus to meeting our own needs first as best as we were able. Somewhere along the way however surplus (abundance) became scarcity. Whether our ancestors who made the first of these transactions felt they lived in a world of scarcity or abundance, we shall never know. I suspect they accepted the world as it was, which might from time to time provide them with a surplus.

The whole of economics seems predicated on this concept of scarcity - not of nature's goods and services but of man's. Don't blame Adam Smith. He had the misfortune to provide the prose that the rationalists, the reductionists, developed into an economic 'science'. Furthermore, although we may no longer believe the earth is the centre of the universe, we each have a propensity to believe the world revolves around each of us individually. We may have conceded our anthropocentricity but we retain our egocentricity.

The competitive equilibrium model of supply and demand in micro-economics applies only under perfect equilibrium conditions. Unfortunately it works only when there are endless numbers of buyers and sellers and there is perfect information. Great for the consumer but disaster for the producer. It is a race to the bottom. In order to make a profit the players attempt to create a position of comparative or competitive advantage, through innovation, the witholding of knowledge, the creation of an absolute or relative monopoly (often with state assistance). No one wants to be a model player. In reality therefore successful enterprise does not operate around the concept of equilibrium. Outside of this concept economics has no means of saying how prices are determined.

Furthermore the realm of macro-economics does not even claim to have an irrefutable 'law', not even the competitive equilibrium model, and does not even accept the concept of optimality or limits, ie. growth can be infinite (Daly 1996). Nevertheless macro-economics abounds with mathematical complexity.

Economics of course is the handmaiden of capitalism and international trade, in which the practice of economics is often at variance with the theory of economics. Consider this comment by Michael Lewis who abandoned a career as a successful trader on world capital markets after the 1987 crash .. Economics satisfied the two most basic needs of investment bankers. First, bankers wanted practical people, willing to subordinate their education for their careers. (Secondly,) economics seemed designed as a sifting device. .. The only inexplicable part of the process was that economic theory served almost no function in an investment bank. (in Ormerod 1994) Capitalism, world trade, and the practice (if not the theory) of economics however are predicated on growth. Capitalism cannot be sustained except through quantitative growth. The world, at least as we know it, however cannot be sustained by such growth, whether it be in population or affluence. Capitalism, like socialism, on which it was dependent, will collapse too because of its inherent contradictons. As real wages and social expectations rise, and social and environmental costs become more and more internalised, capital will find fewer and fewer places where it can make a real profit, particularly as it (and the populace) are dismantling the state on which it depends to create an environment of relative or temporary monopoly in which to make a profit (Wallerstein 1997)

The middle ear of corn has 480 grains and weighs 1 troy ounce. Not necessarily of gold, but we think in those terms because gold is scarce, dense, durable and portable - a useful medium for exchange in a world in turmoil. When not in turmoil corn is better because it's useful - at least you can eat it. Neither standard holds now, so currencies are traded against other currencies, but which is best? There is however little real currency (money) as such because it is mainly imaginary 'funny' money created on the strength of some real money elsewhere (leverage) and the prospect of growth (interest or usury). With so much 'funny' money chasing real money no wonder it comprises around 90% of global trade. Real goods and services don't seem to matter any more. This 'funny' money must eventually extract some real money from those that hold it to repay those who loaned you the 'funny' money. To win someone has to lose. In such unregulated circumstances real money and wealth flows from those with least to those with most. Thus the poor get poorer and more numerous and the rich get richer and fewer.

Real money is therefore scarce whereas the goods and services we wish to access to sustain us are abundant. Because real money is scarce, but still only symbolic and vulnerable (eg. to inflation), it is used by those who have it to buy things which are also scarce but tangible, such as prime real estate, works of art, jewellery, education, where it tends to get tied up and do little for the general populace.

Regulation is more than a means of wealth redistribution. It is a means of creating a united society by keeping money out in the economy and flowing. It is also a means of encouraging economic activity in areas or sectors of society where it is deemed desirable. The flow of money is a measure of the health of an economy. We don't want to retard its flow, we want that money to be used to the full and by many. If money (capital) were to attract no interest it would be used to the full in productive and creative, rather than speculative, purposes otherwise it has no value. The more real money is used the less need there is to create 'funny' money to achieve the same outcomes. The more it is used the less scarce it becomes. Leverage and usury in fact create scarcity, distort the economy and are unsustainable.

There is a third party to the transactions that you and I effect - namely the earth, more specifically the resources of the earth, or to put a human dimension on this party, the Great Mother. The Great Mother in Jungian psychology is a great archetype. If an archetype is repressed the shadows emerge. We have always regarded nature's resources as free goods, as abundant goods from which we can derive surpluses. Modernity paradoxically regards the enormous production of man-made goods as scarce goods.

To regard nature's resources as scarce is a repression of the Great Mother that sustains us. Scarcity then becomes a shadow of our own making, the polar shadow of which is greed (Lietaer 1997). Beyond Greed and Scarcity is the title of Lietaer's book to be published this year. He has wide experience as a manager of international finance. Thus an economics based on scarcity that goes unchecked will sharpen these shadows and the void will deepen.

Lietaer (1997) describes two periods in history (there were of course more) when our economic paradigm reflected rather than drove our visions. They were the building of the pyramids and the great cathedrals of Europe. Are we today duped and willing slaves without a vision? Consider also the architectural and artistic beauty of the city states of medieval Europe, Italy in particular. How would we today justify investments that may not provide any economic return and may take several hundred years to come to fruition?

Greed and scarcity have unfortunately become part of the Western culture. We may even be schooled to practice greed. Research with students in a range of disciplines shows that not only students of economics but also their professors are more greedy than other students (Frank et al 1993). Elsewhere, Watson (1992) investigated the moral tension experienced by MBA students between the institutionally reinforced premises about human behaviour and motivation and the 'everyday' ethics prevalent in the broad culture. The former is predicated on unimpeded self-interest in human transactions virtually all of which are considered as economic transactions.

If we are brought up to see scarcity we run the risk of becoming greedy, and scarcity becomes a self-fulfilling prophecy. If we are brought up to see abundance we may achieve abundance. Other cultures, untainted by Western culture, have quite different perspectives. Burmese children were, maybe still are, brought up to not just share their toys ( what few they might have) but to give them to other children that express an interest in them (Arnold 1996). The most wicked crime that could be committed in a remote tribe in Borneo was not sharing (Barclay 1980).

Freedom in a commons dilemma brings ruin to us all .. wrote Garret Hardin in his classic parable of the tragedy of the commons (1968). He was reinforcing the paradox of cooperation articulated earlier by Mancur Olson (1965) .. Rational, self-interested individuals will not act to achieve their common or group interests. Yet we live in an age where reason and self-interest are presented as our guiding beacons.

Fortunately we are not wholly rational creatures. In research simulations of social dilemmas and in real life, we do not always make the rational choice. We sometimes choose to be 'irrational' and selfless. If most of us choose to be irrational, our irrationality becomes rational because both the collective and the individual good are then served. This is rationality or reason that functions at a higher level of consciousness. Hofstadter (1985) reasons that the rational choice must always be the cooperative choice. In an experiment with superrational people he was surprised how irrational superrational people can be.

We do not however make the irrational cooperating choice very readily. Research in social dilemmas (the commons dilemma is the ultimate social dilemma) identifies the circumstances whereby we forego the rational choice (Fricker 1998). Cooperation is facilitated when we:

• can really come to know and trust each other,
• can really explore together the consequences of our possible decisions, and
• have the resources and the power to effect solutions.

So we not only have to get beyond scarcity and greed, we have to get beyond the rational - or at least the conventionally rational. Indeed the power of reason can be seen to have contributed to many of our social and ecological ills, for it has subdued our intuitive faculties of compassion, wisdom and love - those faculties whereby we find meaning and purpose in life. Reason has seen the emergence of science and technology, from which much of the dignity of modernity comes. It has also seen the rise of the Hero, the autocrat, the bureaucrat, and the technocrat, that Jonathan Ralston Saul speaks of in Voltaire's Bastards (1993). Even scientists, such as the biologist William Jordan (1991), attribute institutional, scientific, and medical atrocities to the power of reason. Albert Speer, Hitler's Minister of Commerce and Industry, .. exploited the phenomenon of the technician's often blind devotion to his task. Because of what appeared to be the moral neutrality of technology, these people were without scruples about their activities (Speer 1970).

Stuart Chase, in the second quarter of the century, wrote The Economy of Abundance (1934) and The Tragedy of Waste (1925). In the former he asked the reader to imagine the USA of the 1830s where the people awoke to find that they had four times as much energy as they had had the day before. Would they not find that they would quickly become a world of abundance? Yet those living in 1934 had forty times as much energy as those in the 1830s, but were not living in a world of abundance. He concluded that they had both squandered and been robbed of their abundance. We still need that economics of abundance.

Today we have an (over) abundance labour, a propensity which could be stimulated to become an abundance of good will, but a now tenuous abundance of renewable resources. The global ecological capacity of 2.1 ha/cap is already exceeded by our footprint of 2.8 ha/cap (Wackernagel et al 1997). We don't have to attain a Western lifestyle and education to reduce population or recognise our unsustainability. Kerala in SW India has quality of life indicators comparable to the West on a tenth of the income (Alexander 1998). Contrary to popular belief in the West there is an inverse relationship between affluence and concern for the environment (Dunlap and Mertig 1995).

Furthermore we seem poised to want to move beyond a quantitative economics. Daly (1996) among many others talks of qualitative development rather than quantitative growth. Many feel that once a people have attained a sufficient standard of living we should then concentrate on quality of life. Not because necessarily that continued quantitative growth in the standard of living is bad (there are certainly negative effects) but because we feel rather than know that it cannot be sustained. Furthermore there is much evidence that a sustainable future is itself about quality of life rather than standard (quantity) of living.

In that event where does that leave economic theory and practice? Perhaps they will cease to emulate a science and return to what they were initially - a language subject to all the vagaries that humans and nature can throw at it. Clearly some quantification needs to remain, but this needs to reflect physical and global limits. We need resource accounting rather than monetary accounting. Had we been on this track we would have realised long ago the folly of our ways. Nuclear energy generation would never have been considered had we thoroughly computed and internalised the energy requirements of nuclear waste containment. We would have eliminated long ago the potential of tar sands as a viable source of oil.

An economics of abundance is going to require a radical change in thinking. A sea change. A new world view. We need to retain our objective faculty of reason but we need to awaken our subjective faculties which shape who we are - faculties which have been suppressed since the Age of Reason. Reason is the mode of only one way of learning. There are others. Wildman and Inayatullah (1996) offer four. We have been immersed in Techne (doing) and Scientia (knowing) whereas we need to also embrace, evolve into, Praxis (being) and Gnosis (insight). Wilber (1996) takes an even greater sweep. He sees the whole of history, and therefore the future, as an evolution of consciousness - an evolution that must embrace the interior subjective dimensions of reality - an evolution that transcends and includes previous levels of consciousness, warts and all.

Those people who have been able to advance the human condition, whether through knowledge, the arts, service to others or even perfecting their own skills as in sport, do so because they attain higher levels of consciousness. George Soros has made a fortune speculating on international money markets. He is reviled by many but anyone who takes the trouble will find a man who has attained a high level of consciousness in terms of knowing how the financial system operates, or fails to operate (Soros 1997). Put simply his success is based on the rational (and therefore predictable) response of governments to the breakdown of imperfect laissez-faire economic ideology. He is a strong advocate for an international credit insurance corporation as a sister organisation to the IMF to regulate and guarantee international lending. Yet little (less than 10%) of this trade is in goods and services. It's not even real money; it's leverage money, funny money issued on the strength of someone else's real money that must extract through interest another person's real money. This is not the abundance that I have in mind. An economy of abundance can hardly be less whacky than what we already have.

With an economy of abundance we can create a mood to dispel despondency. But it will not be a profligate abundancy. It will be an abundancy of sufficiency, for our needs rather than our greed. The full employment of the third quarter of the 20th century may have been unique. Technological developments are displacing labour and we may not willingly choose to return to work that is mundane and demeaning. We all need work however to satisfy the three purposes of work - a means of sustenance, self-expression, and service to others. Many may have to discover this for the first time but that may not be difficult as we rediscover and strengthen community. For this to happen therefore, each of us needs to be assured that we can live a sufficient lifestyle without fear and dependency. A conditional retractable unemployment or sickness benefit is no incentive for creative participation. A universal unconditional income is. In time and with careful preparation few will choose to remain idle. Most will choose to supplement the basic income with paid employment. Others will create their own employment as a means of self-expression. Others would be enabled to enter voluntarily into the service to others. Involuntary service, as a carer for instance, would also be recognised but may need a supplement. Utopia? Perhaps, but Oscar Wilde reminded us that .. progress is the realisation of our utopias.

The UBI may be too large a leap. We could creep up on it through the development of local economies (Douthwaite 1992 and 1996). These would complement the trend towards the global economy and be a buffer against the bad effects of that trend, particularly the potential to collapse. Globalisation is draining both the resources and their control from local communities. It is leading to rural depopulation, urbanisation and subsequent decay, and to social disintegration. We used to source 90% of our essential needs (energy, water, food, clothing, housing) locally; now it is around 10%. Douthwaite presents many examples of local communities endeavouring to reverse this trend. They may need to create local currencies (Green $), local banks, credit unions, networks, but it is happening. The retention of capital within the community or region gives the investors other choices other than the rate of return - a job for themselves, their children, their neighbours, environmental objectives. In the process the communities are strengthened and united.

Successful endeavours in this direction therefore are likely to influence political endorsement at the national level of the concept of a UBI.

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