The valley of the economy is a desolate place full of smoke and fire, pitfalls and dangers. The well-beaten paths tend to lead to wars and destruction. There are deep chasms into which the economy can unexpectedly fall. It is easy to be drawn to superficial distractions and to stop moving, becoming passive consumers of worthless things and staying forever in the dark bottom of the valley far from the light. There are temptations on every side, sold persuasively by well-planned marketing. To escape this valley, you need strong will-power and a vision of a higher and more rewarding reality up in the distant mountains.
The Financial System and the Growth Paradigm
One source of the smoke and fire in this valley is the economic free-for-all in a globalized economy without mechanisms for global economic management or common regulations for multinational corporations. Beyond national borders, anything goes. Since the end of the cold war and the collapse or transformation of most communist systems, the free-market economy has spread around the world and created wealth on a scale unimaginable in the past. It demonstrated the triumph of deregulated enterprise and innovation, including financial innovation, and confirmed the dominance of the United States and its consumer culture as the world's largest economy and the model to follow. Economists convinced by this model have been the drivers behind most government policies for the last few decades.
The western economy and its materialistic values have been exported to every corner of the world. The material success of this system made it impervious to critiques that it might be socially or environmentally unsustainable in the long term. Growth was the unchallengeable goal of business and government, and suggestions that there might be limits to growth were derided and ignored. Experts in the scientific and environmental communities have long suggested that humans might also be vulnerable to overshoot and collapse. They have only recently begun to attract attention after decades in the wilderness of indifference (as you have seen in the valleys you have already crossed). Evidence for climate change like melting ice caps, and the rapid rise and general instability in food and energy prices, signalled even to economists that something was wrong in the system.
Fire burst out in the economy with the collapse of the banking system in 2008 after the American sub-prime mortgage scandal, and its propagation throughout the world economy. This provided a sudden challenge to the economic paradigm.55 Sophisticated mathematical models for managing financial risk proved incapable of managing greed.56 The triumphant free-market economy went up in flames. Stock markets plunged and unemployment surged. Price volatility for fossil fuels and food destabilized national economies and plunged millions more into poverty and hunger.
As the world recession deepened, government intervention on an unimaginable scale was required to head off a complete collapse of the financial system and economy. Money was poured into the economy like water into a building on a fire. The attempt to restore confidence in the banks and to restart lending saw debt increasingly being transferred to governments on the assumption that no one would worry about governments' ability to repay their debts. Social unrest increased as workers asked why the rich got all the handouts while they lost their jobs. The head of the European Central Bank said "We live in non-linear times: the classic economic models and theories cannot be applied, and future development cannot be foreseen".57
The consequences of the fire still smouldering in the economic system are far from evident. One distinguished economist warned in December 2008 that the real danger was not a deepening recession, but the possibility that massive government intervention might produce a partial recovery. Leaders would be convinced that they had avoided the worst, and not recognize that the economic system was broken and in need of fundamental reform. Having used every weapon in their armoury, there was nothing left with which governments could respond to the next crisis.58
This is exactly what has happened. The next fire to break out could be among national governments, with a number of countries already on the verge of bankruptcy.59 The fire does seem to be spreading. A loss of confidence in governments could bring down the whole global monetary system on which the world economy is based. Perceptive speculators are fanning the flames, pocketing enormous profits while betting against the very financial system that created them.
In the lead up to the Paris Climate Change Conference in December 2015, the Governor of the Bank of England warned that climate change might make the world’s stock markets and banks unstable and lead to a financial crash. Panic selling could cause a plunge in value of shares in fossil fuel companies and industries that produce a lot of carbon dioxide, amounting to one-third of stock market assets. Banks might become unstable because the billions of dollars in loans they have made to fossil fuel companies might not be repaid. He continued: “Our societies face a series of profound environmental and social challenges. The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity. While there is still time to act, the window of opportunity is finite and shrinking”.60 This sounds like a conflagration that could break out at any time.
A failure of values
To take the metaphor a step further, the fire in the economy resembles some of the classical descriptions of hell, where greed has replaced need as the driver of growth at all costs. The current economic paradigm depicts growth as measured with GDP as the only way to improve society. Economic growth is seen as the solution to all our problems.
There is a logic to the economists' attachment to growth. A system based on borrowing and debt cannot survive otherwise. A growing economy will create new wealth to reimburse current borrowing and interest. Without growth (or the shadow of growth that results from inflation), there is no way that debts and accumulating interest can be repaid. The whole system collapses like a house of cards.61
To find a way out of this valley, you need to question the basic values on which modern society has been based, where success is measured by growth in the economy, in business and in politics, and any leader who does not bring growth in GDP, profits or power is quickly replaced. The growth paradigm may have been a necessary response to an expanding population, an increased energy supply, and growing resource exploitation, on which technological advances have been built. However the UN estimates that the world population will stabilize in mid-century, as it already has in many wealthy countries. The decline in fossil fuel reserves means the end of the cheap energy subsidy on which industrialization, trade and intensive agriculture have been based. In a heavily-exploited world, it is difficult to see where further significant growth in natural resources can come from. Economic growth as we have known it cannot continue except to respond to the needs of the poor.
Avoiding overshoot and collapse means abandoning the growth paradigm for one based on balance, efficiency, equitable distribution, optimal sizes, renewable energy and closed materials systems, in what is sometimes called the circular economy. As in nature, the wastes of one part of the system become the inputs to another, so everything is recycled and nothing is simply thrown away. This implies a revolutionary change in economics, politics and society, one that will not come easily, but that is the only way to put out the fire.
The continuing difficulties in the financial system have changed the diplomatic landscape, put new issues on the table, and broken major resistances to public intervention and international action, but not enough to create a consensus on ways forward. They have demonstrated how fundamental trust and confidence are to any human system or institution, including banking, business, government and diplomacy; how easily they are lost and how difficult to restore. They also show how all the different problems are interrelated, and solutions to all of them have to be considered together, challenging the traditional approach of dealing with different issues in separate arenas and seldom making the linkages between issue-specific agreements and regimes.
To find a way forward, both to address the immediate causes and consequences of the financial problems, and to explore the possibilities to move in the direction of a more sustainable economy, you need to consider some key questions:
What are the wider consequences for people, and for a planet already facing ecological crisis, of the near-failure of the banking system and the enormous financial effort by governments to prevent the total collapse of the economic system?
Austerity has become the key issue for governments as they try to rebalance their accounts. Budget cuts generally include environmental and social programmes that should be cushioning the shock and preparing for the future. Short term urgency squeezes out long term necessity. There is a lack of capital to invest in other priorities unless they can be shown to meet also the requirements of the economy.
Will the rise in social instability make the transition to a more sustainable system more difficult, or facilitate it?
There is a growing sense of injustice among workers and the poor that so much help has gone to the rich while rising unemployment and prices impact the poor the most. The middle classes stagnate, and their children look to a future worse than their parents. Pressures on governments to increase protectionism are growing, threatening to put a brake on global exchanges. This defensive turning inward could make it more difficult to find global solutions to climate change and other environmental problems.
What are the underlying causes of the financial crisis and subsequent stagnation?
Are there failures of conception in the way the economic system worked? Were there systems errors, in which each part made sense, but they interacted in ways that were not anticipated? Were the failures not in the mechanisms, but more fundamentally at the level of ethics and values? It could well be that the whole Western capitalist model is as fundamentally flawed as the communist model, with a focus on shareholder value rather than value to society, investing for the highest return, borrowing rather than saving, encouraging excessive risk taking and speculation, and seeing ever-rising levels of debt as "normal". The amounts that governments are borrowing today to finance their interventions in the economic system through quantitative easing are so unimaginably large as to question the meaning of debt and money for ordinary people.
Is finance the central problem, or only the symptom of something deeper?
The same process of debt accumulation, and living beyond our means, can be seen not only in the financial system, but in social and environmental systems, all of which are showing increasing instability and signs of reaching their limits. There is a danger of converging financial, environmental and social bankruptcies, which some experts say could lead to the collapse of civilization. The lessons from the financial crisis may be equally valid for other dimensions of society and the environment. This is a further argument for abandoning the growth paradigm, and replacing it with another more aligned with sustainability. At the moment we seem to be trapped in an economy heading for disaster and unwilling or unable to change course. Blind optimism in technological solutions too closely resembles the optimism in the financial system not so long ago.
How do we deal with an economic system that is so dependent on consumption to create employment, when environmental sustainability seems to require limits on or even a reduction in consumption? How do we redistribute wealth so that poverty can be reduced, implying even greater changes in lifestyle among those who are better off?
Even a slight reduction in purchasing power brings people into the streets and becomes politically destabilizing. We are trapped between an objective reality and a political impossibility. It is no wonder that this valley is full of smoke and fire.
Limits to future growth
The catastrophic fires sweeping this valley should not be a surprise. Economists have had ample warnings. You saw earlier how the report for the Club of Rome on The Limits to Growth presented a computer-generated scenario showing that "business-as-usual" would lead to the collapse of civilization in this century.
One of the authors of the original report and its updates has now forecast the most probable future for the next 40 years by projecting the trends observed since 1972.62 There is a natural tendency, reinforced in democratic systems and in the capitalist economy, to always choose the least-cost short-term solution. We only change when we have to, and no more than absolutely necessary, so the result is always too little, too late. The population will stop growing, but only because fertility rates drop in cities.
We shall pursue GDP growth because it is the only way to create jobs and distribute wealth, but growth will slow down, only doubling by 2052, and most of that growth will be in China and the emerging economies. The rich countries are reaching the limits of productivity increases, so their growth will stop, and in the USA probably decline.
More economic effort will have to go into correcting environmental damage and rebuilding after natural disasters triggered by climate change, so we shall have to work harder just to stand still. The beauties of nature and undisturbed ecosystems will disappear.
There will be enough resources to meet the demand but not the need, with 5 billion people still poor and a billion still starving, since nothing will be done to address extremes of wealth and poverty. Inequity in the rich world will increase, producing more social instability. The young will rebel against their elders who expect to live comfortable retirements while leaving their grandchildren to pay the price for their excesses.
The market will not solve these problems, and democracy will fail to align economic and social interests. There is a brief mention of wildcards that could upset this forecast, including a financial meltdown, a revolution in the USA, and a generational rebellion.63 These predictions are a good estimate of where the world is going at the bottom of the valley without any major changes, and the perspective is not encouraging. The fires will continue.
A much better future is technically possible, requiring a shift of only 2% of labour and capital, but this is slightly more expensive, so we shall do nothing, leaving disaster just over this time horizon. This rather pessimistic analysis is built around five central issues: capitalism leads inevitably to extremes of wealth and poverty, economic growth produces over-consumption, democracy is too slow for the changes that are necessary, intergenerational harmony will fail, and the climate will become increasingly unstable.64
This scenario is based on our present materialistic value system, and projects it into the future without any significant change. It does not consider that there may be other forces at work in the world, and that the inevitable decline in our present disfunctional system can open the way for the birth of a new global civilization founded on new values.
Other thinkers quoted in this study suggest solutions including changes in corporate values towards more responsibility; the potential for open and collective innovation with new technologies; the possible evolution in human values; reaching peak youth with a generation that is more educated, connected and spiritual; waking up with the spiritual strength and rational clarity for repentance and conversion; and taking the next step in human cultural evolution to a higher level of organization, with consultative decision-making, and the acceptance of our spiritual reality.65 It is clear that many other people see constructive ways out of this valley.
These are the economic challenges for you today. You are our best hope if we can empower and accompany you to use your potential for sacrificial service, innovation and collaboration to transform the system from the bottom up. Forty years is enough time for two generations of exciting change.
You should not feel discouraged by the gloomy economic scene described above. Many people are looking for solutions and making progress. There are encouraging efforts at all levels in society. If the present financial system does collapse, there are alternatives waiting to be built on the ashes of the old system.
One dimension of the way ahead that is being pushed strongly is the rapidly developing concept of the “green economy”, defined as an economic system that preserves and restores ecosystems as the backbones of economic and social well-being and essential for poverty reduction, while simultaneously creating new industries and employment. Environmental industries using clean and efficient technologies, and sustainable agriculture, would serve as major engines of wealth and job creation and poverty reduction. The aim is to find combined “win-win” solutions for the economy, human well-being and the environment. This has been a major theme for the United Nations Environment Programme (UNEP), and at the UN Rio+20 Summit in 2012.
UNEP66 has identified the priority green
economic sectors as:
The economy also needs to respond to the challenges of climate change. Imagination and innovation will be required, as business as usual is no longer a realistic option. The coordinated financial stimulus required to rebuild the world economy can either lock us into a vulnerable fossil-fuel based system or accelerate investment in a low-carbon transition, creating jobs, technological innovation and market stimulus, and using public funds to trigger much more private finance.
We need an unprecedented multistakeholder collaboration to link the climate and economic agendas, responding to "the shared desire to deliver climate security, energy, food and water security, economic security, equity between rich and poor through enhanced capital and technology flows, all through the creation of a package that promotes economic growth by decarbonizing the world economy".67
The Global Commission on the Economy and Climate68 has shown that a new climate economy based on renewable energy sources would create better growth with more employment and a higher GDP than business as usual with a fossil fuel-based economy, while also protecting us from climate change. There is no economic reason not to make a rapid transition now.
However most present efforts to address the economic crisis have emphasized relaunching consumption and maintaining sectors such as the automobile industry, in the hope of returning to the consumer economy, with only marginal efforts to invest in more "green" alternatives. Too many vested interests want to protect the status quo. There is a danger that the "green economy" would just be consumption with a new name, when the real need is to place limits on consumerism. The debate on how to do this is only on the fringes, and the resistance to change is very strong. Furthermore, all of these proposals are still within the economists' growth paradigm, which is unsustainable, as growth cannot continue forever in a finite system. The consumer society is overdeveloped and the costs of unsustainability are rising. Some people talk about "degrowth" in wealthy countries. What is needed is another economy emphasizing the social rather than the material forms of development.
Putting out a large fire requires a coordinated response by many actors, and this means effective governance at the scale of the problem. The economy has globalized, but economic management mechanisms are largely national. The system of governance based on national sovereignty has great difficulty in addressing global problems effectively, as illustrated by the slow pace of intergovernmental action on climate change.
At the same time, the diversity of situations around the world requires a nested set of levels of governance to keep decision making close to the level of action, and to encourage innovation and local adaptation. We need to evolve institutions of governance at all of the scales of the problems we face in global change.
There is presently a strong prejudice in many quarters against global government, often reflecting an ideological or political position that government is essentially inefficient and bureaucratic and the less we have of it the better. Yet effective government is an essential component of any civilized society. Even the business community recognizes this. Europe has pioneered the creation of institutions at a regional scale in complement to national governments, and this example, however imperfect, will be equally appropriate as we consider how to deal with global change.
As long as there are extreme differences between and within countries in wealth and level of development, it is necessary to apply the approach of common but differentiated responsibilities, with each country adopting its own implementation strategy within the larger framework. However all must respond to the required fundamental transformation in the dominant economic paradigm and its consumer lifestyles. How to organize the transition, and cushion its negative impacts, is a major challenge. In addressing climate change, for example, the adoption of deep emission cuts in the north, on the principle of equal per capita emission rights, will produce significant transfers of investments from north to south.
The financial collapse and its aftermath have underlined the need for a systems approach integrating all the issues. Science and technology have united the world in information flow, finance, trade, migration and environmental impact. Each part affects the others, so they must be understood together in all their complexity. Yet our society is not well structured to deal with complex multidisciplinary global problems. Governments are divided into ministries or departments, and the academic community into disciplines. There are strong pressures for increasing specialization. Perhaps a first step would be to encourage a specialization of generalist, integrator, or systems manager with an accepted role in bridging disciplines. Education also can include systems thinking and integrative approaches as part of general education. The attentive consumer needs this capacity to assess and integrate many kinds of information, how much more so decision-makers in business and government.
In education and public awareness, these issues should be treated proactively. Your generation, at least, should feel comfortable with integrated thinking and consider it normal that there be institutions of governance at all levels. These should be among the foundation principles of an acknowledgement of your world citizenship. However more is needed to motivate action. The challenge is to be both scientifically objective and realistic about the threats and risks of global change and its implications for the economy, society and consumer behaviour, while also inspiring hope and a desire to act, seeing the necessary sacrifices in a positive light.
The engagement of business is also critical. The first encounters between business and environmental interests in the 1960s and 1970s were negative. Industrial pollution had caused great damage, and the costs of pollution control and clean-up were considerable. Governments instituted increasing levels of environmental regulation in the public interest against the strong opposition of the business community. This resulted in the general assumption that environmental regulations reduce profits and damage competitiveness. Today that assumption persists, particularly in government. Many governments continue to believe that, to stimulate the economy and create wealth, government regulation and interference with business should be minimized or eliminated.
But the reality is different. One of the surprising results of a survey of thousands of business leaders in 104 countries,69 was the demonstration that business leaders considered good governance, as expressed in strict environmental regulation fairly enforced, actually increased their competitiveness.70 The countries where business thinking on environmental and social responsibility is most advanced are also those with some of the most advanced and competitive industrial economies. Having strong regulations allows companies to compete in meeting their regulatory obligations, giving a competitive advantage to companies that innovate and increase their efficiency in environmental performance, as well as opening up new market niches for environmental services.
The Ethical Component
Each culture and nation has evolved and institutionalized its own ethical framework within the context of its religious, cultural and philosophical heritage, representing the ethical consensus of its society. However, rapid globalization has taken the ethical issues and challenges to the planetary level, for which the self-contained national sets of values are poorly adapted.
In response, there have been efforts at the intergovernmental level to adopt declarations of ethical principles, such as the Universal Declaration of Human Rights71 and subsequent declarations and conventions, and in the environmental area the Stockholm Declaration,72 the Rio Declaration73 and other similar documents. Civil society has tried to go farther with texts like the Earth Charter.74 However it is not always easy to translate these general principles into guides for practical action, whether at the governmental level or in the behaviour of each individual. Where self-interest and ethical principle are in conflict (as they frequently are), self-interest (including national self-interest) has too often won out.
An ethical or moral framework of what is right or wrong underlies most systems of human organization, whether in traditional cultures, religions, or legal systems. Central to all these frameworks is the necessary balance between individual freedom or satisfaction and the collective well-being of society. A mature citizen with confidence in the government will voluntarily accept to obey laws and pay taxes in the common interest.
One of the prominent features of the last century was the rise of materialism as the dominant value system, expressed in the prominence of economic thinking in government and business (Adam Smith's "invisible hand of self-interest") and the rise of the consumer society focusing on individual satisfaction, while traditional ethical frameworks were abandoned.
Although Western society has emphasized individualism and Asian versions have been more collective, both have centred their efforts on material satisfaction, based often on a rather superficial conception of human potential and needs. Even the communist system, while putting forward social goals, was basically materialistic in orientation. None of these gave any real priority to the well-being of the planet and its sustainable environmental management as an essential pre-requisite for our emotional, ethical and spiritual well-being as well as our physical survival.75
The needed transformation in the economic system requires
global public support, which will only come if the proposed
solutions are seen as equitable. The combined crises
described above call for a sound ethical foundation for human
Redesigning the economic system is primarily an issue for government leaders, business and economists. It is not so apparently relevant to actions that you as an individual consumer can take. You need to see the ethical dimension and consequences of your individual consumer actions.
How is a decision to drive rather than take public transport
in a city causally related to the melting of Arctic ice and
the plight of the polar bears?
If you want the answers to such important questions, you need some basic understanding of the workings of global environmental, economic and social systems. Then you need to ask the ethical questions relevant to your individual contributions to these larger system processes. For example, would you be willing to change your dietary habits to make more grain available for drought-stricken populations? Is it reasonable and just for Europeans to accept voluntarily a reduction in their purchasing power and level of consumption to allow millions in Asia to rise out of poverty? Obviously the answers to such questions are intimately linked to the effectiveness of global systems to deliver food in disaster areas and to ensure that rapid economic growth really benefits the poor, meaning good governance and trustworthiness in the institutions concerned.
Climate change is one area where the consumption patterns of our economy are threatening our future and putting millions of the poor at risk, strengthening the pressure for an economic transition. The United Nations Development Programme, in its Human Development Report on the theme of climate change, stated: "Mitigation of climate change poses real financial, technological and political challenges. But it also asks profound moral and ethical questions of our generation. In the face of clear evidence that inaction will hurt millions of people and consign them to lives of poverty and vulnerability, can we justify inaction? No civilized community adhering to even the most rudimentary ethical standards would answer that question in the affirmative, especially one that lacked neither the technology nor the financial resources to act decisively."76
Toward an ethical framework for concerted action
The need to mobilize the world population to respond to these challenges requires new kinds of partnerships across all segments of society. The scientific community can marshal the evidence for income inequality, the poverty trap, over-exploitation of resources, the impacts of pollution, and the effects of climate change, but such information by itself does not usually motivate change. Something deeper and more fundamental is needed to build the ethical and emotional commitment necessary for real change. Traditionally, this has been a role of religion, but religion has seldom been seen to have any relevance to the economy. Yet since rational arguments have been insufficient, a broader approach is obviously necessary.
Religions and faith-based groups are increasingly raising the ethical issues behind the economic challenge, in complement to the scientific arguments. Pope Francis, in his 2015 Encyclical, linked poverty eradication and the environment as ethical issues.77 Faith-based organizations have a unique reach to grass-roots levels all around the world, and a capacity to motivate change, that can be used to communicate the ethical challenges arising from poverty and climate change and the need for a common effort to respond. The necessary transition will require sacrifices from many people, which will be more readily accepted with an ethical justification and spiritual motivation.
What might an ethical framework for economic transformation towards sustainability based on justice and equity look like? As a start, it will question the dominant materialist society and consumer culture, emphasizing the necessary balance of the material and ethical or spiritual dimensions of human life.78 By teaching contentment with little, and the need to eliminate extremes of wealth and poverty, it would encourage a reconsideration of lifestyles and consumption patterns. "Take from this world only to the measure of your needs, and forego that which exceedeth them."79
If we are to address the root drivers of the many imbalances in present world society, we need a more ethical approach to economic development. Economics has ignored the broader context of humanity's social and spiritual existence, resulting in corrosive materialism in the world's more economically advantaged regions, and persistent conditions of deprivation among the masses of the world's peoples. Economics should serve people's needs; societies should not be expected to reformulate themselves to fit economic models. The ultimate function of economic systems should be to equip the peoples and institutions of the world with the means to achieve the real purpose of development: that is, the cultivation of the limitless potentialities latent in human consciousness.80
We therefore need new economic models that further a dynamic, just and thriving social order, are strongly altruistic and cooperative in nature, provide meaningful employment, and help to eradicate poverty in the world.81 Only such a system will allow us to make the transition to sustainability.
As trustees or stewards of the planet's resources and
biodiversity, we must:
At the social level, we need to focus on the unity of the human race founded on justice and solidarity.83 Any solution to the challenges facing society must be based on ethical and spiritual principles, inciting individual reflection and community action. For a complex issue such as the economy, where costs and benefits, immediate advantages and long-term risks are so unequally distributed, justice and equity will be essential to achieve any global agreement on action. "Concern for justice protects the task of defining progress from the temptation to sacrifice the well-being of the generality of humankind -- and even of the planet itself -- to the advantages which technological breakthroughs can make available to privileged minorities.... Above all, only development programmes that are perceived as meeting their needs and as being just and equitable in objective can hope to engage the commitment of the masses of humanity, upon whom implementation depends.84 If we want to meet our enormously demanding collective goals, we need everyone, and every group within society, to put forth relevant human qualities such as honesty, a willingness to work, and a spirit of co-operation. They will only do this when they can trust that they are protected by standards and assured of benefits that apply equally to all.
As the world moves towards a future global society, the economic challenges are an important force compelling the nations and peoples of the world to give priority to their common interest. Such perspectives of the long-term future of the human race provide a positive focus to counterbalance the concerns for our immediate future.
One way both to understand and to manage complex systems is to develop methods of accounting for important stocks and flows in the system. This is how economic systems and businesses are managed. At the simplest level, you measure the amount of money in an account at the start, income (money in) and expenditures (money out), and see if the closing balance is bigger or smaller than it was at the beginning (profit or loss).
Gross Domestic Product (GDP) is one of the best known economic indicators, widely used to measure progress in an economy. It is a complex measure of the flow of money within a national economy. The challenge is that the accounting must capture what is really important in the system. Economic accounting in monetary terms is an overly simplistic way even to manage an economy. For example, automobile accidents are good for GDP, since automobile repairs and replacements, and medical expenses increase, but they clearly do not add to human well-being.
Using GDP per capita is even less appropriate in ranking the wealth of nations. First, it is an average, so that a nation where everyone is reasonably well off, and another where a few people are extremely rich and the rest in abject poverty, might rank the same. Second, an increase in per capita income raises well-being up to the point where basic needs are met, but higher levels of wealth do not increase happiness or well-being, and may even cause them to decrease. Other things like social acceptance, job security or a meaningful life become more important. Using economic measures to assess and manage larger human systems is inappropriate and misleading. Costs and benefits cannot be calculated only in financial terms.
For example, economists may try to measure the value of a beach by how much people are willing to pay to go to it, but this only makes sense if everyone has the same ability to pay. A wealthy tourist may pay a lot to access a beautiful beach, but a poor subsistence fisherman who depends on the beach for his livelihood may not be able to pay anything.
An accounting system that includes only the flow of money from buying and selling ignores all those things that are not traded in the market, and also fails to capture what goes on in the subsistence economy of people who grow their own food and build their own homes, and among the poor who barter and exchange in what is often called the informal economy beyond the reach of official statistics.
A further challenge is the over-simplified economic paradigm derived from 19th century physics, which assumes that rational actors with access to perfect information use market mechanisms to achieve equilibrium without government interference. In fact, people are far from perfect actors making rational judgements, information is often hidden or manipulated, the wealthy and powerful are always able to grab more and achieve a monopoly position, and the economy is a complex non-linear system driven by dynamic change and innovation far from any equilibrium.85
If we want to climb out of this valley, guided by appropriate indicators, we need to acknowledge that there are multiple dimensions in our complex human system, each with its own accounting needs for sustainability. To start with, there are many kinds of capital accounts or stocks: the materials we use and that flow through our system, financial resources, human capital including labour and social relationships, information and knowledge including science, and our ethical and spiritual capital of values, principles and ideals. All of these are necessary for civilization, and negative trends in the balance of any of them can hinder the others as well.
A full set of both state and flow accounts for a just and
sustainable society should therefore include:
Where the more intangible aspects of human society may be difficult to measure directly, there are scientific ways to assess their presence in human behaviour.86 Ultimately this comes down to the power of individuals to do good and contribute to the betterment of society, or to do evil and cause destruction and disintegration. At one extreme there are those whose teachings and example have inspired billions over the centuries (Buddha, Moses, Christ, Muhammed, Bahá'u'lláh); at the other the villains of history, like Hitler, Stalin and many others like them.
What you can do
While you may not be able to change the economy single-handedly, there is already a lot you can do to start doing business differently. If you are entrepreneurial, you can launch a social enterprise with a principal aim of doing social good while also making money. Larger corporations can join the B-corp movement by demonstrating that their ethical behaviour and environmental and social responsibility are at the heart of their business plan. Even when you are surrounded by materialism and corruption, you can make the effort to maintain a high standard of conduct in your financial affairs.
Behind these practical considerations are some fundamental principles. Wealth is a means, not an end in itself, and its acquisition should not become the goal of your life. It should not be obtained without exertion or through dishonourable means. Wealth should serve as a means for you to achieve higher ends such as meeting your basic needs, helping your family to progress, and promoting the welfare of society. Furthermore, the end does not serve to justify the means. You should never use improper or unjust means to achieve a goal, however constructive or significant to you or others. The legitimacy of wealth depends on how it is acquired and on how it is expended. It is praiseworthy when you earn it through your own efforts in commerce, agriculture, crafts and industry, if it serves to enrich everyone, and if you use it for benevolent purposes, the promotion of knowledge and the common good.87
The acquisition of wealth should be governed by the requirements of justice. For example, if you are an employer or employee, you are bound by the laws and conventions that regulate your work, and are expected to carry out your responsibilities with honesty and integrity. At a deeper level, justice should determine the relationship between the minimum wage and the cost of living. Workers contribute to a company's success and are entitled to a fair share of the profits. Some of the unjust practices in today's economy are the wide margin, often unjustifiable, between the production costs of certain goods and the price at which they are sold, the exploitation of others, the monopolization and manipulation of markets, and the production of goods that promote violence and immorality.88 You should be careful not to be drawn in to situations involving these practices.
The Sustainable Development Goals
2015 was an important year for the world community, with agreement on a new 2030 Agenda for Sustainable Development and the Paris Agreement to address climate change, among others. The UN Secretary-General called for a fundamental transformation in society and the economy. The Sustainable Development Goals (SDGs) at the heart of the new agenda define a paradigm shift for people and the planet that is inclusive and people-centred, leaving no one behind. The new agenda integrates the economic, social and environmental dimensions of development in a spirit of solidarity, cooperation, and mutual accountability, with the participation of governments and all stakeholders.89
The world leaders assembled at the UN General Assembly Summit in September 2015 said: "This Agenda is a plan of action for people, planet and prosperity. It also seeks to strengthen universal peace in larger freedom. We recognise that eradicating poverty in all its forms and dimensions, including extreme poverty, is the greatest global challenge and an indispensable requirement for sustainable development.
"We are resolved to free the human race from the tyranny of poverty and want and to heal and secure our planet. We are determined to take the bold and transformative steps which are urgently needed to shift the world onto a sustainable and resilient path. As we embark on this collective journey, we pledge that no one will be left behind.
"It is 'We the Peoples' who are embarking today on the road to 2030. Our journey will involve Governments as well as Parliaments, the UN system and other international institutions, local authorities, indigenous peoples, civil society, business and the private sector, the scientific and academic community – and all people.... It is an Agenda of the people, by the people, and for the people – and this, we believe, will ensure its success."90
The 2030 Agenda can be summarised as follows:
The 2030 Agenda is more than just a declaration without substance. It includes 17 Sustainable Development Goals (SDGs), which are action oriented, global in nature and universally applicable. Supporting the 17 goals are 169 quantified targets to be achieved by 2030, and global indicators have been identified to measure progress towards the targets. Governments are now expected to adapt the goals and targets to their own national priorities and reality, to determine their share of responsibility for the global goals, and to report regularly on their progress.
These are aspirational goals that you can see are relevant and motivating. The fact that they have been approved by world leaders and the United Nations gives them added weight. And since they need to be achieved by 2030, you can have an important role in making them come true, and in holding governments to account for their commitments. However, governments are not very good at keeping their promises. We also need a transformation in people and in the institutions of society.
These goals are also relevant to transformation at the community level through social action as you saw previously. For example, in the following box, the goals and targets have been rewritten in ways that you as an individual, or your group or local community, can take responsibility for them and put them into action where you live and work.
In the next valleys you will explore what else is required to make the just society defined by these goals a reality.
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BOX - SUSTAINABLE DEVELOPMENT GOALS FOR INDIVIDUALS AND COMMUNITIES
Goal 1. No poverty
Goal 2. Zero hunger
Goal 3. Good health and well-being
Goal 4. Quality education
Goal 5. Gender equality
Goal 6. Clean water and sanitation
Goal 7. Affordable and clean energy
Goal 8. Decent work and economic growth
Goal 9. Industry, innovation and infrastructure
Goal 10. Reduced inequalities
Goal 11. Sustainable cities and communities
Goal 12. Responsible consumption and production
Goal 13. Climate action
Goal 14. Life below water
Goal 15. Life on land
Goal 16. Peace, justice and strong institutions
Goal 17. Partnerships for the goals
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