ecs reading response

Understanding the ideological roots of our global crises: a pre-requisite for radical change

Harinder S. Lamba *

Renewing Technologies, Inc., 6921 Creekside Rd., Downers Grove, IL 60516, USA

1. The unfolding crises – financial, environmental, developmental

The recent global financial crisis has shaken the world financial system to its foundations. Not in recent memory have governments come together globally to discuss, plan and coordinate action plans. Except for the 1930s depression, even with the most unusual of strategies, it is thought that the recession caused by this crisis will linger longer than earlier global recessions. Partly receding into the background has been the global environmental crisis of which global warming is the most profound symptom. Here again, the nations are arranging discussions and meetings to negotiate further aspects of the global warming treaty. What lingers further in the background are the other symptoms of the environmental crises – ozone depletion, toxic and hazardous waste, loss of biodiversity, increasing deforestation and desertification, and damage to global ecosystems like coral reefs. The planet’s natural capital is in the process of destruction.

Even further in the background is the global development crisis. Even before the financial crisis hit, many of the so-called developing nations have been in financial and development crisis, suffering under the burden of a crushing foreign debt, and unable to pay their way out through exports and trade. With a few exceptions, and some partial successes in some of the larger developing nations, there has been a worsening of poverty, malnutrition, agriculture, employment, and health. While some progress on millennium development goals has been recorded, achieving the goals in any significant manner remains a dream that appears difficult to reach.

Elsewhere, the author has described the nature of the crises and provided a view of some of the ideological root causes [1]. Although the symptoms of the problems can be described, there may be disagreement on whether these constitute crises.

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A R T I C L E I N F O

Article history:

Available online 14 August 2010

A B S T R A C T

Even though the unfolding global financial crisis has shaken the world, it has been

accompanied in the background by slowly unfolding environment and development

crises. While action is being taken to keep the financial crisis from getting worse,

negotiations for next steps in the climate change treaty are ongoing, and efforts are being

made to implement the millennium development goals to improve the lives of people

globally. Herein, the author advocates the argument that the reason the solutions have not

been very effective, and that the financial crises unfolded anyway, is because the roots of

the crises have not been fully understood. In the absence of this understanding, the very

mode of progress has ultimately worsened the problems. After a brief historical review,

this paper puts forth and analyzes five major ideological root causes, and provides

supporting arguments to show how these have led to a worsening situation for the long-

term prospects for progress. Understanding the root causes better points to solutions and

directions for progress that are for the long-term benefit of all.

� 2010 Elsevier Ltd. All rights reserved.

* Tel.: +1 630 347 2258.

E-mail address: [email protected].

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Futures

j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / f u t u r e s

0016-3287/$ – see front matter � 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.futures.2010.08.007

However, when one sees the whole picture, one can see interdependencies among the different aspects – environmental, developmental, financial and social – both in terms of problems and solutions. The whole is more than the sum of the parts.

This article attempts to step back and understand the underlying causes of these crises, and why, in spite of global efforts, the crises seem to get worse with time, and proposed solutions appear to do no more than mitigate their impact. On the other hand, a better understanding of underlying causes, by itself points to solutions and directions for progress, which can not only help to reverse course, but help show the way to more holistic and globally beneficial modes of progress.

2. Origins of the crises

As one looks at many different aspects of the history of the planet, the history of civilization and economic progress over the previous centuries, significant issues come to light. The author looks at five major areas that might provide some insights into the root causes of our ongoing crises.

2.1. The domination of the rest of nature

A few million years ago, our ancestors lived by gathering food from various plants and trees, and by hunting herbivorous animals. At that stage, humans appeared to closely identify with nature, and even worshipped plants, trees, animals, stones, and mountains, and the sun and the moon. We know of many tribal societies, including the Native tribes of North America, like the Illinois, the Cherokees and the Iroquois, that learned to live in harmony with nature, so as to not deplete the natural resource base around them. On the other hand, civilizations and societies like Easter Island, the Anasazi, which were located near New Mexico in the US, and the Greenland Norse (Vikings settling in Greenland), that depleted the natural resource base – over-tilled the soil, cut down too many trees, misused or wasted water resources, over-grazed the land, or desertified the land – suffered a grievous collapse [2].

Studies of planetary and natural history reveal that human beings evolved from other forms of life and are, clearly, part of the complex web of life and nature. However, some human societies developed the concept that humans were above nature and had been given dominion over it. The concept that developed was that man was above and separate from nature. Man was supposed to enslave nature, and squeeze from it, all of its ‘‘fruits’’. So, new forms of progress emerged based on the enslavement and domination of the nature.

This has led to the global destruction of natural resources such as the forests, soils, water, ecosystems, and biodiversity, that we see today, as the land areas were sought to be ‘‘developed’’. At the same time, the over-use and misuse of arid areas has led to them becoming increasingly degraded or even subject to desertification. The rapid consumption and ‘‘mining’’ of the rest of nature, as evidenced by the reduction of natural resources, leaves global civilization increasingly vulnerable to the kinds of problems that led to the collapse of many civilizations in the past [2].

The artificial feeling of the separation of humans from the rest of nature should come to an end. We are not separate from nature but only a strand in the web of life. The environment is not something that is out there, separate from us. We are totally immersed in the environment and the environment passes through us constantly. Many of the molecules of the air we breathe come from other living species or other humans. We have an internal environment that meets the external environment at our skin. The environmental crisis is impacting us from all directions. The environment is not something out there – for we are a part of the environment. So, if we damage the external environment, we are only damaging ourselves [1].

Our relations with the rest of life and the earth are in need of a profound transformation. Here we can learn from ‘‘deep ecology’’, which is a holistic approach that pays greater attention to the whole systems that support life, while attempting to understand how unique humans, who are inseparable parts of the whole systems, can function harmoniously within these systems. It maintains that the well-being of all life, its richness and its diversity, has intrinsic or inherent value that is independent of its economic or exchange value, and that we cannot take from the rest or reduce this diversity except what we need for our vital needs [3]. With a greater emphasis on restoring the health of ecosystems, this approach has sometimes been called the wilderness approach. Another approach that we can learn from is called ‘‘social ecology’’, which emphasizes the husbanding nature in terms of the soil, the water, the forests, and other species, so as to create a bountiful lifestyle based on a cooperation with nature. Because this approach emphasizes the husbanding of nature to produce healthy and bountiful lifestyles, it has often been called the garden approach [4]

We need to learn from such approaches and concepts, that are more holistic and systems oriented. Later, in the last section, we discuss alternative methods of farming that are more organic and natural, which are based on these ideas. This is opposed to most of the current methods of agriculture that are based on the heavy use of energy and materials, and which attempt to generate high yields per acre, while dominating the other species through the use of biocides. As in human health, so in agriculture, this approach has become counter-productive, as in response to antibiotics, herbicides or pesticides, nature has begun to fight back, through genetic mutations of increasingly resistant bacteria, and plant and insect species, and the decreased effectiveness of many antibiotics and biocides.

2.2. Life as a machine – fragmented knowledge systems

In Europe, man’s understanding of the universe changed during the enlightenment, so that man’s knowledge should be based on his direct observations through his senses, and on a reliable qualitative and quantitative analysis of these

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observations. This came to be known as the scientific method. The flat earth hypothesis was replaced by a realization that the planet was indeed a globe, and the thinking that everything revolved around the earth was gradually replaced by an understanding of the solar system, galaxies and the universe.

Technology, or the application of science, led to the development of many instruments, machines, methods and products, which man could use. The instruments, in particular, helped to further reveal the secrets of physical and biological nature. The application of science also led to the development of technologies that fuelled the Industrial Revolution in Western Europe, so that machines, products and methods began to be used that transformed the nature of human civilization. Previously, different parts of Europe, Africa and Asia had traded items like precious metals, ivory, silks, fine cloths, jewellery and handicrafts. As the sea lanes opened, via the Atlantic and the Indian Oceans, trade expanded in materials from agriculture and minerals needed by the factories, to machines and consumer goods made from these materials. Since then, civilization has advanced to increasing levels and types of consumption.

Some have argued that the understanding of societal and global problems requires the different disciplines of knowledge to come together, so that we can begin to understand the whole picture, or the interdependencies between different realms of human knowledge. In science and technology realms, this is called the systems approach. So, it is argued that the solutions of problems or the next stages of the evolution of knowledge requires knowledge systems that are based on the unity of knowledge [5]. Such approaches led the way during the age of the European Enlightenment, and led to a vast expansion of our understanding of the world. However, reductionism and analytical thinking, while initially leading to an explosion of knowledge, also led to piecemeal thinking, where each realm of knowledge was dealt with in isolation, and there was little emphasis on the synthesis of knowledge.

It is postulated herein that it is the fragmented mode of thinking that has strongly influenced man’s ideas and behavior and largely contributed to the financial, environment and development crises that face us today. Some of these were embedded in the very nature of the method. For example, phenomena that could not be quantified were excluded. Then, the method advocated the separation of man, as an observer, from nature, the observed, and the separation from mind from body, where the human mind, where all rational (objective) thinking occurred, was separate from the body, the latter being merely a combination of materials put together as in a machine. Also, everything from human bodies to the universe came to be regarded as a machine, put together like a clock, and capable of being described by mechanistic principles, like the mechanics of a clock.

Such approaches had a significant influence on the thinking of Descartes, who took the process one step further. He argued that thinking in the mind was the real basis of man’s existence, and that it was quite separate from and above the non- thinking part of the brain and the body that worked just like a machine. Also, that this division of mind and body is unscientific has been increasingly proven by neuro-scientists who have demonstrated that human beings are complex biological organisms in which the mind, brain and body function as a complex interacting interdependent whole [6]. Thus reasoning, feelings and bodily functions are all tied together. The problems caused by the mind–body dichotomy are becoming the most apparent in the medical field, where the interaction of bodily disease and mental health is being increasingly realized. While parts of the human body and of nature may behave like machines, it has become apparent that living things do not behave entirely like machines but are complex biological organisms that interact with their internal and external environments [7].

It appears that we are ready for a move away from fragmented knowledge systems to more unified and integrated knowledge systems, so that we can begin to understand issues and situations from a more holistic point of view, and to see the interconnections between different areas that we never or seldom saw before. This can lead to some of the next great steps in the development of knowledge, thereby avoiding the pitfalls of fragmented knowledge systems. Overall, it appears that the different disciplines of knowledge can come together so as to develop more unified knowledge systems. Wilbur has argued for an integral approach to the development of knowledge, so that we can better understand ourselves and the world around us in more comprehensive and inter-connected ways [8]. In this way, we can not only expand to more full existence, but also learn how to relate more innovatively and comprehensively with our communities, other species and the planet.

2.3. Non-recognition of limits on a finite planet

Civilizations that reached the limits of their natural resource base, and ignored their ecological limits, weakened as conditions worsened. Those that have attempted to go beyond these limits have collapsed. Rather than alter their behavior, or cease damaging their environment, one response was to appropriate the natural resources and wealth of another area, usually by means of conquest, or to move and dominate other less inhabited areas as they were discovered [2]. As today’s global human civilization has bumped up against the limits of a finite planet, which may be affected by climate change, this is no longer a viable option. Mars and Venus do not really offer us living options. There is no additional adjoining area left to take over. Although we can still steal from each other, globally there are no more areas to take over. This planet is all we really have.

The current model of progress favors exponential growth in production and consumption in almost every sphere of human activity. The idea that we have been taught and grown up with is that there can be endless economic growth, without a recognition of the limits of the natural environment. The exponential growth in the level of carbon dioxide in the atmosphere, and the resulting climate change poses grave dangers to us and the planet. The burning of fossil fuels that mainly drives this growth, feeds the exponential growth in everything from consumer goods to cattle. Any item grows

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exponentially if its growth depends on its present level. So, if interest is compounded annually, money grows at an exponential rate. Hence, with a growth rate of 7% only 10 years are needed for the money to double itself. Again, if a quantity doubles itself every year, although the numbers are small to begin with, they grow to be very large in a very short time. A thought-provoking example is that of a lily in a pond that doubles in size every day and, say, needs a certain number of days to take over the whole pond, and choke off other forms of life. On the day before the last day, the lily would only occupy half of the pond, but life in the pond would be only one day away from disaster! [9].

And yet, it is apparent that exponential growth in material consumption and in activities destructive to the planet has been adopted by human civilization – whether by those following either capitalistic or socialistic ideologies. Continued exponential growth, without regard to the nature of growth, is considered good, and increased rates of growth are considered even better. The continued emphasis on exponential growth is straining the life support systems of the planet, and has begun to bump us up against the ultimate ecological limits of the planet.

If we look at the whole planet as a system, one can better understand the effects of human activity [10]. In systems terminology, a ‘‘system’’ consists of inter-connected parts, but is usually more than the sum of the parts, ‘‘overshoot’’ occurs when a limit is exceeded, the ‘‘stock’’ is the current level of a particular item like population, forest resources, fossils fuels, or capital, ‘‘erosion’’ is when a resource base supporting a system goes into a decline, a ‘‘positive feedback loop’’ is a sequence of events that cause the stock of a certain item to be increased, and a ‘‘negative feedback loop’’ is a sequence of events that cause the stock of a particular item to decrease. ‘‘Equilibrium’’ is when increases equal decreases, and ‘‘collapse’’ occurs when a ‘‘stock’’ goes into an uncontrollable decline because it overshoots the limits, or because a positive feedback loop causes an erosion of its limits.

A computer model of the world system [10], indicated that with the same trends continued, population and industry would grow and overshoot the limits for a few decades, before the environmental and natural resource constraints would lead to a collapse in population, industrial output, food output, life expectancy, per capita consumer goods and services, the stock of natural resources, and per capita food availability. Doubling the available resources would only delay the collapse, leading to worse conditions. Climate change could lead to a positive feedback loop in regard to carbon dioxide levels and temperatures (as carbon sinks such as forests and oceans become increasing emitters of carbon dioxide as temperatures rise), and a negative feedback loop as the decline of ecosystems lead to further decline in natural resources. The model shows that if an aggressive program is implemented to stabilize population and industrial growth, technologies are used to minimize pollution and carbon emissions, erosion of the resource base is reduced, and resource use is optimized (including increased efficiency), the population would level off, and the industrial output and food production would stabilize at reasonably high levels (achieve equilibrium). If implementation of this plan is delayed, then the computer model predicts that the population and economic levels will collapse, followed by a later stabilization at lower levels than otherwise. So, understanding the nature and extent of the limits and transforming human activities to stabilize before overshooting these limits may be the best course to adopt.

About 30 years after the book, ‘‘The Limits to Growth’’ was written, an evaluation of the situation reveals that, as predicted, the global economy is in a process of overshoot, as the economy and population are exceeding the biosphere’s regeneration rate [11]. For example, when the annual catch of a particular fish exceeds the regeneration rate of that species (when fishing is in a process of overshoot), then that fishery collapses, and the annual catch decreases to nearly zero. Similarly, the increasing global human ecological footprint and that the erosion of the global ecological limits of the planet (for example, the capacity of the ocean as a sink for carbon dioxide is decreasing as it warms), is increasing the probability of collapse, especially as the signals that the limits are eroding are mostly being ignored.

2.4. Destructive economics – the fallacy of misplaced concreteness

It is postulated that the high level of abstraction in economics has contributed to societies being increasingly out of touch with their long-term well-being. Abstraction is defined in the Webster’s dictionary as ‘‘the act of considering something in terms of general qualities and characteristics, apart from concrete realities, specific objects or actual instances’’. For example, land is simply abstracted as a factor of production that has exchange value or rent value. The fact that land is needed by land- based species (including homo sapiens) for their survival, the fact that it is an ecosystem, and that it in turn nurtures land- based ecosystems, is totally forgotten. The fertility of soil, the depth of tree roots, the quality and level of groundwater, the forest or wetlands ecosystems needed for the hydrological cycle (although the importance of some of these wetlands ecosystems has been recently recognized), and the health and diversity of species on it, are often considered secondary.

Too high a level of abstraction, that takes the concepts and thinking too far from concrete reality, and ends up considering the abstraction as the reality itself (rather than merely a conceptual tool) has been called the ‘‘fallacy of misplaced concreteness’’. The problem with current day economics is that it has fallen in the trap of this fallacy [12].

Another area is money. While exchange was difficult in a barter economy, the use of money helped in the exchange of goods and services. However, when money was abstracted from this so as to become a commodity in itself, to be accumulated and compounded, it increasingly became out of touch with its role as a medium of exchange. All of us know that real wealth in terms of goods or property, wears out, decays, rots or rusts. However, money, which is supposed to represent wealth does not. It is allowed to grow exponentially, both in bank accounts and in terms of investments. The result was that while only $20–25 billion was needed daily for trade in goods and services that constitute real wealth, about $800–1000 billion of financial transactions, mostly speculation, occurred daily in the financial markets [13]. On the wealth side, by the

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year 2000, for the G7 nations excluding UK and Japan, the stock of financial assets (bonds, shares, bank loans, mortgages, derivatives, options, etc.) stood at $130 trillion, whereas the stock of real wealth (physical capital, human capital, and research and development expenditures), stood at about $45 trillion – so financial assets were about three times the real wealth [14]. The fallacy of misplaced concreteness has abstracted the concept of money to a point where it has little or no relationship with real wealth. This is a principal cause of the current financial crisis.

Another area is that of the market. Under ideal conditions, when the actors are more or less equal in their wealth and access to information, the market acts as a means of allocating resources, in terms of which activities get favored over others in the use of productive resources. Perfect competition may be said to exist when there are many small producers and many small consumers, where none are in a position to artificially influence the price or conditions of sale of goods or services. No centralized organization or bureaucrat decides what is to be bought and sold or how resources are to be allocated between different activities. In reality, however, the larger producers have more resources to influence governments in their favor, so that what was a free or undistorted market, now becomes a market that is regulated to favor the bigger producers.

A promising approach that is gaining prominence is that which is based on the ‘‘triple bottom line’’, where, along with financial performance, companies emphasize social and environmental performance as well [15]. Companies that have ignored social and environmental performance are often paying the price, either financially or in terms of image. On the other hand, companies that have worked with communities, on energy efficiency and environmental issues, have often found these to be profitable, a new business opportunity, or a means of gaining acceptance and community trust.

The abstractions in money and market are a principal cause of the current global economic crisis that unfolded in 2008. The increasing deregulation of the financial sector, starting in about 1980, led to the creation of financial instruments and activities of many types – derivatives, options, credit default swaps, naked short selling, mortgage backed securities, currency futures, and others, that enabled money to grow far and above any basis in the real economy. Deregulation of financial and other markets in the US and other G7 nations, combined with the lack of enforcement of remaining regulations in the US, and the absence of international regulations, led the financial sector to generate large incomes, mainly through speculation in these financial instruments and in stocks and real estate. In the US, the Reagan era deregulation led to the Savings and Loan debacle that cost taxpayers $200 billion. Since then, the vast growth in the international market for these creative financial instruments, led to the growth of money or financial assets, that far exceeded the underlying real wealth – or the growth of what have been called financial bubbles. Principal among these have been, the stock bubble, the debt bubble and the real estate bubble (mortgage backed securities) [14]. The recent bursting of the real estate bubble has led to a lack of confidence in credit (or debt) markets, where banks do not trust the financial soundness of any other financial institution, and hence do not want to lend.

One problem with the abstraction of the market is the tendency to ignore the costs of ‘‘externalities’’ which are economic areas and effects that are not taken into account in determining the costs or prices of these activities. Another aspect of the market is one of scale. In the past, when human activities were small relative to the size of the planet, their effect on the whole ‘‘system’’ was considered negligible. Today, however, the market can grow to astronomical heights that have no relationship with the finite planet or its finite ecosystems. The excessive abstractions of land, money, and markets have created unregulated financial systems that are wreaking havoc.

All of this has ignored the destruction of social capital, or the degradation in the social conditions such as family and community togetherness, levels of violence in society, quality of life issues (noise, congestion, sanitation, lighting, ventilation, crime, etc.), poor, boring, or repetitive working conditions. Although social conditions had been improving because of increased freedom from feudal, religious, social and political persecution, and economic exploitation, the pendulum swung too far in the other direction. Conditions were encouraged in a way that enabled the rich and the powerful to maximize their social, economic and political advantage, regardless of what the consequences were for society as a whole.

The first glaring instance of this is the destruction of pre-existing family and community structures in the nations of Western Europe as they faced the start of the industrial revolution. For people, their previous livelihoods and social lives that had provided them with so much economic and psychological support, were totally destroyed, and were replaced by hellish conditions in the factories and mines, isolated dwellings in crime infested neighborhoods, and polluted and toxic living areas [16].

A social trend that has shown up in all the large cities of the world, is the emergence of a dual society. The world is becoming separated into a mostly urban, educated and richer class and a mostly rural, less educated, poorer class. The poor landless peasants and the increasing number of urban slum dwellers in many developing nations have hardly anything in common with the thriving middle classes living mostly in the cities. The gaps between rich and poor and between urban and rural are growing fast, leading to a social stratification that is leading to tremendous social friction and pressures in all societies. Because of a tremendous bias towards urban and industrial programs, planned national economic and development programs in the poorer nations have, in the past few decades, led to a worsening of the gulfs between the two groups [17,18].

Early in the development of western economic thought, Chrematistics was distinguished from Oikonomia. Chrematistics is defined by Daly and Cobb [12] as, ‘‘the manipulation of property and wealth so as to maximize short-term monetary exchange value to the owner’’. Oikonomia is defined, ‘‘the management of the household so as to increase its use value to all members of the household over the long run’’. This definition can be expanded to include all levels of society, as well as geographical entities from the local community to the planet.

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In the early stages of the development of political economic thought, economics was thought of as Oikonomia (from which the word economics is derived). So, economics was supposed to emphasize long-term needs of people and communities, to calculate the costs and benefits for the whole community rather than just for individuals or companies, and to emphasize use value for communities rather than only exchange values for individuals. However, Chrematistics took over and became the mainstream definition of economics. Today, the results are there for all to see, the manipulation of property and wealth to maximize personal wealth for the relatively few, either through stock markets or through real estate, has displaced any considerations of use value for the billions of poverty stricken people all over the world [19].

2.4.1. GNP – a critique

Another example of the fallacy of misplaced concreteness lies in the measurement of economic success and economic welfare by the Gross National Product (GNP). Generally, if the GNP of a nation is increasing, it is economic welfare is supposed to be improving, and if it is shrinking then society is supposed to be in recession. What is the GNP and what effect does it is growth have on the environment and development crises?

The GNP is defined either as the monetary value of the purchase of goods and services to people from businesses, or as the total earnings in terms of wages, interests, rents and profits, plus all gross (total) investments that consist of new construction, purchases of durable goods by manufacturers and increases in business inventories. If the first approach is used for a nation, the items included are the personal consumption of goods and services, the government’s consumption of goods and services, gross domestic capital investment, and the surplus of exports over imports. If the second approach is used, GNP includes wages, interest, rent, indirect business taxes, business incomes (including profits) and the calculated depreciation of capital (allowing for the using up of physical capital). The Net National Product (NNP) is what is left when one subtracts the depreciation of capital from the GNP. If one subtracts a variety of taxes and other adjustments, what people have left to consume and save is disposable income.

There are many reasons why the GNP is a very flawed method of determining the economic welfare of a nation. The first is that it only includes the depreciation of humanly created capital. There is no accounting of the increases or decreases in either natural or human capital. Natural capital is that which assists with and sustains the production of renewable resources (like food from agriculture) or which provide services to humans. Natural capital includes the quality and quantity or arable soil, freshwater resources (needed by agriculture and industry, and by humans for survival), forests, wetlands, and all the diverse species (biodiversity). Today if a nation is robbing itself blind by deforesting its land areas at a fast rate and using or exporting the timber, all of this counts as income in the GNP. There is no accounting method to consider the rapid decrease in income when the forests are gone, or the economic disaster that will follow the environmental disaster as the nation looses other productive capacity and becomes a desert.

Further, every nation that is doing well economically knows that the productive knowledge, skills and health (its human capital) of its population are a major contributor to its economic success. Yet, nowhere is there an accounting of the investment in human capital or of its depreciation (reduction in the value of knowledge and skills with changing technology). Education and health expenses are counted but only as social consumption expenditures, not as investments in human capital. On the other hand, increasing pollution, increased medical costs, increasing crime (more police, courts, prisons, etc.) generate spending that is all added to the GNP. From this it becomes increasingly clear that the GNP will continue to grow even as the environmental and development crises worsen, and that both the planet and human life on it will have to look for other indicators with which to measure progress.

This realization has led to the search for better indices. One index which has been proposed is the Index of Sustainable Economic Welfare (ISEW) [12]. This index starts with the statistics of personal consumption, as does the GNP, but it then determines adjustments for a number of factors: (1) income distribution – increases in income add more welfare for a poor family than for a rich family, (2) net capital growth – takes into account only the fixed humanly created capital, but excludes the human capital (education, health, etc.), (3) foreign versus domestic capital – assumes that the increased borrowing of foreign capital, or an excessive reliance on it means a weakening of the economy and subtracts to the index, (4) natural capital (natural resource depletion or rejuvenation) – takes into account, not only the depletion of non-renewable resources such as fuels and minerals, but also the degradation or restoration of wetlands and farmlands (natural resource base), (5) environmental damage – includes not only the short-term effects of air and water pollution, but also the long-term effects of climate change and the destruction of the ozone layer, and (6) unpaid house labor – tries to account for the goods and services provided within households. Often because of measurement difficulties, or because adequate statistics are not available, or because some adjustments give unrealistic trends, some factors have been excluded from ISEW. Human capital formation is excluded because, in the view of the authors, the activities that lead to real human capital formation have not been well defined and measured.

Other indices that have been proposed, and which are discussed in the Daly and Cobb book [12], are (1) the Measure of Economic Welfare (MEW) by Nordhaus and Tobin [20], (2) the index of the Economic Aspects of Welfare (EAW) by Zolotas [21] and (3) the Japanese index of Net National Welfare (NNW). Other indices, such as Bhutan’s Index of Gross National Happiness (GNH) have been proposed.

What has become increasingly clear is that GNP is a very poor measure of economic welfare, and may be an even poorer measure of the total well-being of nations if the social, psychological and environmental considerations are included. Its continued use is an extreme example of the fallacy of misplaced concreteness as applied to measuring economic success. For

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example, even as the per capita GNP of the US grew steadily in the 1950–1990 period, the per capita ISEW actually stayed level in the 1980s before actually falling in 1990 [1].

With the growth in the GNP adopted as the centerpiece of economic policy, we are faced with the problem of continuous, obstructive, unhealthy, undifferentiated and pathological growth. We have lost our ability to distinguish good from bad, healthy from unhealthy, and holistic from fragmented. We need to develop better measures of economic welfare than the GNP (and even the suggested alternatives), and overhaul our economics principles to reduce the levels of abstraction, and make it more relevant to long-term economic welfare.

2.5. Increasing concentrations of economic, political and military power

Another significant reason why the environment and development crises continue to worsen is because of the increasing centralization of political, economic, technological and social power.

The centralization of power is not a recent phenomenon. In most civilizations, the few at the top (usually a monarchy or supporting nobles) controlled and appropriated most of the wealth and the majority worked hard, had poor living conditions and were often subjected to various levels of slavery. It was in the era of colonialism that the centralization of power began at the international level. From what began as trading outposts and companies, the activities expanded to include the political and the military.

In the 20th century, one of the greatest battles was fought over ideology – communism versus capitalism. Both ideologies claimed that they will lead to political systems that vest control and power in the hands of all the people. And yet, in practice, these ideologies have led to the over-centralization of power in fewer and fewer hands. The manner in which Marxism was practiced wrought great havoc. In practice it meant the centralized state control of all economic, technological and social matters. Capitalism, too, has not been far behind in the centralization of power. Where capitalism was combined with dictatorship, the centralization of power was absolute – almost as concentrated as in state centric communist nations. Where capitalism was combined with western style representative democracy, in theory, power was supposed to vest in the hands of the people. In practice, voters have only been able exercise some influence over the process of changing representatives every few years. In between elections, the representatives have become more and more influenced by money, and both the media and politicians have come under the influence and control of powerful financial interests.

The over-centralization of power through the actual functioning of the ideologies of capitalism and communism, and the methods used to exclude common people are major causes of the environment and development crises. The international financial system that supports this consists of what has been called the triple alliance of international financial interests, national governments and national financial interests [22]. This alliance (world financial system) directs all international institutions and generates the conditions that lead to low levels of human and economic development in most parts of the world. The world financial system has organized matters so as to create monopolistic corporations and organizations at all levels. The drive to generate maximum levels of return on investments (profits, surpluses, etc.) needs police control of political dissidents and a subsistence and below-subsistence wage for most of the workers in the factories and workplaces of the world. This is also a principal cause of human rights violations in most parts of the world. The result has been high levels of misery in most of the nations of the world, including those such as Republic of the Congo, Peru, Argentina and Brazil [23].

Not only has a backlash to this process developed, but there has also been the development of arguments and movements that fight the excesses of the corporate misconduct and the distortion of global and public policies to help the unscrupulous among the corporations to make excessive profits, that are out of all correlation with the benefits provided or services rendered [24]. Considerable evidence has surfaced after the global financial crisis unfolded in 2008, that the financial corporations of the world had been quite destructive to the world economy because of speculative financial practices, unethical lending practices leading to the sub-prime home mortgage crisis, and even unethical investing and accounting practices by some companies, leading to their financial collapse.

On the other hand, the drive to maximize the rates of return on investments make the financial system turn a blind eye towards environmental destruction. No destructive process is considered bad if it can give high rates of return, and the accounting systems used currently (such as GNP) show false improvements in economic welfare. The world financial system, which sits in command and control over the global political and economic structures, presides over these destructive processes. Even those who control it, and benefit immensely in the short term, realize that the financial crisis has come to hurt them. Also, just as carbon monoxide gas can poison all occupants in a closed room, spreading degradation of the environmental and social conditions of the planet is bound to eventually have an adverse effect on their own prospects, and eventually, on their own survival.

3. Learning from the ideological roots of the crises

On thing has become clear is that there will be little change in direction unless the ideological roots of the environmental, developmental, financial and social crises are targeted. Only then will we be able to realize the benefits of cooperation with nature instead of its domination, the development of integral knowledge systems that are capable of seeing the whole picture, the stabilization of material growth while maximizing rejuvenation of natural resources, the development of economics concepts for land, money and market that are not unduly abstracted, a development of measures of economic

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welfare that truly represent the long-term beneficial use value to people, and the replacement of centralizing ideologies with ones that distribute political and economic power.

A look at these root causes provides some guidance as to the different directions that we need to proceed. First, the excessive concentration of economic and financial power at the global level needs to be curtailed, otherwise the financial activities that started and happened in the US will happen in a much worse manner globally. Strong global regulatory institutions need to be established that setup the global rules of the game, and strictly regulate all financial transactions so as to exclude the most speculative. The global financial system should encourage only productive activities that generate real goods and services for the sustainable society of the future. Then, the mode of progress needs to be based on cooperation with the rest of nature, or working with it, rather than against it. Natural and organic farming are methods of agriculture that need research and development, and funding and encouragement, so that the benefits of cooperating with nature can be demonstrated [25]. This should help us develop transformed or sustainable forms of agriculture, forestry, fishing, etc. We need to reform and transform all other human activities, so that they are more favorable to energy efficiency, solving issues like global warming, and transforming transportation, community design, industry and business, so as to be favorable to all communities, and to local and global ecosystems.

Taken as a whole, efficiency of resource use needs to be transformed so rapidly, that it would pre-empt the collapse of the global economic system, and transition to a progress system that while stabilizing at a reasonable level, continues to increase the planet’s natural wealth. Hence, the natural capital will be re-built in terms of increases in forests, vegetation, improvement in the fertility of soils, the restoration and rejuvenation of local and global ecosystems (including rainforests, coral reefs, coastal waters, and freshwater ecosystems). Resource use both in terms of energy, materials, and renewable products, would be transformed to the highest levels of efficiency possible, so that much more benefit can be obtained by using much less. Whereas the increasing productivity of labor has been emphasized in the past, a greater emphasis on increasing resource and energy productivity will not only enable more benefit to be derived from increasing scarce energy and resources, but also make good business sense as it ultimately saves costs, and minimizes waste [26].

Transformed forms of economic theory and practices would be developed that combine the currently purely economic system, with the environmental system, and include changes in the amount of natural and human capital. Hence, politically and economically, land, instead of being only a factor of production, would be considered as an ecosystem, and as a holder of other land-based ecosystems – the possession and use of land would therefore carry both a right and a responsibility (this principle has already been applied to wetlands in the US) – and the rights of all people and all forms of life to the use of the land, would be accommodated and encouraged. As a step in the positive direction, on Earthday 2004, the US government announced a program to restore, improve and restore wetlands.

Further, money would be restored back to a medium of exchange, and the ability to make it grow through the use of fancy and speculative financial instruments would become a thing of the past. Lastly, the manner in which we measure progress in general, and economic welfare in particular would be transformed so as to exclude all destructive activities, and to include assessments of natural and human capital. The role of human capital will need to be transformed so that in corporate taxation laws, companies could invest in and depreciate human capital in such a manner so as to encourage greater employment, improvement in human skills, and more distributive forms of ownership. The principles of ecological economics need to be adopted here, so that land, money and market are managed in such a way so as to bring the type and size of the economy to with the carrying capacity of the earth [27].

Another promising area is the alteration of the functioning of markets, so that externalities are included, shareholder activism is supported and encouraged, the means is found to direct the allocation of resources in more beneficial directions. One such approach is ‘‘socially responsible investing’’ [28], so that resources are more realistically priced, companies are encouraged to move towards positive change, shareholders can more democratically exercise their powers as true owners, and companies and institutions are encouraged to work towards greater transparency and accountability.

To address the development crisis, millennium development goals are only a categorized expression of desirable goals. The underlying economic system, basic functioning of the economies of so-called developing countries needs to be transformed so that the citizens of these nations are looked after first, both as producers and consumers, their agrarian economies are restored, and a global effort is mounted to restore the natural resource base on which their economies depend. Starting from the massive reduction of their foreign debts, global trade needs to be reformed so that these nations can not only pay their remaining debt, but also have the ability to meet the needs of all of their people in a sustainable manner.

Lastly, politically, the world needs to proceed in two directions simultaneously. First, it needs to setup effective institutions for global governance, where nations can come together to solve the major problems like global warming, nuclear proliferation, financial chaos, global security, and worsening living conditions for many – these institutions have to be amenable to democratic control from below. Second, the world needs to encourage local communities that have institutions and working arrangements that rely on participatory functioning, and enable the participation and representation of all segments of society. These will provide local communities with the means of effective governance, so that they can usually take care of most of their local problems and needs themselves.

Much of this will not happen unless there is the general adoption of a new code of ethics that re-introduces the healthy constructive tendencies in the relation of people to themselves, their communities, other species and the planet. Although there are some who are adopting such ethics, by and large, most of the world’s population is still headed the other way. The best that pioneers can do is to establish demonstration sites of what they propose at different locations, so that when the world emerges out of some profound crises (similar to the current global financial crisis), people at large are receptive to

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these ideas and begin to adopt them. The promising thing is that at least the realization is growing that problems such as global warming need to be effectively tackled at the global level. So the logjam of frozen ideological thinking has to be broken, and the ideological roots of the crises have to be exposed. Only a concerted global movement that moves on many fronts, through the media, international political and financial circles, citizens movements, and non-governmental actors can work together to usher in this era of change, and be ever watchful that we do not slip back into strengthening the roots of the crises.

References

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