Current Events and Politics
January 9, 2008
“In [Adam] Smith’s and [David] Ricardo’s time, nature was perceived as a huge and seemingly inexhaustible resource."
—Gary Gardner and Thomas Prugh
The Worldwatch Institute released its State of the World for 2008 today, and while it was very bleak in the current assessment of environmental and economic conditions it sounded some positive notes about changes in attitudes from business, industry and governmental institutions.
E.F. Schumacher put it a different way when he coined the title for his 1973 visionary work, Small Is Beautiful. The book advocated decentralization of economics and development on a smaller scale that takes into consideration not just economic factors but also environmental, social and cultural factors. The Oxford-educated economist was considered a radical in economic circles when he first began writing and working for the British Coal Board in the middle of the 20th century. By the time his book rolled off the printing presses the global economy was already revving up for the greatest economic expansion in history, fueled by technological advances and a philosophy of large-scale globalization diametrically opposed to Schumacher’s view. But his ideas germinated, and now—after the world has had three decades to test the fruits of globalization—they are taking root and are no longer confined to radical circles.
In their keynote article Seeding the Sustainable Economy, The Worldwatch Institute 2008 State of the World project co-directors, Gary Gardner and Thomas Prugh, advocate that a new economic model is needed to protect the earth’s environment, continue development of poor nations and attack the vast problem of global poverty. Arguing that the economic philosophies that got us where we are today are now outdated, the academics write, “The world is very different, physically and philosophically, from the one that Adam Smith, David Ricardo and other early economists knew—different in ways that make key features of conventional economics dysfunctional for the twenty-first century. In Smith’s and Ricardo’s time, nature was perceived as a huge and seemingly inexhaustible resource.”
In the last 200 years the earth’s population has increased six-fold while the gross world product has expanded 58-fold. Many positive developments for humanity have also occurred during that time, including a significant increase in life expectancy. That seems like a favorable judgment on the modern economic system and the industrial age. But the estimates for the earth’s ability to continue that expansion or even sustain the achievements are not at all optimistic because we know now that the earth’s resources are not infinite. According to Gardner and Prugh, more than one third of the earth’s population lives on less than $2 per day, and bringing them out of poverty will require a new model of wealth creation and development. The Worldwatch report cited a United Nations study that found the richest 2 percent of the population owned more than half of the world’s household assets. Gardner and Prugh force us to consider that overwhelming inequality alongside the fact that diseases such as obesity, cancer and heart disease are epidemic in the wealthier nations. In doing so, their case that western-style affluence should not necessarily be the goal of development in the poorer nations becomes much more poignant.
One insightful observation in Gardner and Prugh’s report concerns the contrast between growth and development. The authors point out that growth is about making an economy bigger while development is about making it better. With this in mind their report suggests seven “Big Ideas” to advance conceptual reform in current economic thinking. One radical idea introduced into the economic equation is the concept of “happiness.” How much economic growth is needed to ensure happiness in a society or community? Gardner and Prugh cite studies and surveys showing that economic prosperity has not delivered happiness to prosperous societies.
Interestingly, they note, the country of Bhutan has now made “gross national happiness” its official goal in development as opposed to increasing gross national product or other measures of economic growth. Of course, the measurements of that goal will remain quite subjective, and the pressure from its citizens to enjoy the materialism of developed nations could easily overwhelm it in the end. But at least one government is daring to practice rather than just preach the common wisdom that “money can’t buy happiness.”
One criticism of past Worldwatch reports is that overly pessimistic predictions have not always come to pass. But this year’s report rings a much more positive tone. Gardner and Prughare optimistic about the number of multinational corporations and national governments that are not only giving lip service to the idea of radical change in how they measure business success and economic growth but are actually stepping up to the plate with a change of practice.
The report also notes changes in individuals and consumers as they begin to understand that the ever-increasing consumption of Western societies cannot continue forever and perhaps not even for very long. The marketplace demand for green products is increasing and with it will come profit potential for companies that adapt to the trend. “The celebrated insight of Adam Smith was that the ‘invisible hand’ leads self-interested individual actions to positive collective outcomes. This is a powerful idea, but it has overshadowed the equally important communitarian dimension of human societies,” Gardner and Prugh write. “People are motivated not only by self interest but also by the desire to participate in a larger community.”
The individual, then, is both the key and the greatest challenge to accomplishing this kind of radical change in our global society. But human nature has not always found the best balance between self-interest and communitarian interest. One requires self-sacrifice and the spirit of giving. The other is driven by a spirit of self-preservation and futility that often trumps. But human behavior is changeable when positive pressure comes from the larger community and this year’s report from the Worldwatch Institute is convincing in giving that hope.