Opinion Sur
The impetus for this series of papers from Neva Goodwin that Opinion Sur starts to publish is the urgent need to figure out how a non-growing – even a shrinking – economy may be able to support human well-being while beginning to restore the health of natural world. She considers that the twentieth century economic theory is not well able to conceptualize this problem, especially since it sees growth as necessary for jobs, jobs necessary for income, and income necessary for well-being. In his extraordinarily prescient paper, “Economic Possibilities for our Grandchildren” (1930), John Maynard Keynes referred to the struggle for subsistence as “the economic problem,” and anticipated that, due to the rapidity of technological change, making labor ever more productive, “in our own lifetimes … we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.” By the time of his generation’s grandchildren (or around 2030) he predicted that “the economic problem” would be solved.
In fact, this prediction has already been proved right: Humanity does have the capacity to feed, clothe, house, and provide basic health care for all its members. That we do not do so – that a quarter of the human population still lives in situations of abject poverty – is not because we are technologically incapable. Rather, it is because the prevailing economic systems provide some, but not all, people with the means to be highly productive, in the sense of producing much that is valued in the world’s markets; while others can barely produce enough for their own needs, or work at jobs whose output is rewarded with very low pay.
Karl Marx proposed a very appealing resolution to this, in the slogan “from each according to his ability, to each according to his needs.” Socialist or communist regimes that set out to translate this slogan into practice during the 20th century were on the whole less successful than the capitalist alternatives. However, as we move farther into the 21st century, capitalist systems are also showing serious flaws and strains. Many contemporary economies serve the demands of the rich but not the needs of the poor. At the same time the world’s economies have overshot the capacity of the ecosphere to absorb the wastes they generate, and now face catastrophic consequences, unless they make a dramatic change in course.
The largest need is to figure out how a non-growing – even a shrinking – economy may be able to provide human well-being while beginning to restore the health of natural world. Twentieth century economic theory is not well able to conceptualize this problem, especially since it models well-being as dependent on income, income dependent on jobs, and jobs dependent on growth.
To unwind this chain will require some radical changes in economic theory to allow it to incorporate already existing economic realities. The theory must focus on the final goal of human well-being, in the present and the future, prior to the intermediate goals of growth, financial wealth, or the maximization of consumption. And it must find ways to take account of human values, and identify the places where they are more salient than market values, or prices.
This series of papers will focus especially on the challenges involved with the topic of work in the 21st century. It will look at both paid and unpaid work, giving the latter the attention it deserves, but that it does not receive in a market-focused theory. It will consider the issue of technological employment that Keynes raised. It will also consider the possibility that resource constraints will, in fact, reduce labor productivity. It will outline scenarios relating to different possibilities for future labor productivity and human well-being. Then we will propose ways of changing our economy to address the real dangers and opportunities as well as the theoretic failings, outlined in the first half of the papers.
A complex of critical issues for understanding the possibilities of a new economy
Much of economic theory is based on the fact that prices affect our lives in many ways. People tend to associate this fact with two beliefs: prices are set by markets: and only markets should set prices. I will argue that markets, in fact, don’t do a very good job of setting some of the prices that are most important in our lives; and that other social forces should, and can, take more intentional control in some areas of some price-setting.
This conclusion is not quite as radical as it sounds, for in reality many prices are already set by a much more complex set of factors than just market-determined supply and demand. The reason we are not generally aware of this is that our perceptions are shaped by an economic theory that has gone too far in defining a particular kind of ideal economy, and then in setting out what we must and must not do—or believe—for this ideal to be realized. Which, in fact, it never is.
Hence a part of this series of papers will be about the economic theory that prevents us from seeing some opportunities that are before our eyes. Since these veiled opportunities are pathways to overcoming serious problems, we also often avert our eyes from the problems themselves, feeling that they are essentially insoluble. They are not. They have seemed so because we lack a theoretic framework that can make sense of them, and also because each one is part of a set of problems and issues that are interconnected to an almost baffling degree.
When you want to make sense of a really knotted tangle, you need to figure out which threads to pull on. I will list the intertwined issues I have been trying to unscramble in thinking about the new economy, and then I will take hold of a skein of threads that seem to me most likely to lead to constructive new ways of understanding.
1) First of all is the issue of scale in the relation between economic activity and ecological health. The global economy appears, from many indicators, to have gone beyond a scale of economic activity that is ecologically sustainable. This suggests the need to find, especially for the rich countries, an alternative goal to that of growth as it has been understood, for example, in terms of GDP.
2) The relation between economic activity and human well-being on the consumption side raises the questions: what kinds of outputs contribute to human well-being: and how can economic activity, including systems of production, be refocused towards enhancement of well-being – rather than simply the maximization of consumption?
3) The relation between technology and work. The burning questions here are: will technology raise labor productivity, hence wages, faster than they are reduced by resource degradation and depletion? And will the number of jobs that are needed inevitably be reduced by technology in concert with the shrinking economy demanded by ecological constraints?
4) The relation between work and well-being in a reoriented, post-growth economy. What, aside from a pay-check, are the values of work? Are there goals other than full employment that should be considered? What is the importance of leisure in our rethinking of work and well-being?
5) There is a huge, largely unexpected demographic shift taking place: A slowing of population growth, and then it’s likely (though not certain) reversal into population decline. This is predictable or already underway in much of the world.
6) With all of these complex interrelations in mind, the great practical challenge for is to work out the least painful – maybe even the most exciting – ways of making the transition from existing economic systems to systems that are socially and environmentally just, sustainable, and satisfying. If we do not manage to plan an orderly U-turn from our present growth dependence, the result will be ecological—hence economic and social—disaster on an almost unimaginable scale. To quote the subtitle of Peter Victor’s path-breaking book on the subject, our best hope is “smaller by design, not disaster.” In stating this challenge I both suggest the basic elements of the new economy—it must be socially and environmentally just, sustainable, and satisfying—and implicitly state why we need a new economy: because these words do not characterize the economy we have now.
For the long run, the scale of the economy is the most critical element on this list; but you can’t get to the long run in one jump, even when this long run is not so very far away; indeed, it is not only in the lives of our children and grandchildren, but probably also in our own lives. To get there, conceptually and practically, we have to go, I believe, through some short-run issues around work. But these, too, have been very hard to get a grip on because of the theoretic assumptions pulling against us.
I should emphasize that, while the theoretic issues are relevant for the whole world, the practical conclusions and suggestions I draw later will be addressed expressly to the rich countries. Some of the suggestions will be relevant also for developing countries, but the circumstances are in many ways so different that this would all need to be quite substantially rewritten to address their situation.
