Executive Summary: The Third Millennium Economy (3ME)
The Two-World Problem in the Age of the Anthropocene
This chapter demonstrates: 1) the unscientific assumptions embedded in and foundational to narratives about economic, financial, and political reality; and 2) that these assumptions are categorically different from and completely incompatible with our most advanced scientific understanding of the real world. Remarkably we find, this advanced scientific understanding is in broad alignment with the core spiritual insights of the world’s leading belief systems. It is contemporary ethics, economics, finance, and systems of governance that are out of place.
The new terms of human survival in the age of the Anthropocene clearly dictate that we must urgently reconcile the differences between these two worlds. The good news is that scientific knowledge has already provided us with a coherent basis for making the changes in our economic, financial and governmental systems required to accomplish this feat. This knowledge must be connected to a new (or perhaps merely forgotten) ethical understanding of human identity; and what we owe each other and the Earth itself.
Ethics for the Anthropocene
In this chapter we show that advances in scientific knowledge have revealed that many of our moral beliefs and the ethical principles in which they are expressed rest on dangerously outmoded and unscientific assumptions. This does not mean that all our existing moral beliefs must be discarded or overturned. But it does require testing, adjusting, and re-envisioning them in light of our new understandings of our place on Earth and in the Universe. Bold rethinking is required; for many of our beliefs have legitimated, and even celebrated, practices that have led to the current sharp decline in life’s prospects. These must be replaced by an ethic of life affirmation consistent with our fresh, but still incomplete, understandings of the Universe and our place in it.
As a result of our fresh understanding of ourselves, what we know, and what we should do, we must start from a realization, already found in our sacred traditions of our oneness with the Universe; and a refreshed understading of our duty to do unto others what we would have them do unto us. From this point of view reconstructred economics, finance and governance rest on at least three rather simple, interconnected, premises: 1) that persons are interdependent members of communities that include humans and other life which depend on, and co-evolve with, the Earth’s biogeochemical processes; 2) that it is a fundamental duty to care for where we and our communities live; and 3) that care for life requires the respectful use of low entropy sources of energy and materials that makes life possible. We call these, respectively, membership, householding, and entropic thrift. Living in keeping with these three premises may be summarized as living in right relationship with life and the world. This ethical framework informs the reconstruction and reconfiguration of economics, finance, and governance that follows.
This chapter is followed by “Living Safely and Justly in the Anthropocene” which summarizes much of the evidence that the human project exceeds the regenerative capacity of the Earth’s biogeochemical processes; and results in poverty that is morally unacceptable. Metrics of success in reaching these “safe and just” boundaries are provided.
The Misleading Character of Contemporary Economics
Neoclassical economics as covered in today’s economic textbooks (and practiced as the core economic doctrine driving the political affairs of at least the Western Democracies) credits the nineteenth century creators of the discipline with transforming the study of economics into a rigorosly mathematical scientific discipline. But what these textbooks fail to mention is that this theory was created by subtituting economic contructs derived from classical economic theory for physical variables in the equations of a badly conceived and soon-to-be outmoded theory in mid-nineteenth century physics.
The first aim in this chapter is to reveal that the mathematical formalism which ressulted from the substition of economic constructs for physical variables in the equations borowed from the theory in physics was predicated on axiomatic unscientific assumptions about the dynamics of market systems. The second is to demonstrate that these assumptions did not change in spite of the fact that subsequent generations of mainstream economists extended and refined this formalism. And the third is to explain why the unscientific assumptions in neoclassical eonomic theory and the mathematical formalism used by mainstream ecoonomists effectively undermine the prospect of implementing scientifically viable and equitable responses to the multiple crises of our time.
Macroeconomics for the Anthropocene
One of the unscientific assumptions in neoclassical economic theory is that market systems are closed and that the “right price” of goods, services, and commodities can only be determined by dynamics which operate within these systems. Another is that these dynamics will result in the growth and expansion of market systems if they are not interfered with by government or other “exogenous agencies.” And both of these assumptions are embedded in and foundational to the macroeconomic theories used by mainstream economists to study the dynamics of entire economies.
There are three problems with these theories this chapter addresses and attempts to resolve. The first is that the theories are predicated on the absurd assumption that market systems are closed in spite of the fact that economic activities are embedded in and interactive with the biosphere and human action and culture on every level. The second is that there is no adequate basis in these theories for realistically assessing the damage done by economic activities to the environmental systems and natural resources that allegedly exist “outside” of closed market systems. And the third problem is that there is absolutely no basis for assuming that market systems can perpetually grow exponentially and expand in a finite ecosystem where global economic activities have already begun to undermine the capacity of this system to sustain human life.
The macroeconomic theory and the associated computer program described in this chapter are not predicated on these unscientific assumptions. The computer program is based on systems dynamics and provides political leaders and economic planners in highly industrialized prosperous countries with a coherent basis for making the transition to a low growth or steady state economy; which is morally required in order to leave ``ecological space`` where growth is justified for human well-being. The program makes it possible to plan for and manage this transition in such a way than minimizes disruptions in the national economy and in ways that would enhance the quality of life and the security and well-being of the general population.
Finance for the Anthropocene
After the near collapse of the global financial system in 2008 many academics and policy makers realized that the claim by market fundamentalists that this system is self-regulating and self-correcting is bogus. But efforts to regulate this system in ways that could prevent a similar collapse from occurring in the future are technically and politically complex, and therefore remain ineffectual. Furthermore, they are unrealistically premised on the assumption that the amount of capital circulating in the virtual economy of the global financial system must increase to provide the liquidity required to fuel the growth and expansion of the real economy of the global market system. The presumption here is that the optimization of returns on financial capital is the most efficient way to stimulate economic growth and generate wealth.
Financial theory and conventional practice are predicated on the assumption that there are no limits to the aggregate growth of the stock of financial capital and no basis for making distinctions between qualitative differences in the kinds of growth financed. The chapter argues that our multiple crises can only be addressed based on an holistic understanding of the connections between: 1) capital in the virtual economy of the global financial system; 2) the growth of the real economy of the global market system; and 3) the regenerative capacity of human society and the biosphere to enrich and support life.
The chapter discusses the impact of the monetary system, and financialization on the real economy, and through it, society and the life supporting systems of the biosphere. But it focuses on the primacy of real investment decisions – qualitative and quantitative – as the critical leverage point to drive economic transition. By focusing on investment, it becomes clear that we are in a state of “financial overshoot” which accompanies ecological overshoot. We argue that this reality makes real investment decisions by large actors in the economy a matter of vital public interest, demanding public oversight and accountability.
Governance for the Anthropocene
The existing system of international governance and its primary institution, the United Nations, is woefully inadequate to address the crises of the Anthropocene. To live safely and justly on a flourishing Earth, two fundamental changes are urgent and essential. First, there must be an accountable global governing system or systems of some sort which clearly recognizes that there are specific, indivisible global issues; while at the same time respecting the principle of subsidiarity—that governing works best closest to individuals and the communities in which they live. Global issues cannot be resolved by the current system whose primary goal is to maximize the interests of sovereign nation states. These could be new global institutions such as a network of regional governing bodies; new directions for existing global institutions such as the G-8 or G-20; and/or bi-lateral or multilateral agreements between major players such as the United States, China, and the EU.
The second fundamental change involves a re-conceptualization of the foundations and purposes of law itself. In many countries the law, particularly those in the Anglo-Saxon tradition, assumes that the principal human/Earth relationship is one of property; and does little to recognize our duties to each other. There is an urgent need for a system of law based on the principles of membership, house-holding, and entropic thrift outlined in the Ethics chapter.
We must create a new network of global institutions (or repurpose existing ones) with the resources and authority required to implement and enforce the new system of law. The institutions described in this chapter are offered as examples that together could serve as a functional template for the critical indivisible global issues: 1) A Global Commission with lawmaking and executive powers for adopting and implementing the rule of ecological law. 2) A Global Reserve that would be responsible for and have the authority to measure and recommend the allocation and distribution of Earth’s life support budgets according to the rule of ecological law. 3) A Trusteeship of Life’s Commons that would have the legal power and resources required to protect and restore the earth’s commons, such as the oceans and the atmosphere. 4) A Global Court that would have the authority required to issue binding rulings that hold corporations, nation-states and/or their subsidiaries to the rule of ecological law.
To many, these ideas likely seem to be out of sight as well as out of mind; but if there is a single lesson to be learned from modern evolutionary biology it is this: species that survive are species that adapt to changed circumstances. The Anthropocene defines such changed circumstances, like never before in the history of the human project.
In summary, the authors are calling for a new intellectual map to navigate the unprecedented challenges of the Anthropocene. Such a map must be first and foremost grounded in our latest scientific insights about how the universe actually works, which are remarkably aligned with the core spiritual insights from all of the world’s most prevalent belief systems. Such a map would redefine many critical domains of knowledge in alignment with these insights, influence our technology choices, and then guide the principal institutions by which we manage the human project on this planet. The diagram below illustrates such a holistic map of knowledge to which we see our report making a vital contribution:
Project History and Plan
This report grew out of a meeting held at York University in Toronto in May of 2010. Those who attended were Peter G. Brown, Robert Costanza, John Fullerton, Tim Jackson, William Rees, Juliet Schor, Gus Speth, and Peter Victor. What brought us together was a concern that economic and financial trends were precipitating unprecedented global crises for humanity, as well as an accelerating decline in life’s prospects.
Though we each had somewhat different perspectives and backgrounds we felt that putting these together in both a diagnosis and a new way forward was urgently needed; and that together we could produce a document that none of us alone could do. Along the way we drew on expertise from Geoffrey Garver and Alex Poisson. In April of 2011 the sponsor of this project, the Capital Institute, received a generous grant from the V. Kann Rasmussen Foundation that facilitated the writing of this report and the convening of global meetings for its review. .
Peter Brown, co-chair of the project and the lead author, wrote the section on ethics. Alex Poisson wrote an early version of the section on planetary boundaries and Appendix 2; Peter Victor and Tim Jackson contributed the section on economics; John Fullerton, also co-chair wrote the section on finance and Appendix 3; and Geoff Garver wrote the Section on governance as well as the indicators portion of the planetary boundaries section. Robert Nadeau provided insights on how both to anchor the overall argument in contemporary science in section one, and to use that perspective to forcefully integrate our findings and recommendations. His participation has been critical. The initial group that met in Toronto form a Steering Committee. We are most grateful for reviews of a previous draft by the New Economics Foundation in London; the Club of Rome/India in New Delhi: and the Global Ecological Integrity Group, as well as comments and criticisms from numerous individuals.
One inescapable conclusion of the authors’ worldview is that everything is connected to everything else. The whole created by understanding the connection of all the parts is not only more than the sum of the parts. Holism, as Jan Smuts points out, “is the universal design principle that underlies all life and the evolutionary process itself.” (Smuts 1927) In our view, holistic principles such as those found in the Earth Charter will be critically important in the effort to find our way in the Anthropocene. For this reason we chose to frame our report around four parts of the Earth Charter Preamble: 1) Earth Our Home; 2) The Global Situation; 3) The Challenges Ahead; and 4) Our Universal Responsibility. We also believe that the following four principles in the Earth Charter provide crucial ethical guidance in the age of the Anthropocene: 1. Respect and Care for the Community of Life; 2) Ecological Integrity; 3) Social and Economic Justice; and 4) Democracy, Nonviolence, and Peace.
During the balance of 2013 and through 2014 we will continue our consultations with groups such as the Earth Charter Initiative, and the Tellus Institute. This global consensus building process will be followed by a concerted policy effort with the goal of reframing the sustainability related policy debates already accelerating in the face of a broad awakening to the interconnected global crises that served as the impetus of this report.