Economy: breaks that need to be made for the transition
Proposals for the French Rio+20 collective and for the Thematic Social Forum in Porto Alegre
Auteurs : Pierre Calame
Please note: the following text is a summary of a number of proposals. It addresses only proposals for « breaks, » and not for the numerous improvements that could be made to the existing systems.
It is part of a series of four texts, each corresponding to one of the four themes selected by the Thematic Social Forum of Porto Alegre: ethics; territory; governance; transition of the economy to sustainable societies.
In the presentation of each theme, the analysis grid covers the four themes, which explains repetitions from one text to another—for instance, the combined territory-economy analysis comes up in the same terms in the “economy” text and the “territory” text—so that each of the fours texts can be read separately. Each text has a corresponding desmogram that provides a synoptic view of the proposals.
The economy: transition to sustainable societies
All the current thinking on the economy is based on a development model in which the economy can only be balanced when there is indefinite growth (the « bicycle balance »). It makes the assumption that self-regulation by the market is the optimal scenario and that market rules apply to all categories of goods and services.
Since World War II and especially since the fall of the Berlin Wall, the majority of policymakers consider that what they should do, ideally, is organize a unified world market with no barriers. As a consequence of the dramatic fall in the cost of moving goods and of circulating information, places of production have been increasingly dissociated from places of consumption. Generations of economists have been trained on the basis of these assumptions. Economics has been increasingly presented as a science close to a natural science because of the importance attached to mathematical formalization. Since the 19th century and even more so since the 20th, the two pivotal actors of the economy, multinational corporations and states, have been structuring the system. Over time, these actors have designed the instruments, tax systems in particular, according to the dominant model.
Since 1972, and even more since the 1992 Earth Summit, attempts have been made to address the new requirements for protection of the planet without changing, other than marginally, the dominant model: this is reflected by the oxymoron “sustainable development,” which juxtaposes the idea of never-ending development and the idea of the physical limits of the planet. It is time to become aware that transition to sustainable societies will only be accomplished at the price of a radical recasting of the thought system, institutions, and instruments that organize the system of production, trade, and consumption.
A/ Economy and œconomy
1. From economics to œconomics
The word « economy » is too closely associated with what is being taught in thousands of university economics and management departments to be able to give it a radically different content by just adding an adjective like “green” or “sustainable.” Only a change in concept is able to mark the necessary break. What needs to be established for the 21st century is precisely what until the 18th century was called the œconomy: the art of enjoying scarce natural resources for the benefit of everyone’s well-being. The definition of the œconomy must be used as a global transition roadmap, where each of its terms is translated into specific proposals: “The œconomy is a branch of governance. Its goal is to create actors, institutional arrangements, processes and regulations aiming to organize the production, distribution and use of goods and services in order to guarantee human beings the utmost possible well-being; it does so by making the most of technical capabilities and human creativity whilst always striving to preserve and enrich the biosphere and protect the interests, rights and power of initiative of future generations, governed by principles of responsibility and equity that everyone can subscribe to.”
2. Sustainable territories and supply chains, the two pivotal actors of the œconomy
The two pivotal actors of 21st-century œconomy, those that are to structure the system as a whole, will be: territories (cities and regions), a local level at which the three essential orders of relationships–among people, among societies, and between humankind and the biosphere– can be apprehended and at which the economic, social, and ecological aspects can all be managed together; and the supply chain, from exploitation of primary resources to consumption and recycling: society can only be sustainable if supply chains are sustainable, and all actors in the economy, companies in particular, must have their activity governed by contracts requiring sustainable supply chains.
3. The œconomy must be plural
The œconomy is plural. In a society, it is impossible to draw artificial separations between economic efficiency, social cohesion, and the preservation and enhancement of the biosphere. Actors who can deal with these objectives as a whole are to be privileged. For this reason, social and solidarity economy must be supported and encouraged.
4. Traceability is mandatory
Contrary to the current system, which tends to make the link between production and consumption anonymous, this link must be regarded as essential because trade of goods and services is one of the major social relationships. This implies the obligation of traceability in economic activity. Traceability is technically easy to apply with the new information processing systems; it is in fact already applied when safety is at stake.
5. Currency must be multidimensional
Our conception of currency is a legacy of the past and of the limits of old computational tools. Today, we need to encourage the development of human work–which guarantees redistribution of wealth–and to place strict limits on the consumption of nonrenewable natural resources, which is a major threat to the biosphere. This can only be done only by using different units of account and means of payment for each of the two cases. Currency must necessarily be plural (to allow the articulation of various levels of trade from the local to the global) and pluri-dimensional: consumers will thus pay what they are encouraged to consume with one unit, and what they are dissuaded to consume with a different one.
B/ The economy and governance
As the œconomy is a branch of governance, we can apply to it all the thinking on the purposes and principles of governance. This observation is very useful for designing new concepts, institutional arrangements, and tools. We will give just a few examples here.
1. Establishing governance regimes adapted to the nature of the different goods and services
The art of governance lies in particular in the capacity to invent measures that are truly adapted to the problems that need to be addressed. This is not the case in the current economy, which is aimed at limiting goods and services to two categories: commercial goods and public goods. The governance regimes of the future will have to correspond to four categories of goods and services: those that are destroyed when shared out, as is the case for ecosystems or living beings; those that are divided when shared out but are limited in quantity, as is the case for the majority of natural resources and in particular water and fossil energy; those that are divided when shared out but the quantity of which is limited only by human creativity and work, such as industrial goods, the only goods that can be legitimately covered by the market; and goods, finally, such as intelligence, experience, and intangible capital, which proliferate when shared out and which, instead of being managed by scarcity, artificially created by intellectual property rights, should be the basis of tomorrow’s prosperity and well-being.
2. Governance regimes for natural resources: negotiable quotas
The carbon tax is a regressive tax insofar as the cost of energy weighs more heavily on the budget of a poor family than on that of a rich one. On the other hand, a family’s energy budget grows as its wealth increases. As the use of nonrenewable natural resources needs to be limited in order to preserve the biosphere, the principle of justice must govern their distribution. Consequently, a system of negotiable quotas, where those who consume less than their share of energy can resell it to those who want to maintain a resource-intensive lifestyle is a system that both respects the limits of the biosphere and is socially fair.
These negotiable quotas constitute, in a multi-dimensional currency, an “energy” currency or a “natural resources” currency. This is the system that needs to be set up from the local to the global.
3. Making the choice of modes of consumption democratic
The terms of the choice between consumption and lifestyles are seemingly determined by individual preferences, but they actually derive from collective choices that modify the very terms of individual choices. The example of individual transportation and collective transportation is a good illustration of this. From the local level to the global level it is possible and necessary to design methods of democratic choice.
C/ The economy and ethics
Modes of production and consumption structure how each actor, each citizen, and each society has an impact on the rest of humankind and the biosphere. Sustainable society is impossible when states and companies are not held accountable for their impacts and when, in addition, in the absence of relevant information and of consistent “price” signals, individual consumers themselves are neither able nor willing to appreciate the impact of their lifestyle.
As indicated in the Charter of Universal Responsibilities, responsibilities and co-responsibilities are shared by all but are proportionate to capacity and knowledge. International and national law arising from the Charter of Universal Responsibilities particularly applies to the economy.
1. Responsibility of economic and financial actors
Current law and practices make those responsible for the economy and finance, especially the major ones, irresponsible as much with regard to the international impact of their action as with regard to the long term. The law that can be applied to them is usually national whereas their action is international; when their impact is assessed, their subsidiaries and subcontractors are not taken into account; and many of the payment schemes for company executives or financial agents push to irresponsibility. Institutional responsibility is separate from personal responsibility: this encourages risk taking (“moral hazard”), privatizing profits, and socializing losses. An international law of responsibility is to be built on the basis of the Charter of Universal Responsibilities.
2. Responsibility of political leaders
The impact of economic policies and of lifestyles is decisive and because there is no legal basis to refer to, cannot be considered at the international scale. This is what needs to be remedied.
D/ Economy and territory
1. Building the capacity of becoming major actors of the œconomy at the level of territories and cities
This is a very new perspective that supposes new concepts and new institutions, in particular the institution of territorial œconomic agencies able to equip territories and cities with the means of understanding their metabolism, and of organizing and managing the different flows going through them.
2. Returning economic choices to the local level
At all levels, from the local to the global, the collective choice of lifestyles and forms of consumption is an essential dimension of democracy. The idea is not to go back to a planned economy, which failed everywhere in the world, but to make it possible to establish collective debate at the level of each territory. For example, if we want to move in the direction of sustainable economies, tangible goods should be replaced by services whenever possible, and this is only possible if the numerous objects and machines that populate our modern daily life and are indisputably a source of well-being, are constantly transformed, updated, and possibly replaced by services, rather than endlessly thrown out and replaced by other goods. This is not decided at the level of individual consumers; the economic actors need to be given standards of consumption predictability, and component compatibility for easy updating needs to be imposed on manufacturers. These are all collective choices. Some, like standards for industrial products, need to be adopted on a global level, but others are only completely meaningful at the local level.
3. Social and solidarity economy takes root in the territories
Experience shows, in banking and insurance for instance, that in a national and international market, social-economy companies, when competing with the traditional economic model, do not behave very differently than other companies.
It is at the territorial level that social and solidarity economy contributes best to the continuous invention of new responses to emerging needs: a community’s learning the thousands of ways to respond to common problems is the most reliable way to increase the community’s intangible capital, its reaction capacity, and its capacity to take the initiative under any circumstances.
Social and solidarity economy, by mobilizing local resources for its capital, intelligence, and work, by combining salable and non-salable goods and services, by making their goals economic, social, and environmental at the same time, constitutes an essential branch of the œconomy and one of the best ways to anchor it in the territories.
4. Territory, the fundamental management level for common goods
Governance regimes for the different categories of goods and services need first to be set up at the territorial level. This is obvious for goods that are destroyed when shared, as for ecosystems, which are known to be maintained only when they are jointly managed by the population and the public authorities. In the case of ecosystems benefiting a community that is larger than the territory, it is at this other level that negotiations should take place such that the larger benefiting community contributes to the maintenance of the common good.
In the area of natural resources, for instance water and fossil energy, it is at the territorial level that need to be defined the consumption quotas, the procedures for distributing these quotas among activities and among families, and that the elementary level of quota trading should be organized.
5. Territory: the space for organizing a decentralized œconomy, thanks in particular to the generalized use of complementary currencies
We must reject the opposition between on the one hand, closed, inward-looking economies, presented as an illusory return to the past, and a single global market, which has proven to fail to connect, locally, idle hands, unemployed creativity, and the needs of the population.
No territorial or national economy can be closed at this stage of global interdependence. Conversely, the global market has shown its inability to respond to the requirements of social cohesion and the protection of the biosphere. As in all other areas of governance, what counts is knowing how to articulate the different levels of production and trade, from the local to the global.
Introducing a diversity of currencies (creating a currency and building a community always go together) allows each territory to stimulate short supply circuits, combinations of paid and unpaid activities, equivalence procedures for work time, etc. Historically reinvented in the 19th century to face crises (for plurality of currencies was the rule in the older days), developed at different levels, from the local to the national (in practice, many countries use several currencies depending on whether it is for domestic or foreign trade), with the benefit of all the new facilities offered by computer science and the Internet, these local and regional currencies, or even currencies specific to a professional community (like the wir for small and medium-sized companies in Switzerland) is a response that can be generalized at the level of the different territories.