Development Beyond Economism: Local Paths to Sustainable Developmentby Hazel Henderson
Ninth Annual E. F. Schumacher LecturesOctober 1989, Great Barrington, MassachusettsEdited by Hildegarde Hannum©Copyright 1989, 2004 by the E. F. Schumacher Society and Hazel HendersonMay be purchased in pamphlet form from the E. F. Schumacher Society, 140 Jug End Road, Great Barrington, MA 01230 USA, (413) 528-1737, www.smallisbeautiful.org/publications.html.
The effects of forces of industrialism and economism, foretold so well by E. F. Schumacher, have led to a revolution of unprecedented scope. Technologies and human activities now effect major changes in the global atmosphere and ozone layer, create deserts, pollute ground waters and oceans, and accumulate garbage in space. Industrialism’s powerful promise of development, modernization, and economic growth has fueled rising expectations worldwide. However, today’s guiding philosophy of macro-economic management has locked most governments and policy analysts into a narrow range of options generated by the conflict between socialist and capitalist models. These sterile Left-Right debates about whether to nationalize or privatize and whether to regulate or deregulate are based on outdated concepts of national sovereignty, the immobility of capital, and material definitions of commodities that, ignoring information and service flows, focus on trade (now swamped by financial flows) and overaggregation of statistical data that ignore nonmoney sectors such as social costs and social benefits.
Meanwhile, seven globalization processes are driving the restructuring occurring in all countries: the globalization of1) technology and production, 2) employment, work, and migration, 3) trade, finance, debt, and information, 4) the arms race and militarization, 5) pollution and resource depletion, 6) consumption patterns and the emergence of a “global culture,” and 7) the multiple restructuring within and between countries driven by all the foregoing. These processes are circular, interactive, accelerating, and irreversible. A new dialogue to redefine “development” is inevitable, and thanks to global mass communications this general debate between countries and between different cultures and academic disciplines can accelerate social learning worldwide. Indeed, some countries are redefining their goals by enhancing problem-solving capabilities and accelerating learning.
The Failure of Economism
Economic reform efforts can be viewed as attempts to clarify the basic values and rules underlying all economies, exemplified by perestroika in the Soviet Union, the unplanned “hollowing” of the U.S. economy, the consolidation of the European Community, and the shifts toward “democracy” in Eastern Europe, the Philippines, and Korea, as well as the struggle to end apartheid in South Africa. As the two superpowers further realign out of economic necessity, the rest of the world is breaking out of the ideological prison of the Cold War, which has crippled the United Nations and still preempts massive resources that must be released for true development.
As the new game of Mutual Development emerges, it is already clear that the winner of the Cold War was Japan. With 25 percent of the world’s capital, Japan’s role as a fulcrum for the shift to the new worldgame is crucial, and many globally minded and influential Japanese politicians, scientists, and business leaders are stressing ever more the transfer of yen surpluses to development projects in the South. Japan’s growing internationalism and its key fulcrum role emphasize the importance of redefining “development” in an Age of Interdependence. “Developing countries” (a misnomer, because all countries are developing) are reassessing their own plans, which have been dashed by crushing debt service and the politically impossible “adjustment” demands of the International Monetary Fund. This new realism is now endorsed by the United States in the Bush Administration’s Brady Plan, which moves beyond the Baker Plan by accepting the necessity of actual write-offs, as U.S. banks have been doing for some time
and as Canada has proposed doing by forgiving debts of the most-pressed African countries. Secondary markets for “country junk bonds” are growing.
Many developing countries almost gave up on the North-South dialogue of the past decade when their proposals for a new international order were consistently ignored. The South Commission, co-chaired by Julius Nyerere, former president of Tanzania, and President Carlos Andres Peres of Venezuela, charted a new course at its meeting in Kuala Lumpur in 1987. The Commission resolved to redefine “sustainable, equitable, people-centered development” without the help of traditional, Eurocentric industrial development theorists. The term “sustainable development” has gained wide acceptance since it was advocated in Our Common Future (1987) by the World Commission on Environment and Development, chaired by Dr. Gro Harlem Brundtlandt of Norway. Much imaginative work to operationalize these new concepts of development is underway, such as that in Venezuela and Costa Rica as well as the new Human Development Index of the United Nations Development Program. These new indicators prove that per-capita-averaged income and current national accounts conventions are by no means the best indicators of overall welfare or progress. Many countries moving away from central planning, however, still follow in the spirit of Karl Marx’s original coining of the word “socialism”—that is, a more inclusive, systemic view beyond economics.
Indeed, a broader view of development is essential because planet Earth is now providing warning signals from which all humans must learn and to which they must react. The breakdown of the ozone layer and similar large-scale effects, as well as the seven globalization processes mentioned earlier, are teaching us the overriding need for cooperation: our planet is a vast programmed learning environment, with positive and negative feedbacks allowing basic understanding of its functioning. Out of this context comes the criterion of sustainability—that is, providing equitably for the needs of the present generation without jeopardizing the needs of future generations. Thus, the redefinition of development must include more than the avoidance of the boom-bust cycles of market-dominated capitalistic economies and the rigidities of Soviet, Stalinist-style central planning; it must also include measures to curb the excessive pollution and depletion of the earth’s resources that both these development models cause. In the United States and other mature industrial societies the excesses of mass consumption have brought major problems, including eroding ethical standards and widespread, increasing levels of drug abuse, crime, illiteracy, homelessness, hunger, and splintered families and communities as well as an increasing gap between rich and swelling poor populations. Short-term industrial values are clearly at a crisis point.
The basic problem is that industrialism’s ideology, crystallized in economic theory, is too narrow a framework for policy formation and the management of the total productivity of societies. This economism is an inappropriate basis for sustainable, equitable development. An expanded framework is needed, based on broader interdisciplinary theory, thermodynamics, physics, engineering, ecology, and the life sciences as well as advanced approaches to human motivation, psychology, and anthropology. Similarly, more dynamic models, such as those emerging from chaos theory, are needed to capture the rapid changes and restructuring now occurring.
Once we transcend the box of economism and its false universalism, we can see how many intractable debates between economists, such as those about planning versus markets and competition versus cooperation, can be overcome. The key issue is less whether countries have market-system or centrally planned economies, as many economists still believe, than the extent to which they incorporate at every decision level the necessary feedback loops from those people and resource systems affected by the original decisions. There are two major types of the latter (cybernetic) systems: homeostatic (governed by predominantly negative feedback loops) and morphogenetic (governed primarily by positive feedback loops). Of course, prices are a ubiquitous and useful element of feedback systems. Unfortunately, as technology becomes more complex and as social and technological interlinkages increase, managerial scale and scope must also increase in order to control this complexity. Each order of magnitude of technological and managerial scale in the market sector calls forth an equivalent order of magnitude of government regulation (particularly in democracies where citizens demand it politically).
From a general systems theory perspective, all economic systems are sets of rules, devised to fit the specific culture, values, and goals of each society. Thus, even so-called free-market or laissez-faire economies are designed by humans and legislated into existence, while prices and wages reflect the values of each society and its state of knowledge of its real situation in the physical world. In fact, the notion of “objectively set, free-market” prices is revealed as a myth (albeit a politically useful one), because all markets are in one way or another created by human rather than “invisible” hand. Resource allocation methods—whether planning, price regulation, rationing, barter, or reciprocity—are only as good as the state of human knowledge.
This decision-theory view of economic systems as “games” with human rules, as management systems employing many feedbacks and strategies, allows an overview of planning, market, and other tools of policy, and it is clear that both competition and cooperation are equally useful strategies that must be continually balanced in all societies. A former economist, Herbert Simon, who won a Nobel Memorial Prize in economics, noted in his acceptance speech that he no longer used the economic method but rather decision theory and other systemic models. Systems scientist Stafford Beer has been designing such models for many years and is applying them under a United Nations grant in Uruguay.
Ecological and natural-resource decisions as well as prices are only as good as human scientific knowledge and must be based on sound science in systematic, dynamic models. Many systems theorists, including Fritjof Capra, Leonard Duhl, M.D., and the World Health Organization itself have proposed substituting health as a basic criterion for development—that is, healthy land and water, healthy cities, healthy public policy—all with healthy people as the goal. Introducing a new set of "green" sin taxes on pollution, depletion, obsolescence, and waste is increasingly popular in Europe, where eighty-five of these kinds of fees are levied. Natural resources can be conserved by correcting prices to include social costs incurred. Full-cost pricing will provide a more accurate market-allocation method, albeit that additional accounting for environmental and social cost will produce an “inflation effect,” since most countries have been overstating productivity for decades.
New Indicators and Methods
Social indicators have been a theme of discussion in many mature industrial societies for years, but their application has been thwarted by bureaucratic resistance, by intellectual vested interests in methods, textbooks, etc., and by cultural biases (for example, against accounting for the work of women in parenting, housekeeping, and subsistence agriculture). No one “correct” method will emerge, because multiple models and indicators will be closely fitted to local situations and the different “cultural DNA” of diverse societies. It is clear that guiding societies by late twentieth century overaggregated indices is like trying to fly a Boeing 747 with a single oil pressure gauge! The social-indicators debate is about disaggregation, revealing overlooked detail both locally and sectorally and adding a whole row of additional gauges to societies’ “instrument panels,” so as to plug feedback into appropriate decision levels with more precision and timeliness. For example, an in-house audit evaluated one thousand World Bank projects and found that none of them had met their projected goals, not even in traditional economic terms. Thus, no easy formulas are available for addressing the new needs of developing countries for culturally sensitive, egalitarian, and sustainable development. The first order of business for development officers is to be able to “decode” the cultural DNA of a recipient country and determine what values and goals they are optimizing, which may not be goals they are qualified to assist toward.
Traditional indicators such as Gross National Product (GNP) and Gross Domestic Product (GDP) were actually developed for military mobilization purposes in Britain and the United States. Their materialistic view of progress cannot guide humanity beyond consumerism toward moral growth and sustainable development. I have traced the evolution of economic indicators and reviewed the many post-economic indicators and policy tools now available to decision-makers. The crucial role of the informal economy and the unpaid productive work of subsistence agriculture is the subject of a small but growing body of literature. In addition, there is the inability of national accounts to distinguish between “goods” and “bads” (or "wealth" and "illth"), because liquor, tobacco, auto accidents, cleaning up pollution, and the multibillion dollar “stress industry” are all included as progress. It might well be that in the United States these growing social and environmental costs as well as the increasing monetarization of cooking, child care, and other formerly unpaid work are the main growth sectors of GNP. Yet efforts to add “sin” taxes to harmful products are fiercely resisted by industry lobbies.
Whereas national accounts and indicators are important, it is local indicators that provide the balance to correct overaggregation at the national level. Local indicators and methods now being tried in the United States are useful; key experiments during the 1980s have been in response to the economic and social problems experienced by many localities as a result of the budget priorities and laissez-faire policies of the Reagan Administration. The local search for alternative models in many states has stemmed partly from the failure of national policies based on overaggregated statistical illusions, including GNP, inflation, unemployment, interest rates, and all the other paraphernalia of the Bush Administration’s macro-economic management, which is now lying in ruins. Due to its failure at the local levels, where conditions vary widely across the United States, macro-economic management has become almost as discredited in the U.S. as the centralized Stalinist policies have in the U.S.S.R. Both became bureaucratic, out of touch with regional needs, and—in the United States—relied more on “single bullet” monetary and fiscal policies with very different lead and lag times, which were often in conflict with each other. As the seven great globalizations took hold during the 1980s, it became clear that domestic economic policies were a thing of the past, for such policies were swamped each day by the billions of footloose “hot” dollars sloshing around the planet seeking interest rate advantage. No one knows how to measure these global monetary aggregates, which also began swamping bilateral trade statistics, obscuring policy options, and leading to faulty trade legislation and unnecessary conflict with trading partners.
In all this national confusion, with rising domestic deficits and the rapid shift of the United States from the world’s largest creditor nation to the world’s largest debtor nation, states and localities were left to fend for themselves. Many of them, suffering severe economic disruption, unemployment, deficits, crime, and other social and environmental problems, turned to experiments and activist policies in spite of their ideological commitments to the free market and nonintervention. Formerly, they had relied on accounting firms to assist in trying to reach their economic development goals. This economic approach offered assessments of a state’s business climate in such terms as what conditions a firm’s corporate clients were looking for in plant location. Predictably, states were told that a good business climate was one of low taxes, tax credits, cheap land, and cheap labor—what is sometimes called “the plantation model,” where the state’s people and resources are basically offered on the auction block to lure outside investors. This has always been a risky game, since in the United States approximately twenty-five thousand localities are offering these lures, while only some five hundred location or relocation decisions are made by major companies each year. Such a strategy in the new global economy puts the state in direct competition with countries with much lower wages and resources, countries which in addition offer tax holidays. Indeed, most multinational corporations have financial models that can tell them, on a daily basis, which nation is foolish enough to be offering them an annual 35 percent return on their investment. State officials can never win at such games employing global electronic funds-transfer, where no allegiance exists to any locality.
Another approach in the desperate search for local development is the use of the Quality of Life indicators developed by such firms as the Midwest Research Institute of Kansas City, which rates various cities for their livability and attractiveness to top managers, their schools, research facilities, cultural opportunities, climate, etc., as well as the more traditional factors such as few unions, availability of capital and trained workers, friendly politicians, and weak environmental laws. Another new approach is that of Ameritrust/SRI (formerly called the Stanford Research Institute) of Menlo Park, California. Its revised Indicators of Economic Capacity (1986) are based on a somewhat arbitrary regional grouping of states, one still geared toward traditional economic growth; however, these indicators move away from the plantation model and identify “quality inputs” such as an educated work force, level of state investment, and commitment to academic excellence, research facilities, quality of faculty at universities, numbers of Ph.D.s graduated, levels of state investment in infrastructure, civic services, and other quality-of-life factors as well as capital availability.
Capital availability is the crux and symptom of the globalization process and the largely unanticipated restructuring of the U.S. economy. The capital markets have been deregulated in the United States, and capital has become highly centralized as a result of this and of the global search for advantageous interest rates and currency differentials in the now tightly interlinked financial markets of the world. This situation leaves most localities short of the liquidity they need as their locally generated money is “vacuumed out” of their communities by branches of the major money-center banks. The chronic lack of liquidity for local circulation and trading as well as investment in local enterprises, dependency on outside investment, and other factors are the basic cause of their vulnerability. Not surprisingly, new forms of computer-assisted barter, skills exchanges, and limited-purpose local “currencies” are in use in thousands of U.S. and Canadian localities. Meanwhile, capital is available only to those large-scale, successful enterprises that localities are forced to try to lure in head-on competition with other cities and states as well as with other countries.
At the same time, on Wall Street billions of dollars of “hot” hungry money competes fiercely for fewer and fewer opportunities in higher and higher technology start-ups in the hopes of at least one big winner. No enterprise that does not offer at least 30 percent annual returns on investment is even considered, while millions of modest, useful, small-scale enterprises meeting local and regional market needs are too short of capital to expand, and many are forced into bankruptcy when they experience a temporary cash-flow crunch. Thus, many local needs for locally produced goods and services that would build a stable local economy remain unmet, and many people must drive long distances to shop for vital goods and services at regional outlets of large multinational companies. In this way local initiative is choked off much as it is in a centrally planned economy. This kind of absurdity occurs when market power is allowed to dominate instead of playing a balanced role in resource allocation. Of course, traditional economics recognizes this in monopoly theories, and the U.S. government is supposed to regulate such monopolies. However, political power, campaign contributions, lobbyists, advertising, and the commissioning of research allow many of these monopolistic corporations to control the mass media, large areas of production, and weapons manufacture, thereby capturing enormous government contracts and influencing policies.
Many U.S. localities are waking up to the impossibility of playing the old plantation-model game of economic development, since it leaves them wide open to the new world-trade “roller coaster,” vulnerable to sudden investment shifts, currency swings, bouncing interest rates, and lower wage competition while their well-laid local plans are disrupted as financial markets open in cities around the world. In Florida a 1987 report, Florida Sunrise, shifts emphasis from the plantation model to one in which education and investments in its citizens are seen as new paths to development.
Thus, the old growth view of economic development has hit these kinds of new snags, and most states are now developing growth management plans and development impact fees that assess construction and development companies with part of the infrastructure costs their projects will incur. Many large companies that lose out in these new struggles with local governments or refuse to pay impact fees simply move over the Mexican border and set up the now-familiar maquiladoro plants in politically weak Mexican border towns. These towns, too, are becoming overburdened with influxes of migrants looking for jobs, and their tax bases are insufficient to provide infrastructure and basic services. Not surprisingly, many state and city officials and politicians are now learning that development in the world of the late twentieth century requires a dual approach. The first is to learn to play a much smarter role in the global “fast lane” and find export strategies not easily copied by others—that is, genuine niches of true comparative (not competitive) advantage, partly based on Adam Smith’s concepts. The second is to develop a home-grown economy to provide basic security and meet local
needs with local resources in smaller-scale enterprises. One can see common elements
in this approach in the United States's and China’s contract system, now
spreading to the Soviet Union.
As the “luring outside investors” approach to development becomes more
risky in today’s context, when a whole generation of a technology, from innovation
to obsolescence, can have a life cycle of three years or less, more interest is
focusing on the “home grown economy” approach. This basic strategy offers
a minimal safety net until the world trade roller-coaster is tamed by new global
agreements, such as those to which the group of seven leading industrial nations
known as the G-7 is already moving (in spite of their free-market preferences).
The decline in U.S. competitiveness is forcing new thinking. The commonality in
the new approaches in the United States, one of the world’s most mature industrial
societies with one of the highest per-capita-averaged income and GNP levels, is
the now widely shared insight that sustainable development must begin locally
from the grass roots, building on basic agriculture rather than the failed trickle-down
model of industrialism. This industrial model saw rural communities and farmers
as “backward” people to be mobilized into industrial production. But,
as has been discovered in most countries, there are few easy short cuts to sustainable
development, which involves steady efforts and prevention of harmful unanticipated
consequences often very expensive to remedy or even irreversible. The U.S. Office
of Technology Assessment, on whose Advisory Council I served during its start-up
years from 1974 until 1980, released a study in June 1988 on grass-roots development
in Africa that surveys efforts to enable the poor to participate in the process
of development. OTA assessed nineteen countries in which such projects had been
funded by a new agency set up by the U.S. Congress, the African Development Foundation.
Between 1984 and 1987 the ADF awarded grants ranging from $700 to $250,000 to
114 projects, two-thirds of which were agricultural activities such as providing
potable water, raising vegetable crops for local consumption, improving animal
health, renting tractors, helping set up cooperatives, and the like. OTA’s
study confirmed the validity of ADF’s assumptions concerning local participation
as key to healthier forms of social and sustainable development. The World Bank
is examining other grass-roots development models such as the Grameen Bank in
Bangladesh and Women’s World Banking, a network headquartered in New York
and Amsterdam with local affiliates in fifty-five countries.
A now widely perceived key to sustainable development seems to involve what the
World Bank refers to as “capillary lending,” where channels are sought
to pass through overly large sums of money to many village organizations, bypassing
government and political influences in capital cities. It is questionable, however,
whether the World Bank can recycle recent Japanese surpluses effectively.
All these new grass-roots lending policies—in mature industrial societies
such as the United States, Canada, and many European countries as well as in developing
countries—again prove that old “left” or “right” ideologies
associated with economic models are obsolete. For example, the World Bank is pressured
from both left and right to stop its massive, inappropriate projects, which are
geared to host-country governments and infrastructures and which have led to some
$30 billion of overinvestment in centralized energy projects on a world basis.
Conservatives demand a grassroots private-sector approach in the name of the free
market, while liberals want less environmental damage and less maldistribution
of income. Still, the blindest spot is hardly addressed: the “informal economy”
of unpaid productive work still uncounted in any national accounting models. These
informal sectors still provide the basic safety nets in all societies, even those
in the United States, Canada, and Western Europe. Sociologists (rather than economists)
collect this data, using methods of counting productive hours worked, whether
paid or unpaid. Most of these studies in France, Sweden, Canada, and the United
Kingdom show that approximately 50 percent of all productive work is unpaid, while
other studies show that fully 80 percent of all the world’s capital formation
and investment is not monetarized, a fact that millions of subsistence farmers,
rural entrepreneurs, and most of the world’s women know only too well. Even
industrial value systems are now in conflict.
Accounting for unpaid production is a way to address price inflation and pinpoint
specific ways to keep prices in line with true value. A good example of the problem
of per-capita-averaged income statistics based on monetarized production alone
is evident in Japan. The British journal The Economist noted the problem
in its June 11, 1988, issue under the headline “Feeling Poor in Japan.”
The article pointed out that the Japanese per-capita income, GNP-averaged, is
the equivalent of $19,200 per year (ahead of the U.S.’s $18,200). But when
the Organization for Economic Cooperation and Development worked out what the
money actually buys in each country—that is, its purchasing-power
parity, Japan looked rather poorer. Each Japanese had only $13,100 compared
with the $18,200 for each American. The difference, of course, involves all of
the various quality-of-life indicators.
Whereas purchasing-power parities are a very important new social indicator, they
still do not get at the full range of social costs and benefits in each country.
In Japan, The Economist pointed out, extra consumer goodies are consumed
in ever more unpleasant surroundings; even New Yorkers have ten times as much
green space per capita. True, Japanese life expectancy is in the eighties, but
homes are prohibitively expensive due to exorbitant land prices, and standard
commutes to work in cities are over an hour each way. In Britain real purchasing-power
parity is higher than nominal income, as it is in Italy, whereas in the United
States real purchasing power has remained flat for over a decade while nominal
wages have increased. One of the key tasks is to examine the unpaid informal sectors
and, where necessary, create barter systems locally so that real welfare may be
increased without increasing wages and inflation. The interchangeability of money
and information is a key to building local “information societies” based
on barter and skills-exchanging networks in the same way that barter systems are
employed when countries wishing to trade with each other do not have foreign exchange
for this purpose as, for example, in the barter trade between China and the Soviet
Union and the 25 percent of all world trade now conducted in barter or countertrade
systems. Similarly, the Southern Hemisphere countries could set up highly sophisticated
computerized countertrading networks to at last create multiple South-South trade
systems, by-passing the current financial and trade channels.
The pressing need to overhaul national accounting as currently defined by the
United Nations Systems of National Accounts (UNSNA) is underlined by Chilean “barefoot
economist” Manfred Max Neef, winner of the Alternative Nobel Prize, who notes
that “nearly half of the world’s population and over half the inhabitants
of the Third World are statistically invisible in economic terms.” Hernando
de Soto, in The Other Path, documents the extent of Peru’s informal
sector, which accounts for 38.9 percent of that country’s GDP. In If Women
Counted Marilyn Waring, a New Zealand legislator, dissects the UNSNA statistics
to show how they confirm women’s domination by men in most countries. In
a speech to the second meeting of the South Commission in March 1988 President
Peres of Venezuela offers a new paradigm for development indexes based on his
concept of “integral development” and deals fundamentally with quality
of life rather than quantities of goods and services produced. Peres’s formula
includes: 1) satisfaction of basic needs and the need to treat humans as indivisible
beings; 2) self-reliance where possible; 3) sustainability defined as equitable
distribution within inbuilt environmental standards. New kinds of indicators are
now under widespread discussion.
A comprehensive review of existing economic indicators and their reformulation
is under way in the United Kingdom by Victor Anderson. Research in the Netherlands
is proceeding along similar lines—based on the work of Roefie Heuting, Wil
Albeda, and others—and includes accounting for natural resource stocks and
the nonmonetarized work in the informal sector. Many researchers in Europe—including
Britain’s Gershuny, Robertson, and Shankland, Sweden’s Inglestam and
Ackerman, Italy’s Giarini, Canada’s Dyson and Nicholls, and Germany’s
Huber—have studied the nonmonetarized informal sectors of production, but
as of 1989 the results are not included in national accounting in any integral
way. Italy’s Orio Giarini, author of Dialogue on Wealth and Welfare
and The Emerging Service Economy, believes it will be necessary to incorporate
the nonmonetarized sectors in order to understand the postindustrial service economies
now emerging in Europe and North America. James Robertson reaches the same conclusion
and has coined the term “ownwork” for the increasing numbers of part-time
or self-employed autonomous workers in Britain and North America. Both Robertson
and Giarini agree that this type of work must be accorded much higher status and
part-time work must gain more prestige. They also agree that the encouragement
of these new services sectors and their expansion will complement the formal,
monetarized sectors. These views accord with my own work in The Politics of
the Solar Age and that of Scott Burns in The Household Economy.
As industrial societies move further into this “services and amenities”
view, beyond production per se, emphasis also shifts from obsolescence/innovation
cycles to durability and overall optimization. An underlying problem with all
national-income accounting is the focus on flows rather than stocks,
emphasized in what is still the fundamental Western book on overhauling economic
models, The Entropy Law and the Economic Process by Romanian scientist
Nicholas Georgescu-Roegen. Costa Rica already portrays this wider, more systemic
view, which augurs well for overall performance and efficiency there. The China
2000 studies are a model for other countries, including the United States, where
similar studies—such as the Global 2000 Report to President Carter—have
been ignored. Today the new Solvency School led by Paul Kennedy, author of The
Rise and Fall of the Great Powers, and including James Chace, Mancur Olsen,
David Calleo, and George Kennan, has gained widespread credibility, and the U.S.
citizenry is waking up at last to the reality of the relative decline of
the United States in a new multipolar world of vigorous new trading partners.
The importance of the battle over indicators can be seen as essentially political,
and the more suspect and meaningless conventional economic indicators of progress
become, the more politicians must resort to polls of public opinion.
Savoring Cultural Diversity
A key political task in the United States is to cast its relative decline in positive
terms, not to parrot the shallow claims of some commentators that the U.S. has
“won” the Cold War and capitalism has been vindicated but rather to
outline the positive vision of a safer, multipolar world that is now poised to
enter a new Age of Interdependence, one in which global cooperation with all our
rising industrial partners and the developing countries of the South leads to
mutual sustainable development. As Soviets and Americans continue to discuss at
many levels the newer definitions of “security” in economic, social,
and environmental terms, the U.S. debate can adjust to the new global realities,
particularly if new social indicators of progress are set up. Two-thirds of Americans
agree with the Solvency School that the United States has become weaker compared
to other countries, and 45 to 50 percent believe with Stanley Greenberg that America
is “slipping dangerously.” The Solvency School, while correctly pointing
out the mutual economic exhaustion of the superpowers, overlooks the more fundamental
set of stresses that their rivalry places on human communities—because, of
course, no indicators of these factors are available. When indicators provide
scientific, timely feedback on a full range of variables within broader and global
parameters, they enable nations to steer with instrument panels of sufficient
accuracy and sensitivity to continually course-correct on their paths to sustainable
development. Clearly, most of the data are already available—on education,
health, literacy, life expectancy, infant mortality, shelter, and water and air
quality—to complement per capita income averages. Other categories needing
work are human rights and political participation; much data on these subjects
are available from Amnesty International and other human rights organizations.
More inaccessible but also available are “shadow prices,” equivalents
for unpaid services and production and for barter and countertrade as well as
for much of the productive work of normal systems.
The now widespread interest in global sustainable-development indicators has produced
much debate in academic circles, such as that found in two pieces in Environmental
Management, “The 1987 Forum on Global Sustainability: Toward Definition”
and “The 1988 Forum on Global Sustainability: Toward Measurement.” The
International Institute for Applied Systems Analysis in Austria has produced good
work in this area, for example, R. E. Munn’s “Environmental Prospects
for the Next Century: Implications for Long-Term Policy and Research Strategies
(in Technological Forecasting and Social Change 33 [1988]),” which
reviews nonlinear, interdisciplinary models for global change that are adaptive
and cross-cultural. Worldwatch’s State of the World Report for 1988
assesses capital investments required as a “down-payment” on sustainability
in six areas: 1) protecting topsoil and cropland, 2) reforesting the earth, 3)
slowing population growth, 4) raising energy efficiency, 5) developing renewable
energy, and 6) retiring Third World debt. The report then sets out two alternative
global security budgets: the first continues the projected $900 billion spent
annually on military security; the second defines global security in terms of
sustainable development, with the military budget component falling each year
from $845 billion in 1990 to $751 billion in the year 2000.
The economic exhaustion of the U.S. and the U.S.S.R. will continue to be the major
factor in the development of these new "common security" definitions,
but tremendous political activity on the part of the “global citizens”
of every nation will also be needed to force these priorities onto politicians
and leaders in business, academia, unions, and other social groups. The more we
have improved social and economic indicators to provide better feedback on our
current course, the sooner political will can be mustered for the necessary shift
in policies. We particularly need to know the social costs of our current course,
from the approximately $30 billion the United States will have to spend to clean
up toxic dumps to the $60 billion per year in medical and absenteeism costs in
the U.S. caused by smoking. This information is available, but few governments
pay to have it collated and presented as it is, for example, by Peter Draper (in
the Royal Society of Health Journal [U. K.] 1977), who makes it possible
to relate which kinds of consumption lead to which kinds of disease—for example,
linking sugared cereals to tooth decay—so that the social costs could be
charged to manufacturers.
In the last analysis a fundamental understanding of the role of money itself
must be propagated. Money is information used to track transactions and to keep
score between organizations and individuals—it is not a commodity
in itself. The global financial system today, which has reduced money to a series
of blips on thousands of computer trading screens, has now made it possible to
see that money and information are equivalent and interchangeable. At a time when
such money-symbol systems are used to dominate human affairs, as is the case with
Third World debts, these new insights are producing demands for reform. Similarly,
overusing the price system to accomplish social policy has become a bad habit
in the United States, whose “free market” economy is actually a crazy
quilt of administered prices, tax credits, subsidies, and incentives, all managed
by the narrow policy tools of fiscal and monetary string pulling while international
economic relationships are giving way to crude, bouncing-dollar policies and interest
rates that feed global instabilities. The need for reform of monetary policies
as well as of the role of central banks in issuing money and credit is growing
urgent in the West.
In the emerging Age of Interdependence the new global, systemic view is allowing
serious questioning of traditional disciplines, including economics, and of the
proper role of money itself in relation to tangible wealth and human labor, skills,
and knowledge. The South Commission, at its meeting in Caracas in August 1989,
co-hosted by Venezuelan President Peres, convened experts on national accounts
and social indicators from five continents and the United Nations. Peres presented
their report, Toward A New Way to Measure Development, at the Belgrade
meeting of the Non-Aligned Nations in September 1989, at which time fifteen countries
formed a South Economic Summit.
All development paths are now interlinked and interactive via communication networks,
and this will equalize technological means and move the world trade system to
one of less “hardware” and more “software” as knowledge diffuses
ever more rapidly and widely. Every country will know how to apply basic technologies
to its own domestically manufactured goods, and multinational companies will have
fewer opportunities to recapture research and development investments. For example,
when IBM introduces a new computer line, clones produced by others appear swiftly
on the world market. I have termed this the “bursting seed-pod” model
of world trade—that is, when mature industrial companies and countries release
their knowledge and “scatter” it in spite of patents, because information
flows and is not scarce in the same way as are goods but can be shared in a win-win
game. Enormous efficiencies can thus be gained and shared, with huge savings in
transportation and distribution. As each country is forced to think harder about
its true niche, it will seek creative advantage and will become more unique in
its exports and less subject to competition. An example is the Netherlands, whose
exports of dike technology to keep out sea water have no competitors. Each country’s
unique gifts can be offered to other countries, and all can savor the growing
diversity of the human family, just as today we savor one another’s food,
art, music, and culture.
Hazel Henderson is an independent futurist, author, lecturer,
consultant, television producer and moderator, and freelance journalist as well
as an activist and founder of many public interest organizations. She is a director
of the Council on Economic Priorities, the Worldwatch Institute and the World
Social Prospects Study Association and a member of the World Future Studies
Federation. She has served as a member of the Advisory Council of the U.S. Congress
Office of Technology Assessment and on advisory committees of the National Science
Foundation and the National Academy of Engineering. She is the well known author
of Creating Alternative Futures and The Politics of the Solar Age,
and she has been consulting in several countries that are trying to "operationalize"
sustainable development, including China, Venezuela, the Phillipines, Malaysia
and Costa Rica.
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