World Futures, 69: 402–449, 2013
Copyright QC The Integral Science Institute
ISSN: 0260-4027 print / 1556-1844 online
Table of Contents
CORRECTIVE LENSES: HOW THE LAWS OF ENERGY NETWORKS IMPROVE OUR ECONOMIC VISION
The Integral Science Institute, Chapel Hill, North Carolina, USA
Address correspondence to Sally J. Goerner, The Integral Science Institute, 374 Wesley Court, Chapel Hill, NC 27156, USA. E-mail: email@example.com
We face systemic problems — economic, political, social, and environmental ones all wound up together. Effective solutions are emerging in all of these domains, but we lack a reliable systemic perspective to weave them together. I believe Energy Network Science (ENS) can provide the sound, systemic framework we need to address our systemic problems. ENS’s study of the energy laws of growth and development can help restore our economies and our souls by: (1) Helping us rediscover the truth and power of free-enterprise democracy; (2) Giving us the tools and concepts we need to build healthy Democratic Free Enterprise Networks (DFENs), the kind that have always formed the sinews of American vitality; (3) Providing precise quantitative measures and targets for healthy development that seem quite unimaginable in the current milieu. This is the story of how these gifts change our view of how to rebuild economic vitality and restore the dream.
FREE ENTERPRISE DEMOCRACY VERSUS OLIGARCHIC CAPITALISM: THE REAL CULTURE WAR
What did the Easter Islander who cut down the last palm tree say while doing it? Those trees were felled by rational actors who must have suspected that the destruction of this resource would result in the destruction of their civilization.
. . . Societies aren’t murdered. They commit suicide, they slit their wrists and in the course of many decades, stand by passively and watch themselves bleed to death.
— Jared Diamond, Collapse, 2006
Like the Easter Islander, we actively participate in an economic system that is destroying our world and passively watch as our fate unfolds. It is not just global warming and the environment, of course; nowadays suicidal policies and practices wreck economies, bankrupt treasuries, eliminate jobs, destroy communities, and poison people as well.
Unlike the Easter Islander, however, widespread resistance to this lemming-like race to oblivion is already underway. The sustainability movement has long fought the good fight and recent outbursts such as the Arab Spring and Occupy show that powerful pressure for reform exists worldwide. Other efforts such as triple-bottom-line business, Natural Capitalism, and the New Economy show that inroads are being made in economics and business themselves.
Yet, although these movements have made a powerful impact on the global consciousness, they have not halted the economic belief system, which seems to be the root cause of our problems. According to the mainstream media, one of the reformers’ key impediments is that they lack a “coherent narrative,” especially about what’s wrong with free-market capitalism and what could be better.
The narrative we need must explain what comes next in a way that is both realistic and positive. Thus, a Japanese historian once told me, “You Westerners have no idea how to generate effective change. When faced with the need for Great Change, you emphasize what people must give up to survive. Like a butterfly breaking free from its cocoon, we instead focus on how we can become a better version of ourselves by bringing our most cherished core to a whole new level of function and beauty. The latter energizes and engages the public in change; the former makes them cling to what they have.”
What is our butterfly narrative? I am an evangelist for Energy Network Science (ENS)1 precisely because it can restore our faith in a positive future by showing how we can bring our most cherished core, free-enterprise democracy, to a new stage of function and beauty.
The first step in saving our cherished core is to distinguish between healthy free-enterprise networks and the free-market practices that are driving us over the cliff. In this view, we are in trouble because our original democratic free-enterprise dream has been hijacked by oligarchic capitalism cloaked in free-market clothing. Recent events, of course, provide ample evidence that today’s free-market lingo conceals an oligarchic core. Massive job losses, record home foreclosures, lost retirement savings, and bankrupt treasuries — the crash of 2008 shook the economic ferment, but the bankers responsible for the wreckage received bailouts and bonuses, not pink slips and jail time.
So, although most of the mainstream public assumes we have free-enterprise democracy, in practice we have a government-supported “corporatocracy” serving what Marjorie Kelly (2001) calls The Divine Right of Capital. The resulting free-markets are “free” only in that they allow the wealthy and powerful to extort, distort, and exploit almost as much as they please.
The obvious reason for this dismal situation is that moneyed interests have been paying politicians to rig markets and tilt policies in their favor for decades, even centuries. They also pay pundits and media to rationalize their acts. Thanks to decades of clever catchphrases and incessant propaganda, many officials and lay folk honestly believe that policies that are good for a few powerful elites, but bad for the economy as a whole, are simply the way things must be. Outsourcing, austerity, and “too big to fail” and “too big to jail” are natural outcomes of this corrupt system. This form of capitalism’s other catastrophic outcomes run from endless war and deregulating Wall Street to denying climate change, privatizing water, and poisoning people and planet.
In short, ENS’s answer to “what went wrong” is that we have been running our society as a corporate oligarchy instead of a critically thinking, free-enterprise democracy. We face social, economic, and planetary instability because we have given our lives and livelihoods over to an unholy alliance of concentrated economic, political, and media power, which daily floods our world with arrangements that advantage the rich and powerful, while ignoring, and even undermining, the health of everyone and everything else, including consumers, workers, investors, suppliers, communities, and the environment.
The rest of us participate in the resulting race to oblivion, not because we are greedy, but because we have been taught that what we have is free enterprise. We suppress our doubts because: (1) experts say what we have is somewhere between inevitable and optimal; (2) everyone seems to believe; (3) the problems are too big to think about; and / or (4) we need the job.
What else could there be? Once we realize that people and businesses always work in networks, not separate selfish individuals, we begin to see why oligarchic capitalism could never create economic vitality. After all, networks are built of enduring relationships between people, particularly on reciprocity, fair and balanced give-and-take. Network health similarly depends on members acting in ways that support the health of the whole as well as their own well-being. ENS’s understanding of how nature builds healthy networks refines this picture even more.
So, instead of assuming monopolistic dominance, government corruption, and shrinking well-being are inevitable, ENS’s ironic answer to “what could be better” is: a new, more inclusive stage of our original dream built around more accurate understandings of how to keep democratic free enterprise networks (DFENs) healthy. The resulting shift in vision is both dramatic and obvious at the same time:
- Instead of a battle between Capitalism and Socialism, today’s fight is between oligarchic capitalism and free-enterprise as it was meant to be practiced, namely in networks and communities.
- Instead of either pro-business conservatives or pro-government liberals holding the keys to health, here both sides of the aisle hold a deeply flawed understanding of how to create and maintain healthy free-enterprise networks, which in the end, are the real source of lasting economic and social vitality.
With this new narrative in mind, let us look at how ENS can help correct our economic vision.
ECONOMICS SEEN THROUGH A DIFFERENT LENS
The same streams of life-energy run through all the veins of the universe. It is this stream which binds all life together making them One.
— Bhikshu Shinkaku, Essentials and Symbols of the Buddhist Faith, 2011
One reason our economies are unstable is that classical economics uses nineteenth-century scientific concepts that are completely inappropriate for complex systems. For example, classical economists envision vitality arising automatically from separate, self-serving agents acting in unrestrained markets because nineteenth-century science envisioned a world built of selfish genes, inevitable equilibriums, and separate, atomistic bits. The problems with this science are widely known, but in lieu of better methods, economists have no other way to proceed. This is about to change.
Just as Sustainability is part of a larger shift in society, so ENS is part of a larger shift in science, one that dramatically expands our ability to explore and measure all complex systems including economic ones. The resulting concepts and methods provide the tools New Economists need to anchor their ideas in empirical substance. They also provide a very different view of how the world works.
This new stage of science is built around three core discoveries:
- Everything in the universe is made of energy, including matter and information;
- Everything is built of and into networks and webs;
- Everything emerges from and develops as part of a vast self-organizing cosmic web that is vastly more ordered than previously realized.
Over the last 30 years scientists have come to realize that the order woven through-out the universe is a result of two key factors: energy pressures and invisible, binding forces. Thus, physicists say that the fabric of the universe consists of a dynamic web of forces and flows, where “forces” refers to invisible binding ties such as gravity and electromagnetism, and “flows” means the flow of energy and with it, all other things including matter and information. This all-embracing web of forces and flows forms an omnipresent, motivating, and unifying force that moves and shapes all things. Forces shape and bind all things; Flows nourish and animate all that is.
As Figure 1 shows, the forces that form this all-embracing web produce natural “geometries of behavior,” precise, universal patterns visible in the shape, organization, and operation of all systems at every level. Our understanding of this “order in chaos” took a major leap forward in the 1980s when computers and new mathematical fields such as Nonlinear Dynamics (fractals) and Energy Network Analysis allow us to see and measure these patterns as never before.
This discovery of universal patterns is actually a rediscovery of the sacred geometries — geometrically precise shapes, patterns, and ratios like pi, phi, and the golden spiral — that the ancient Greeks identified 2,500 years ago. It is also a rediscovery of the idea that the vast majority of real-world systems fall into the category of organized complexity (Figure 2).
Science Discovers that Organized Complexity = Most of the World
Mathematician Warren Weaver explained the meaning of organized complexity and its place in science in a 1958 report to the Rockefeller Foundation (1958, 432):
Weaver is describing Newton’s very important two-body model: the sun’s dominant effect on the motion of a single planet. Simple causality has been the main focus of exact science ever since. But since most problems have more than two variables, science also moved on, as Weaver says:
Note, however that statistics, only works on problems of disorganized complexity, that is, on the helter-skelter of non-related behavior, but most of the world’s behavior is related. Thus, by the 1930s it became clear that many systems did not fit the assumptions of either simplicity or disorganized complexity. Such systems were particularly rife in the human and life sciences. One cannot, for example, explain what makes a caterpillar turn into a butterfly using either simple causality or theories of non-related behavior. Economic and social transformations are similarly out of reach. Apparently, therefore, a third set of problems existed which were inherently different from either of the earlier two. As Weaver writes:
ENS and the new mathematical fields such as Nonlinear Dynamics (fractals) provide a new scientific toolbox for exploring the organized complexity that makes up the vast majority of real world systems. These tools and patterns allow scientists to do very hard science on very complex systems — even if they do not know all the specifics — because the same measurable patterns and principles apply. Indeed, hard science is not only possible, but relatively straightforward because universal patterns manifest in network structure — and network structure can be measured by such tangible elements as volume of flow or size, number and diversity of organizations and connections in the whole.
Still, the most discoveries from orderly complex systems came from studying energy’s role in their emergence, growth, and development. Thus, scientists have long known that energy buildups such as voltage and heat create pressure to move that sometimes change patterns of behavior (liquid to gas, for example). But, in the 1970s, Ilya Prigogine’s Nobel prize–winning work in self-organization showed how energy pressures drive the emergence of new patterns of organization. This process of “self-organization” is easy to see in boiling water (Figure 3).2
Prigogine showed that self-organization also follows universal patterns, in this case, of growth and development. Consequently, studying self-organization leads to a clear understanding of the universal laws, patterns, and principles that govern the emergence, growth, and development of all things.
This energy-driven vision of emergence, growth and development is both shocking and easy to see. What makes a tornado rise up and a whirlpool organize into a funnel? Binding forces give matter shape and energy pressures push it to move. What made the cauldron of chemical soup on early earth coalesce into the first living cells? Life itself was born of energy pressures and binding ties. The swirl and flow then continued. Early life breathed out, breathed in, and the air, oceans and land linked and structured themselves into webs and cycles both large and small. All that “is” on this earth — grass, trees, air, oceans, animals, and human beings — is linked, bound in a design whose intricacy we are just now coming to comprehend.
Its discovery also adds a new tool to our box. It says scientists can apply energy laws to economies and ecosystems, not because economies are like ecosystems per se, but because the same laws of energy-driven development apply to both. The same cycle of emergence and development seen in boiling water, for instance, was also active in the origins of life and the cycles of civilization; it appears to be playing out today (Figure 6).
Still, Prigogine shook the scientific ferment most by showing that the same self-organizing processes, operating over and over again at every level of existence, were behind the evolution of all things, literally from the origins of matter to the latest cycles of civilization (Figure 3; Chaisson 2001; Odum 2007). The startling implication here is that, as Systems Theorist Rod Swenson (1997) quipped, we should no longer talk about “evolution on earth, but the evolution of Earth” (and all the things on it). Neurophysiologist Roger Sperry (2000) summed up the idea simply: “In the eyes of science . . . man’s creator becomes the vast interwoven fabric of all evolving nature . . . a cosmic scheme that renders most others simplistic in comparison” (Figure 4).
An orderly universe whose interwoven parts co-evolve according to energy laws? Although ENS uses math, physics, and hard evidence to support its claims, this new stage of science clearly produces a fundamentally different worldview than that envisioned by classical reductionist, materialist science. Some people call it an “ecological universe” or a “web world” because everything in this universe is linked into whole systems and there are no truly separate bits. Everything is also dynamically co-evolving as part of a vast, invisibly ordered web of organized complexity. In this universe, therefore, nothing is static for very long; nothing is truly accidental; and there are no finalities (except at the end of time).
In particular, everything in our universe is built of and into flow–networks, systems whose very existence arises from and depends on circulating matter, energy, resources and information throughout the entirety of their being. Your body, for example, is an integrated network of cells kept healthy by the circulation of nutrients, energy, and information. Ecosystems are invisibly connected webs of plants and animals that add to and draw from flows of oxygen, carbon, nitrogen, and so on. Economies are networks of interlinked people, communities, businesses, and governments that contribute to and draw sustenance from the circulation of goods, services, resources, energy, information, and money. All of these flow-networks, including people and economies, are inextricably integrated into the planetary flows of energy, water, air and earth that keep us all alive.
So, where ecologists taught us to see the natural world as a flow-network through whose veins energy, information, and resources (like carbon and oxygen) transverse the globe, self-organization explains why similar images apply to all things. In economies, money and information form the most powerful circuits of all (Figure 5).
Regenerative economies also help make sense of the human behavior required for long-term vitality. For example, instead of selfish agents, ENS envisions economic vitality arising from interdependent agents who of necessity must serve the health of the whole as well as themselves. Here, as Ulanowicz (1986) notes, “fitness” means the ability to play a constructive role in the “web of processes.” So, although one can easily envision an orderly “invisible hand” at work in economies, here self-interest is a minor part of a bigger picture (as it was with Adam Smith), and agent “rationality” must include awareness of dependence on and service to the health of the larger whole.
Finally, instead of inevitable equilibriums, ENS sees a world of energy pressures driving new stages of growth and development. So, just as water boils under certain conditions, so mounting fear, frustration, and desperation forces societies to a choice point. If we choose learning we will enter a new stage of development; if we fail to learn our civilization will likely collapse.
In sum, self-organization teaches us that:
- There is no “end of history,” only ongoing learning, reorganizing, and adapting to the pressures and crises the cosmos and our own behaviors create. Periodically, developmental pressures will force us to build something better or follow old habits into regression and possibly collapse.
- Diversity is essential to the process of filling niches, finding new ways and developing a healthy future. To suppress diversity is to eliminate the path forward.
These lessons set the stage for a very different view of our current crisis.
STIRRINGS OF A NEW STAGE OF DEMOCRATIC, FREE-ENTERPRISE CIVILIZATION
Oligarchic power is so entrenched nowadays that many people have lost hope for a better future. Self-organization theory, on the other hand, helps us see that no societal pattern is ever final. Furthermore, new stages of society are always driven into being by exactly the kinds of massive, roiling frustrations and pressures that we now face. Instead of an inevitable downward spiral, in this view global civilization is being driven to find better ways before the pressures created by a self-serving power turn into outright collapse.
Here, global civilization is clearly nearing its choice point — learn or collapse — but we do have an option. Instead of oligarchic capitalism being the “end of history,” Sustainability, the New Economy, and Occupy represent the self-organized stirrings of a new stage of history, one that might lead to a significantly better world.
Self-organization theory also helps us see today’s struggle between democracy and oligarchy as ancient, cyclical developmental progression in which distributed empowerment (democracy) is slowly but surely rising. Thus, in The Republic, Plato defined oligarchy as, “a government resting on a valuation of property, in which the rich have power and the poor man is deprived of it.” In The Gettysburg Address, Lincoln defined democracy as “government of the people by the people and for the people.” Which one should rule? In a regenerative view, oligarchy is unhealthy because it tends toward selfishness at the top with exploitation of the rest, not to whole system health. Consequently, the last 3,000 years of history can be seen as a series of stair-step cycles with periodic crises driving democratic pressures to wrest more and more rights, freedoms and power from the hands of oligarchic, power systems. That’s why Martin Luther King Jr. argued that the arc of the universe tends toward justice.
As Figure 6 shows, the standard stair-step cycle starts out with interlinked crises generating massive internal pressures:
- If this pressure meets up with new possibilities brought by better ideas, it may coalesce into what Harvard sociologist Pitirim Sorokin (1937) called a “spiritual spur,” a noble, unifying vision that inspires people at all levels of the society to work for a better world. The American experiment, for example, coalesced around the ideals of democracy, rights for the common man and the freedom to “pursue happiness.”
- Unfortunately, societal success generates wealth, which tends to breed concentration, corruption, and a return to oligarchic power, now cloaked in the language of the noble ideal. In today’s case, our free-enterprise, democratic dream has become oligarchic capitalism and money-run democracy.
- Since oligarchies are notoriously self-destructive, eventually the irresistible force of crisis meets the immovable object of power and the society either brings forth a new stage of civilization or faces regression and collapse.
Ironically, because the struggle between democracy and oligarchy is cyclical, the battle we face today looks a lot like the one that took place at America’s birth. Now as then, America is witnessing a simmering revolt against predatory transnational corporations in league with great political power, whose combined machinations are undermining everyday peoples’ ability to earn a living. The Boston Tea Party of 1773, for instance, was an act of sabotage against the most powerful corporation of the day, the British East India Company. Because the Company had been teetering on the edge of bankruptcy, its friends in Parliament had come to the rescue by giving it a special exemption from paying taxes on the tea it sold in the colonies (the Tea Act). This exemption allowed the Company to undercut local tea merchants and take their business. Since the colonists did not have any influence in Parliament (“no taxation without representation”), they did not think this rigged system was quite fair — hence the Tea Party.
So, what ignited the Boston Tea Party was not so much a tax, as it was a corporate tax loophole giving special advantage to a powerful moneyed interest. Sound familiar? Today we are again facing powerful economic muscle in league with great political clout working to increase the wealth and power of the already powerful while running roughshod on everyone else’s well-being. So, let us start exploring today’s cycle with our own oligarchic concentration and corruption.
CONCENTRATION, CORRUPTION AND CRISIS: THE OLIGARCHIC TRIUMVIRATE
Today’s massive increase in concentration was fueled by a free-market belief system which rose to dominance in the early 1980s under President Ronald Reagan and Prime Minister Margaret Thatcher. Now taught in universities and embraced by elites across the world, this theory is called neo-liberal because its goal is to “liberate” big capital and big corporations to maximize their owners’ wealth without those bothersome restraints against harming people and planet. The rest of us call it “trickle-down” because that’s all we get.
Neo-liberals describe themselves as “pro-business,” but their basic premise is that what’s good for Big Business (and Big Money) must be good for the economy as a whole. Neo-liberal prescriptions for health include: deregulating big business; privatizing everything public; lowering taxes on corporations and the wealthy; smashing unions; rolling back environmental protections; and slashing government services such as education, roads, police, and “entitlements” such as Medicare and Social Security.
Yet, although millions of voters honestly believe liberated markets are the best route to economic health, the evidence shows that this approach works only for a few people at the top, not for the economy as a whole. In fact, 30 years of deregulation, privatization, and outsourcing has eviscerated the middle class and eroded the real economy while coincidentally emasculating democracy and reducing the diversity and distributed empowerment that marks healthy free-enterprise economies. Figure 7 shows its downward drag on America’s 150-year economic miracle.
In short, once you drop the free-market jargon, it becomes obvious that trickle-down is not free enterprise; it is oligarchy (rule by the Few) masked by Enlightenment language. Though it is usually called conservative, trickle-down is actually regressive; it works to shore up power structures that increase wealth at the top and misery at the bottom.
Trickle-down continues nevertheless because, as voting patterns show, its advocates have convinced many working-class voters that freeing “market forces” is best. Why do free citizens vote against their own economic interests? The immediate answer is that oligarchs like the Koch brothers buy radio and television stations and pour money into think tanks such as the Heritage Foundation that develop the talking points, pundits and experts, which make society-destroying policies seem good, right and true.
The longer-term answer is that now, as in the past, the most crucial battle in the war between oligarchy and democracy takes place in the realm of ideas, particularly ideas about how best to run an economy. Oligarchs, of course, finance ideas that increase their power and justify it. Lacking any coherent financial or institutional support, the 99% public has a hard time fighting back until the resulting problems become acute — witness Occupy.
Today’s economic orthodoxy teaches, for example, that the best way to run a business and economy is to maximize profits only for owner-elites, regardless of the harm done to anyone or anything else including employees, consumers, suppliers, investors, local communities and the environment. Such brazen disregard of the health of the whole has bred a business class that accepts the economic necessity of poisoning our planet to maximize elites’ short-term profit, and an accounting profession that calmly calculates the benefits of paying off lawsuits versus selling dangerous products.
The related obsession with short-term profits fuels the cost-cutting rush to eliminate workers, outsource jobs, and cut employee wages and benefits, while giving extra bonuses to the executives who oversee such slashing. The Wall Street Journal (1997) called the result “corporate anorexia” because the constant vomiting up of employees made companies both lean and unhealthy, with corporate life spans deteriorating in kind.
Similarly, our officials scrap antitrust laws and help big corporations get ever bigger because they have been told that bigger is always better: it’s more efficient, more productive, it outperforms! They then eliminate government regulations and oversight that might save us from corporate plunder because they have bought into the idea that government is always bad: it’s wasteful, bureaucratic, and it hamstrings our wonderfully productive corporations and unerring markets.
This system’s most absurd idea is that unrestrained, self-serving, “rational” agents who care for nothing but money (Homo Economicus) lead to healthy economies. Instead amoral agents with unchecked power mostly tend to create those pesky crises that flow from excesses of ruthlessness and greed. In the last 75 years, this greed-centered capitalism has produced two catastrophic collapses — the Great Depression of the 1930s and now the Global Instability of 2007 — as well as 11 other economic downturns. (Figure 8 shows deregulation’s effect on banking instability.)
In each case, millions lost their jobs, their homes, their self-esteem, and often their families; thousands of businesses went out of business and whole communities went bankrupt; services shriveled and debt ballooned. But, in many cases, the super-rich come out of such downturns even wealthier than before because crashes create opportunities to snatch up distressed businesses and real-estate at rock bottom prices, while cutting wages for desperate workers. Plutocrats similarly love war because profits soar.
I could go on, but perhaps you get the picture. Thanks to millions of cleverly crafted absurdities, instead of a Free People building a healthier world, we have money-obsessed oligarchs leading us all over a cliff while fully believing they are humanity’s best hope. Still, the resulting crises also create a powerful impetus for change.
THE RISING NEW BREED OF DEMOCRATIC FREE-ENTERPRISE NETWORKS
The upward surge of the cycle starts in earnest when society destroying practices come home to roost. We saw a dramatic instance of this in 2008 when Wall Street’s wizards of finance stood before a Senate committee, insolvent, panic stricken, with their hands out. The government bailed the bankers out, but the illusion was shattered. Public perception changed in a way unimaginable even a few months before.
The Occupy Wall Street movement gave voice to the outrage the 99% public felt, but Occupiers lacked the practical knowledge of how to build the healthy businesses and economies needed to turn their energy into accomplishment. A much older and more conceptually advanced New Economy movement, however, has been developing the practical path back to vitality for some time already.
Emerging worldwide in response to various economic crises, New Economists appear to be searching for the real-life rules that guide the creation of healthy human systems be they in education, healthcare, finance, or energy. New Economists and business reformers like William McDonough, Hunter Lovins, and Paul Hawken fully believe in free enterprise, they just believe we need to revise current assumptions, policies, and incentives to maintain the health of the entire civilization instead of just the wealth of a few oligarchs.
Centering itself on democratic principles and new strategies for building networks and communities, this New Economy’s unifying theme is that businesses, communities, governments, and economies run best when people work together for mutual-benefit and a fair share in the outcomes.
New Economists also believe that economic vigor comes best from building synergetic human networks that create healthy, productive goods and services (not from financial speculation). They have been experimenting with a wide variety of forms including: Triple Bottom Line business, stakeholder-owned enterprises, socially responsible investing, natural capitalism, B-corporations, public-service banks, and almost everything associated with the sustainability movement from clean energy and mass-transit to farm-share cooperatives and recycling.
New Economists’ most important experiment, however, is with consciously created networks of stakeholder-owned enterprises. Linking semi-autonomous, profit-seeking businesses — each owned by its workers and managed by member managers — together in a mutually supportive association, tends to create more resilient and innovative networks than the smaller, more fragmented co-ops that have existed in the United States and around the world for decades.
In academic terms, New Economists increase resilience, innovation, productive capacity, and long-term vitality by building networks of enterprises, owned by all stakeholders, and organized in a democratized, common-cause, community-building fashion. For example, Organic Valley, one of today’s largest producers and distributors of organic dairy and produce, grew from a few family farms in Wisconsin in 1988 to a network of nearly 1,700 farms located in 32 states and three Canadian provinces with more than $700 million in annual revenue. Similarly, the Evergreen Cooperatives of Cleveland Ohio were started by a coalition of local governments and universities in 2008 as a conscious effort to revitalize their region by building local business that employ local people. The Cooperative now includes: Ohio Cooperative Solar, a worker-owned solar-installation and weatherization co-op; Evergreen Cooperative Laundry, a state-of-the-art industrial–scale laundry; and Green City Growers, a hydroponic farming cooperative capable of producing 3 million heads of lettuce and 300,000 pounds of herbs a year.
The Mondragon Corporation of Spain shows how this kind of mutual-support network helps its people, businesses, and communities weather economic crises like the one we face today. Founded in 1956 as a small stove manufacturer, Mondragon has grown into a €20-billion network incorporating 120,000 workers in over 100 global businesses ranging from machine-tool manufacturers and supermarket chains to a university and bank. Even though the markets for some of its business have shrunk significantly in the last few years, Mondragon and its people have weathered today’s storm well because its community-serving infrastructure (i.e., banks and universities) helps maintain baseline essentials (food, finance, education, etc.) while its internal diversity provides back-up alternatives in times of need.
For example, when one company’s business is down, its workers can often find employment in one of the others. If this fails, instead of laying people off, all workers begin to work fewer hours and take home somewhat less pay. The extra time can be used to learn new skills, create new projects, or take care of more family affairs. Maintaining employment, in turn, helps keep local consumption up and welfare costs down. And, when the market rebounds, there is no need to spend money hiring and training new workers — or worse, building a new business from scratch.
So, if you look closely at the businesses that are weathering today’s economic storm well, you are likely to find a new breed of free-enterprise networks that are trying to stay healthy the old-fashioned way: by working together for mutual benefit. Furthermore, although the Far Right decries such cooperative efforts as socialism, they are in fact a rediscovery of our original democratic, free-enterprise principles. So, just as the kind of free-enterprise my grandfather practiced saw itself anchored in a larger community in which contribution, reputation, quality, and integrity mattered, so too do energy laws teach us that everything and everyone under the sun are inseparable parts of an interdependent web of commerce and community. The Green Bay Packers, the G.I. Bill, the interstate highway system, and free public education — the way to keep free-enterprises networks healthy has always been to apply commonsense, common-cause, whole system operating principles instead of today’s “money for owners is all that matters” worldview.
The potential for restoring and even advancing the American dream is obvious. If today’s budding New Economy succeeds, individuals and communities will enjoy greater economic opportunity; civilization’s greatest social and environmental challenges will be more effectively addressed; and more people will find fulfillment by bringing their whole selves to work in common-cause communities. Like a butterfly bursting forth from a confining cocoon, we might just escape today’s race to the bottom, and enter a new era of healthy DFENs that creates durable vitality at all levels, not merely at the top.
In short, we might actually build ourselves into a much better world. Studying how nature builds lastingly vibrant systems can teach us a great deal about how to bring this world about.
OUR TARGET: REGENERATIVE ECONOMIES WITH ROBUST ECONOMIC METABOLISM
Integral wealth is developed only when all four types of capital – natural, social, financial and physical – are in appropriate balance. By confusing wealth with only financial capital, we run the risk of believing that we can run down our natural or our social capital indefinitely. Below a certain level of natural or social capital, however, it is obvious that financial capital has no relevance anymore: a huge bank account in a wasteland of social disorder or ecological collapse is meaningless. As the bumper sticker claims: “No Planet, No Business.”
— Bernard Lietaer, 2001, p. 277
ENS’ answer to how can we build a better world starts with a new target for economic vitality: regenerative economies with robust economic metabolism.
As we have seen, oligarchic capitalism believes that economic vitality springs from separate, self-serving agents striving for dominance in unregulated markets. ENS, on the other hand, sees an economy as a metabolic system, an interlocking, self-renewing energy-, resource-, and information-processing system. Here, an economy is a complex, network of interlinked people, communities, businesses, and governments that contribute to and draw sustenance from the circulation of goods, services, resources, energy, information, culture, and money. In short, as Ben Cohen, founder of Ben & Jerry’s Ice Cream, put it: “business is a system of organized human effort that produces power.”
Naturally, in this view, everyday people, their relationships and know-how come first because that’s what economic networks are made of. Here, power and productivity come from individuals banding together in synergetic working groups that can do more cooperatively than any individual can do alone.
Cooperative culture is crucial here because “organized human effort” really does “take a village.” In fact, cooperative relationships are literally the connective tissue that holds human networks together. Merits such as reciprocity, integrity, commitment, and quality become central to economic vitality because the ties that bind these networks must be both flexible and durable.
Here, money is like blood and where it goes matters. Like blood, money is the economy’s main vehicle for catalyzing crucial processes and circulating energy, information, resources, products and services throughout the whole. (Note: “catalyzing processes” means that, for example, schools have enough money to pay teachers and small builders have access to construction loans.) Money must circulate robustly from top to bottom — literally from individuals and households to governments, large corporations and back again — because people at every level of the network — parents and teachers to financiers and CEOs — all play essential roles in the overall processing (Figure 9).
Metabolic health rests on three main rules. The system must:
- Keep the whole circuit (i.e., everyone) healthy. Everyone must stay healthy because Adam Smith’s butcher and baker are not alone in their processing and exchange, but part of a vast interconnected metabolic circuit in which each actor’s intake and output link to form a round-trip route that performs all the operations needed to maintain a healthy whole. Should any sector of that circuit fail — food, transportation, education, housing, healthcare, or finance — the whole will fail too. Systemic health means member cells at every level must have adequate access to the basics of life, including food, shelter, energy, information, education, and infrastructure.
- Maintain robust circulation that reaches all parts. Money, information, energy, resources, goods, and services must bathe every part of the whole because all levels and sectors count. Conversely, poor circulation leads to malnutrition and eventually necrosis, which brings the whole system down along with the undernourished parts.
- Maintain cooperation and coordination that supports the health of the whole. The health of the whole is essential because all members depend on it. Cooperation and coordination are necessary to keep the whole circuit running and failure to stay in sync is deadly. So, just as your lungs and legs must stay in sync for you to get enough oxygen when you run, so too must finance and business stay in sync for economic networks to stay healthy.
Regenerative economies arrange their societal subsystems to be self-renewing (like education) and to serve the long-term health of the whole. They remain resilient through thick and thin because they harness the potential of all their members and are constantly reinforcing and rebuilding vitality.
The trick to creating a regenerative economy lies in arranging key processes to augment each other in a mutually supportive way. In economies, the most important of these key subsystems are (Figure 10):
- Monetary Circulation: Monetary circulation is crucial because money is the catalyst for all economic processes.
- Government: Despite its vilification by conservatives, good government is crucial to commerce because the laws, rights and commonwealth infrastructure it provides create the safe, reasonably fair playground in which business can interact. Hernando De Soto (2003), for example, argues that capitalism succeeds in the West and fails every place else because of the West’s system of property rights and laws. ENS would simply add that good government must be defined as one which serves the long-term health of the whole, not just the short-term interests of the few.
- Infrastructure and Resources: Obviously maintaining material infrastructure such as good roads and essential resources such as water and energy is crucial, but, because vibrant networks are built of healthy human capital, our definition of essential infrastructure must also include empowering education and reliable health care because these are essential to societal regeneration.
- Cultural Capital: Healthy human capital is generated by healthy cultural capital, including: everyday mores of give-and-take; empowering education that teaches critical thinking, problem solving, and creativity as well as reading and writing; and models of entrepreneurship that show new generations how to start value add businesses of their own.
HOW DO YOU GROW HEALTHY NETWORKS? ANSWERS FROM NATURE’S DESIGNS
It’s not how big you grow; it’s how you grow big.
— Jane Jacobs, 1997
Naturally, in a metabolic view, the first goal of economic policy must be to build and maintain productive real-economy networks. Furthermore, the best way to do this is to get money pumping through the veins of real-economy networks as opposed to letting it be funneled into low-productive processes like usury and speculation.
Studying the network designs that nature uses in the real world can go a long way in clarifying the kind of economic networks we need to build as well. Naturally, the most common designs exist because they support such metabolic essentials as robust circulation and cross-scale health. Thanks to the measurable nature of network structure, we can turn these metabolism-enhancing patterns into precise, quantitative measures of network health and “sustainability” (meaning the likelihood of lasting for long time).
The two most important network patterns are balanced hierarchies and intricate weave. The former explains why today’s unbalanced hierarchies (think: “too big to fail”) cause economic instability; the latter explains why kind of tight-knit networks my grandfather knew are essential to long-term vitality. Let us start with intricate weave.
Intricacy: Strong, Fast and Flexible Social Fabric Plus Great Circulation
Intricacy refers to the lace like network of small, interconnected, synergetic circles that nature uses to build wholes that are strong, fast and resilient at the same time. A developing embryo (Figure 11) shows how and why this pattern develops: a single cell grows, divides, and reconnects with its twin; the process repeats over and over again, leading to an intricate network of cells.
This process of small things uniting into bigger, more complex things (development) explains why everywhere you look big things are built of littler things which are built of littler things still. Molecules are built of atoms which are built of subatomic particles. Your body is built of organs and tissues that are built of individual cells. Armies are built of divisions, regiments, brigades and platoons.
Nature actually uses intricacy for two reasons. First, it increases the speed and thoroughness of internal circulation. Thus, like a bucket brigade, small, tight cells circulate energy rapidly, while the close-knit connections expand the area reached. The result is rapid, effective distribution of all the things we need — money, resources, information, goods, and so on — throughout the whole. Figure 12 shows how internal energy cycling speed increases in step with increasing intricacy and development.
Secondly, this intricate weave creates an organizational fabric that is strong, fast, resilient, and flexible at the same time. The rubric here is: small & connected = strength & speed. So, reminiscent of the work of E. F. Schumacher, small tight teams work better than big bulky ones, but linking small, teams in a close, synergistic weave work best of all because they have the combined benefits of size, distributed intelligence, and rapid, effective action.
Reminiscent of the stakeholder-networks New Economists are trying to build, cooperative relationships form the connective tissue that holds networks together and allows money, information, goods, and services to circulate rapidly throughout the whole. Goods also circulate more effectively and “wisely” because close connections help maintain integrity and concern for quality and reputation.
Yet, strong individuals are also important to this weave. Thus, the embryo’s first step, individuating (dividing / separating), explains the origins of specialization, diversification, and distinct individuals. Yet, the real requirement, strong selves and strong bonds, validates claims from both Right and Left. Thus, while individuation confirms the conservative ideal of strong individuals, the embryo’s second step, reconnecting in community, confirms that members are nevertheless deeply interdependent, not separate lone-wolves.
Intricacy also gives us a way to define healthy development, not as volume of money exchanged (GDP), but as tightness of weave. Intricacy’s accompanying increase in internal energy cycling speed (flux density) then lets us measure this weave quantitatively. As Fig. 12 shows, this measure confirms our intuitive sense of developmental progression from the Milky Way and living organisms to biospheres, civilizations. Here we find the human brain is the fastest energy cycling and hence the most developed biological matter on the planet, but modern civilization as a whole represents an even more intricate stage of development.
In this view, the “velocity of money” serves as a rough gauge of economic development (intricacy) but the Multiplier Effect, a metric that measures how much money circulates from hand-to-hand within the local economy, is more apropos. The Multiplier Effect confirms that intricately woven networks (ones that circulate money robustly within the local economy) are better for economic health than corporate giants who siphon money off local monies to distant headquarters. A 2003 study of Midcoast Maine,3 for example, showed that local businesses spent 54% of their revenue within Maine (on professional services, wages, goods, etc.), while big-box retailers returned just 14.1% of their revenue, mostly in the form of payroll. A 2002 study4 in Austin, Texas, similarly showed that for every $100 local consumers spent at a national bookstore, the local economy received only $13, whereas the same amount spent at local bookstores yielded $45.
In sum, intricacy explains why:
- Internal development — of individuals, organizations and networks — is much more important to economic health than GDP growth.
- Economic health is not measured by how much money big corporations make, but how robustly money circulates throughout the entire socioeconomic network, from top to bottom and everywhere in between.
- Economic vitality is not measured by the size of one’s big corporations, but by the combined strength, resilience, flexibility, and speed of the entire system.
FAST, FLEXIBLE NETWORKS: THE ECONOMIC POWER OF HUMAN INTRICACY
Cities . . . need all kinds of diversity, intricately mingled in mutual support. They need this so city life can work decently and constructively, and so the people of cities can sustain their society and civilization. . . . I think the science of city planning . . . must become the science and art of catalyzing and nourishing diverse, close-grained working relationships that support each other economically and socially.
— Jane Jacobs (1961, 128)
Still, intricacy’s greatest contribution is its clear picture of the kind of “organized human effort” that New Economists need to build. What kind is that? Goerner (2009, 286) describes human intricacy as:
Intricate webs of human expertise, material infrastructure, behavioral patterns, and cultural systems that have grown up together such that all elements play mutually-supportive roles in the well-being of all members and the long-term health of the entire social, economic and environmental whole.
Jane Jacobs, who penned the opening quote over 50 years ago, described the power of intricate networks in real life. Found from the industrial cities of Bologna and Venice in northern Italy to Silicon Valley in the United States and Asian Motors in Japan, intricate networks exhibit high levels of improvisation and adaptation in design, materials, goods, services, and methods of production because such creativity happens best in small firms that are close to the problem and not hampered by bureaucracy or corporate norms. Such “flexible manufacturing networks” provide living proof that “small & connected = strength & speed.” Describing intricacy in the “innumerable small firms in a great cluster of small industrial cities in north-eastern Italy,” Charles Sabel emphasizes improvisation as an everyday event:
A small shop producing tractor transmissions for a large manufacturer modifies the design to suit the need of a small manufacturer of high-quality seeders. In another little shop a conventional automatic packing machine is redesigned to fit the available space in a particular assembly line. . . . A membrane pump used in automobiles is modified to suit agricultural machinery. (Cited in Jacobs, 1984, 124)
Because they are small, cooperative, and inter-linked, such enterprises tend to produce very sophisticated, high quality work. Innovation is high because improvisation is a central theme. Quality is high because craftsmanship is still important. Craftsmanship is important because human ties still bind. Hence, here people pursue quality and integrity, as well as profit.
Quality and creativity are also high because workers and ideas circulate. Such circulation builds expertise, breadth of experience, and an invisible chain of valued human connections. Breakaway enterprises spring up easily and often as workers from older enterprises move out to start firms of their own. Such spin-offs often collaborate with the older establishments because they share history and have related work. People in such networks establish their own “coherent role in the web of processes,” while members, information, and expertise cycle easily throughout. Members prosper in a synergetic way (not zero-sum) because advances anywhere tend to stimulate benefits everywhere.
Such networks achieve tremendous economies of scale not within the framework of huge organizations as conventionally assumed, but rather through symbiotic networks of small enterprises. Most have but 5 to 50 workers with a few more having one or two hundred. As Sabel says:
The innovative capacity of this type of firm depends on its flexible use of technology; its close relations with other similarly innovative firms in the same and adjacent sectors; and above all on the close collaboration of workers with different kinds of expertise. These firms practice boldly and spontaneously the fusion of conception and execution, abstract and practical knowledge that only a few exceptional giant firms have so far been able to achieve. (Cited in Jacobs, 1984, 124)
The productive, innovative power of such flexible networks seems incredible in today’s “bigger is better” world, but they actually explain America’s early entrepreneurial feats. Feeding such networks with projects like the interstate highway system and the G.I. Bill explains why America’s middle class boomed through the postwar period.
Yet, these webs of healthy enterprise seem to be vanishing. What happened? The answer is simple: big money buys political favors and rigged markets that redirect money flow to the already wealthy and powerful. Taxpayer subsidies to big oil; no-bid military contracts used in unnecessary wars; health insurance companies granted monopoly status; and endless tax breaks for the wealthy — 30 years of trickle-down policies have left America’s flexible free-enterprise networks withering on the vine.
What then shall we do? Angry at oligarchs and enchanted by intricacy, many activists want to get rid of hierarchy altogether and just build flat organizations with intricacy spreading horizontally forever! Unfortunately, the laws of development say hierarchy is absolutely necessary for groups beyond a certain size.
ENS’ approach to resolving the problem of hierarchy is to clarify the issue. Here again, the problem lies not with hierarchies that facilitate, coordinate, and protect of the whole, but with oligarchic hierarchies designed to exploit and drain. Let me take a moment to explain the origins of and differences between these two types of hierarchy.
HEALTHY HIERARCHIES VS. UNHEALTHY OLIGARCHIES
Ironically, the same embryonic development process — grow, divide, and reconnect — that explains intricacy also explains why human and biological networks are driven to develop hierarchies that hold the whole together. Pressure to develop hierarchies arises because growth in population stretches bonds and strains cooperative coherence.5 This strain creates internal pressures that eventually reach a breaking point (literally). These growth pressures periodically force organizations to develop new ways to hold themselves together and stay in sync — or face growing instability and possible collapse.
Such growth pressures, happening over and over and again, have led to a familiar progression of ever more complex wholes held together by incredibly intricate relationships. In the case of human societies, as groups got bigger, from family groups to hunting tribes to villages, they developed new internal structures — clans and councils, for example — to maintain their collaborative coherence. Money also developed as a binding system. Thus, once agrarian villages reached about 350 people, they began using symbolic tokens (money) to facilitate exchange among people who often did not know each other well. Figure 13 shows how this process of growing apart and then reconnecting more intricately drove the development of nervous systems and hierarchical civilization.
In the case of human societies, hierarchies evolved because villages of more than a couple hundred people were no longer able to mobilize for defense — and hierarchies helped them do so. Thus, one man making decisions and funneling directions down an orderly chain of command allowed an increasingly unwieldy society to mobilize resources and coordinate actions to maintain the health of the whole defensively. Over time, hierarchies took on other coordinative roles in service to the health of the whole. Chieftains in Scottish clans and American Indian tribes, for instance, maintained order, organized group actions, and helped make sure everyone was fed.
Note, however, that because hierarchies arose to maintain whole system health, the leaders of healthy hierarchies play a stewardship role: they have a fiduciary responsibility, a social contract to shepherd the organization in ways that maintain the long-term health of the whole — not a license to exploit. Clan chieftains, for example, are not much richer than the people they serve.
Because such stewardship is essential, to this day organizational vitality depends on how well leaders shepherd health of the whole. For instance, in The Living Company, Arie de Geus (2002) shows that all extremely long-lived companies6 share a common business culture (regardless of their nation of origin) whose critical ingredient is a management hierarchy that takes its stewardship responsibilities seriously. De Geus shows that such management hierarchies improve their company’s learning, productivity, and longevity by:
- Valuing people above material things;
- Putting the messiness of learning above the rigidity of standard procedures; and
- Shepherding resources for the long-term health of the whole.
But, if stewardship is so important, why is it so rare in leadership today? According to anthropologist Robert Carniero (1967) the problem is that today’s hierarchies use a coercive hierarchy model that grew out of early conquest and subjugation. In this view, each time a more powerful village conquered a weaker one, it left a warrior-administrator to oversee the conquered; collect tribute (later called taxes); and mobilize work crews to build roads and other militarily useful structures. Over time, recurrent conquests led to ever-expanding layers of management and spheres of control: chiefdoms to kingdoms to empires.
Early coercive hierarchies turned into today’s uncaring oligarchies because conquerors were not members of a cooperative network, but owners of a system of exploitation that served their personal wealth and power, but not necessarily societal well-being. Societal health fails frequently because, in this system, success comes from playing the power game well, not from managing well. Congress is despised because the problem of self-serving power versus society-serving competence is still rife today.
Oligarchies, however, expand extremely well because they are very good at concentrating wealth and mobilizing resources. Unfortunately, such growth makes oligarchy’s problems worse. As societies grow larger, elite groups tend to grow apart from the rest of the society, becoming progressively more focused on the moves of their rivals and out of touch with the public that they theoretically served. Eventually, the ties that once bound leaders to their people break, leaving a caste of self-absorbed elites rabidly pursuing their own self-interest regardless of the harm this does to the society. You see this behavior in both political parties in the United States and the leaders of many multinational corporations today. It also happened in Rome, the Soviet Union, and medieval Europe.7
THE PYRAMID (FRACTAL) HIERARCHY: WHY HEALTH REQUIRES BALANCE
We are so used to equating hierarchy with exploitation that it’s hard to remember that this is not nature’s way. Our next natural design, the pyramid hierarchy, gives us a more precise understanding of what makes hierarchies healthy and why oligarchies always fail.
The familiar pyramid hierarchy with a few, highly efficient, big elements on top and successively more numerous, more diverse, less efficient, small elements on the bottom is seen in systems as different as your circulatory system, river deltas, lightning bolts, lungs, erosion patterns, ecosystems, and economies (Figure 14).
The energy explanation for this arrangement is that it optimizes flow across scales, that is, it reaches all levels and parts of the system in a relatively rapid and thorough manner. The big, efficient elements (arteries; sharks; or multinationals) provide the high-volume and speed needed for rapid, cross-level circulation, while the many small elements (capillaries, protozoa, or local contractors) reach every unique nook and cranny.
Nature’s preference for pyramids teaches us a very important rule of healthy development: it requires balance. We know from ecosystems, for instance, that healthy systems maintain a balance of big elements (sharks) and smaller elements (herring) because too many sharks will eat up all the prey, while too few will not be enough to keep the prey population down. Yet, the same need for balance is also seen in River systems where, for example, building a big canal near River Delta pulls water and soil away from wetlands, thus destroying healthy circulation. In both cases, failure to maintain proper balance of big and little is disastrous for the health of the whole.
Fractals turn this idea of balance into a broadly applicable mathematical law that says network health requires each successive level must maintain a relatively precise ratio of:
- Big & little;
- Resilience & efficiency;
- Diversity & unity;
- Flexibility & constraint.
The need for these balances is easy to see. Organizations with too little efficiency and unity cannot get anything done, but organizations with too much efficiency and monopolistic dominance (unity) increase economic fragility because excessive efficiency tends to drain the surrounding network (see Wal-Mart effect below), while the lack of diversity (resilience) leaves few options if the giant develops problems.
Similarly, economies with too much constraint strangle business, but ones with too little constraint open the door for economic predation that destroys grassroots networks. Similarly, allowing giant companies to swallow up lots of small companies lowers economic resilience, leaving fewer options, less competition and greater economic disruption if something happens to the big corporation. Economic frailty increases because eliminating small companies leaves fewer jobs and more money being sucked up to the top, not circulating throughout the whole.
More importantly, the need for natural balance creates a measurable target for network health. Ulanowicz et al. (2009), for example, used the optimal balance of resilience and efficiency observed in healthy ecosystems to create a quantitative measure of health and sustainability for economic networks. (Figure 15 explains the logic.)
This measure’s most important contribution is an empirical explanation of why extreme corporate efficiency, size and consolidation is bad for economic health because it impairs circulation. It confirms, for example, that excessively large and efficient corporations tend to create a powerful upward “pull”8 of wealth that drains well from lower levels. Lackluster circulation to the lower levels, in turn, causes economic fragility because organizations that cannot get capital tend to go belly up. If too many die, a vicious cycle kicks in with fewer businesses, fewer jobs, less demand, and lower tax revenues spiraling out of control. This spiral creates economic necrosis, which can take the whole economy down along with the under-nourished parts. This is how collapse comes about.
In this view, letting big banks gobble up too many little banks puts the economy in the same situation as your body when frostbite destroys the capillaries that circulate blood to your feet. Monetary circulation shrinks and economic necrosis grows because almost all the money is being pulled to the top and only a few small banks are left to circulate money to nourish small-scale needs.
An example from my home state explains. Bob Wilkinson was a prosperous, North Carolina builder for 35 years — until the money for small-scale development loans dried up in 2008. The problem was not that Bob did not have collateral or was not paying his bills or did not have a great track record. No, the problem was that the local bank Bob had dealt with for many years had been bought by a bigger bank, which had been bought by a bigger bank still. The new gargantuan bank did not know who Bob was and did not care. For them, Bob was small potatoes, too small to be worth the cost of giving him a loan.
Bob and thousands like him are still going out of business because big banks find it too costly to invest in little guys. (Scientists call this a problem of “scale.”) Unfortunately, a downward domino effect then follows. When people like Bob go out of business: their employees lose their jobs; their suppliers lose business; the school district loses taxes; and all the businesses that supply food, gas, healthcare, clothing, and so on to all those people lose money as well. As stories like Bob’s multiply, local economies become ever more fragile — even as the big banks and corporations accumulate more and more cash that they siphon away from local economies and into Cayman Island accounts and Indian factories.
The kind of massive size and monopolistic dominance that current policies encourage also erodes local economies by creating a powerful pull of wealth to the top. One of today’s most common development practices — luring in giant corporations — shows how this draining and erosion process, called the “Wal-Mart Effect,” works. Local development officials are encouraged to lure giant organiza-tions like Wal-Mart into town with various taxpayer subsidies on the theory that they will bring jobs and, in Wal-Mart’s case, lower prices. This combination of unfair subsidies and existing size allow the giants to undercut and drive smaller competitors out of business. Local vitality declines as local businesses go out of business and good jobs are replaced with low-paying ones. Demand falls and less money circulates because the giant is funneling local money to distant headquarters. Once its smaller competitors are out of business, the giant frequently raises its prices to exploit its monopolistic dominance. Meanwhile, taxes go up because the tax base shrinks, and because welfare and healthcare costs shouldered by the public rise. In the end, the giant is likely to move to another town when it gets another lucrative lure.
The disastrous consequences of poor circulation also help us see the Keynesian stimulus versus neo-liberal austerity debate through new eyes. Six years into the Great Recession of 2007 many politicians still argue that economic health can come from tax breaks for the wealthy and austerity for everyone else. ENS cuts through the insanity of this debate by confirming that stimuli increase vitality by nourishing the real-economy networks while austerity harms health by reducing circulation to already withering grassroots webs.
In fact, the Pyramid’s “middle path” logic helps reduce the extremist insanity of many current debates, for example:
- No matter what experts say about the wonders of greater efficiency and economies of scale, big is very definitely not always better. In fact, “too big” is demonstrably deadly.
- Conservatives are right: too much regulation stifles flexibility, but they are also wrong because too much deregulation leaves insufficient constraint.
- Small is not only beautiful, it is essential to the health of the whole. But, too many small guys cannot make a healthy economy; the big guys are necessary too.
- The fact that excessive size, efficiency and power tends to reduce circulation and erode real-economy networks explains why, as Joseph Stiglitz (2011) shows, severe inequality is a sign of economic disease. I call it economic necrosis.
- Fractal networks also teach us a more unexpected lesson, namely, that, like Goldilocks and the Three Bears, every level of economy needs organizations that are “just right” to meet the needs of the actors and activity at that scale. In The Fractal City, Salingaros (2003), for example, shows that cities need big, efficient superhighways to facilitate cross-region transit, but they also need quiet walkways to facilitate casual conversations and safe places for children to play. Cities with too many large-scale and too few small-scale structures and organizations find their sense of safety and vitality disintegrating along with the scale-appropriate activities that once helped link people in community.
- The need for scale-appropriate agents to facilitate activities appropriate to that scale also explains why proper monetary flow requires a proper mix of small, medium, and large banks. Bob Wilkerson, for example, needed a small-scale bank that knew its region and customers, and whose own business depended as much on healthy investments in the local community as Bob’s did on doing good work.
- This need for “right-scale” banks explains why a banking system built primarily of gigantic banks automatically leads to economies that are too feeble to produce good jobs because too little money is going to the grassroots real-economy. This last should sound familiar because it is what’s happening to our economies today.
HOW OLIGARCHIC CAPITALISTS UNWITTINGLY DESTROY THE ECONOMY
The collapse of urban cultures is an event much more frequent than most observers realize. . . . Often, collapse is well underway before societal elites and decision-makers become aware of it, leading to scenes of leaders responding retroactively and ineffectively as their society collapses around them.
— Sander Vander Leeuw, Archaeologist, 2008
This brings us to the Pyramid hierarchy’s greatest contribution: an empirical explanation of why oligarchic hierarchies always fail and why current policies work against economic health and the American dream, not because of any evil intent, but simply because they are using the wrong rules of economic health. In this view, today’s oligarchic capitalists are destroying the economy unwittingly, as a result of insularity, misguided faith in the benefits of maximizing personal profit, and an abiding belief in big, highly efficient, monolithic entities that operate without constraint or concern for the lower levels of society — all of which violate the laws of balance.
So are we headed for collapse? The last 30 years has been a painful experiment in the fallacy of trickledown beliefs. Let me count the ways! Trickle-down capitalists have jettisoned all economists learned about the dangers of unchecked wealth from the Great Depression, and used Ayn Rand’s vision of the nobility of selfishness among heroic elites to create an economic belief system that promotes extreme concentrations of wealth and power.
Neo-liberals, for example, create massive imbalances of wealth and power by promoting ever-greater efficiencies, economies of scale, consolidation, and simple gigantism. Forget antitrust, we are told, bigger is always better! In the space of just 30 years, this emphasis has led to a handful of big companies taking over huge swaths of the American economy. Six corporations now own 90% of America’s media system, down from 50 companies in 1983. Four companies now control 90% of the global trade in grain and one company, Monsanto, controls 90% of soybeans and 80% of corn seeds. Our banking system, diversified as late as the 1990s, is now mostly controlled by a handful of big banks.
The celebrated idea that the best possible economy springs from fully mobile capital and hyper-competitive Big Fish corporations has convinced most state legislatures and city councils that economic health will come from luring big corporations into town by “getting governments off the back of private enterprise.” The actual result is a massive, corporate bribery system funded by public taxes that often results in the loss of local businesses and taxes accompanied by a massive draining of wealth. Worse, the more desperate the local governments and the hotter the competition for Big Fish corporations becomes — the more Big Fish demand in lures. As Shuman says:
Multinationals have become increasingly adept at pitting locales against one another in their bribery attempts. For example . . . in 1986, Indiana paid $50,000 per job to convince Subaru to open a factory in Lafayette. By the 1990s, Alabama was agreeing to pay between $150,000 and $200,000 per job to convince Mercedes-Benz to build new plants, and Kentucky was doling out $350,000 a job for Canadian steelmakers Dofasco and Co. Steel. . . . Politicians, of course, condemn these tactics even while they are signing the checks. (1998, 10–11)
Inevitably, the best deal is to ship jobs to third-world countries where costs are lowest because labor and environmental standards are essentially non-existent. Mainstream economists shrug this process off as the inevitable outcome of competitive capitalism, but Shuman (1998, 12–14) shows that such “outsourcing” poses several fundamental threats to U.S. economies:
- They guarantee that U.S. communities will continue to experience decline in both the quantity and quality of jobs. According to Barry Bluestone of the University of Massachusetts, corporations moving to other states or overseas resulted in a loss of between 32 and 38 million jobs in the 1970s alone, and the U.S. Department of Labor documents another 43 million jobs lost from 1979 to 1996. The displaced workers that found new jobs usually had to accept lower pay and lower quality work. Neo-liberals see this downward spiral for employees as a good way to increase Big Capital’s wealth by keeping workers desperate.
- Sudden corporate departures impose huge costs on all levels of government. Not only does the abandoned community have to pay unemployment and welfare costs, its tax base shrinks as ancillary businesses close, property values plummet and loan defaults skyrocket. This depleted base and the costs of the original “lure” often leaves the community unable to support basic services like schools, hospitals, street repairs, electric utilities, and police.
- Corporate dominance undermines local governance and the community’s ability to plan for a healthy future. Competing for Big Fish capital undermines the standard tools of regulation and taxation that communities once used to maintain a reasonable give-and-take relationship with private firms. As a consequence, governments are increasingly driven, not by a consensus among the community’s multiple constituencies, but by the most powerful corporations whose special interests dictate public plans. As Shuman (1998, 78) notes, “The city of Atlanta follows the lead of Coca-Cola, Turner Broadcasting, and Delta airlines. Houston accommodates Exxon, Shell, and Arco. Seattle is beholding to Microsoft and Boeing. More and more communities have become company towns. It’s just a matter of degree.”
Local officials embroiled in this cycle are afraid to reassert local control lest any reduction in Big Fish support weaken the community’s ability to attract the footloose corporations. In this context, the neo-liberal message becomes clear: cut wages, environmental standards, and taxes or become a ghost town.
The result is irony incarnate. While large American corporations receive all kinds of public assistance based on the assumption that they will create jobs and benefit the community as a whole, their preferred pattern is to cut jobs and costs at the expense of safety, and move operations to foreign lands to increase profits even when they are making money. They do all this despite the largesse they receive from the public pocket.
What about social and environmental responsibility? In a 1970 article on the topic, neo-liberal champion Milton Friedman (1979, 125) proudly proclaimed, “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits.” Do not worry about company closings, job losses, and economic instability because the “gales of creative destruction,” as economist Joseph Schumpeter (1962) put it, serve to keep everyone on their toes. Do not worry about local businesses going belly up because, if Wal-Mart can drive prices and wages down, then local shops should die. Nostalgia should never stand in the way of cheaper goods (lost jobs and lower quality)!
Political economist Robert Reich (1991, 77) summarizes the result: “Gone is the tight connection between the company, its community, and even its country. Vanishing too are the paternalistic, corporate leaders who used to feel a sense of responsibility for the local community.”
In fact, virtually all neo-liberal policies — deregulation, privatizing the Commons, tax breaks for the rich, smashing unions, and so on — have a similar effect. Powerful economic “pull” erodes local networks by funneling money away from local synergetic processes to distant headquarters where it tends to languish in low-synergy processes like gambling and outrageous CEO salaries. Yet, since GDP is blind to such destruction, the rest of us watch like perplexed Easter Islanders as economic deterioration spreads across the land.
On the other hand, because neo-liberals believe markets distribute optimally, they see nothing inherently wrong with excesses such as: CEOs earning 400 times more than the average employee; gigantic gaps between the haves and have-nots; or with pension funds investing American workers’ retirement money in companies that are outsourcing those same workers’ jobs to China. No worries, oligarchic markets are always right! Austerity seems reasonable because this theory does not care about loss of diversity, resilience, competition, and jobs caused by decaying real-economy networks.
Neo-liberals also do not worry about lost jobs and shrinking wages because their models of supply-and-demand assume that businesses will reinvest their profits in productive capacity such that wages, productivity, demand, and business will increase together creating a virtuous cycle of growing prosperity for all. Unfortunately, none of these assumptions hold true. Instead, in reality, we have:
- Big corporation sitting on billions in profits instead of reinvesting;
- Rising productivity accompanied by fewer jobs and stagnant wages (Figure 16);
- Big banks speculating like mad, but loaning little to the constructive, real economy.
Naturally, demand suffers along with the 99% public, but neo-liberals are optimistic anyway because they believe health comes from that core oligarchic dictum: maximize owner-profit regardless of the harm done to anyone or anything else. This dictum has led to all sorts of oligarchic maneuvering that has nothing to do with building a healthy economy. For example, faced with flagging consumer demand in the late 1980s, big corporations took a new profit-maximizing tack. Instead of reinvesting profits in the constructive real economy, they realized they could make money much faster by pumping profits into usury and speculation.
Most states, for example, have no caps on credit card interest rates, which often run 36% or more. Naturally, anyone who could get into the usury business did so. By the time they were bailed out in 2008, General Motors (GM), for instance, made more money loaning money to people to buy their cars than they did by actually making cars. At the same time, American workers, faced with dwindling income but accustomed to a comfortable lifestyle, were willing to accept increasing levels of credit-card debt. The result has been an explosion of individual debt as overworked employees attempt to maintain their standard of living (and mortgages) with shrinking paychecks.
Wall Street, of course, turned speculation into a global casino that generates ludicrous money without contributing much of anything. Deregulation plus powerful incentives to make money by hook or crook has led to market manipulation, defrauding clients, and brilliant schemes like the subprime (mortgage) derivatives market, which Warren Buffett called “financial weapons of mass destruction.” In the latter scheme, Wall Street wizards lumped together large numbers of extremely risky mortgages and whipped speculators into a frenzy with the idea that American property would always go up. When these mortgages began to fail (as they inevitably would), the speculative bubble burst; the world economy lost an estimated $30 trillion in value; Bear Stearns, AIG, and other giants went belly-up; and the American economy ground to a halt with the loss of credit and monetary flow. The U.S. government felt obligated to bail the big speculators out lest their loss create a massive monetary contraction that truly could destroy the economy, but thanks to deregulation, bad derivatives continue with current estimates of the notional value of the global derivatives market ranging from 600 trillion dollars to 1.5 quadrillion dollars. When this bubble burst we are truly in trouble.
Pumping money into usury, speculation, and debt has created a massive tsunami of “phantom wealth” — the kind that has nothing to do with real goods and services — accompanied by the near starvation of real-economy networks (Figure 17).
Unconcerned by the starvation of real-economy networks, neo-liberals actively promote the intentional destruction of businesses through leveraged buyouts, hostile takeovers, and outsourcing jobs. As long as venture capitalists are profiting hugely from such “creative destruction,” they assume it must be okay. Mitt Romney’s Bain Capital makes a perfect example. Bain pioneered the process of buying a controlling stake in a company through deals financed mostly by debt, and then taking substantial dividends and fees for “cutting costs” — a euphemism for laying-off employees and selling off chunks of the company. Thousands of employees lost their jobs as target companies usually either failed or were sold off, but Bain’s owners made millions. So, GDP was up, even as jobs went down.
I could go on, but perhaps you get the picture. All neo-liberal policies: deregulation, privatization, tax breaks for the rich, smashing unions, ignoring infrastructure, and eliminating “entitlements” serve to pump money to the top and misery to the bottom. The result vindicates Ross Perot: neo-liberal policies create a “giant sucking sound” as jobs and money are funneled away from the real-economy to upper echelons, where money creates concentrated power and influence on the one hand, and economic stagnation on the other. In ENS terms oligarchic policies promote imbalance, undue influence, poor circulation, and widespread necrosis at the bottom obscured by a glittering bubble of wealth at the top (Figure 18).
The question now becomes: How can we fix it?
RESTORING THE DREAM BY RECLAIMING FREE ENTERPRISE DEMOCRACY
There have been tyrants and murders, and for a time they can seem invincible, but in the end they always fall. Think of it, always!
— Mahatma Gandhi9
Watching the rich and powerful using their wealth and power to get richer and more powerful makes most people throw up their hands in despair — it all seems so inevitable! But, Gandhi and the self-organizing cycles of history give us a different view. Our politics are polarized, and reactionary voices are rising today because we are again entering a period when tyrants fall and new ways become possible. What then shall we do?
Because oligarchic problems are systemic, we need to build a mass movement based on an equally systemic solution. Because the struggle between oligarchy and democracy is cyclical, we can learn much from successful movements of the past. The Populist movement of the late 1800s provides a particularly useful template for how to build a massive, grassroots movement by teaching people how to work together to promote their economic and political well-being. In The Populist Moment Lawrence Goodwyn (1978) explains how the Populists created their economically and politically effective movement by:
- Developing an accurate narrative of economic, social, and political health that explained what was going wrong and how to make it better. The Populists made this narrative clear, compelling and also practical and powerful in the real world. They emphasized both the positive nature of their actions and everyday people’s power to help implement it.
- They built a mass movement by . . . organizing and educating the 99%. The Populists taught everyday people how to reclaim free enterprise democracy by creating an infrastructure for organizing and educating the lay public in an ongoing, regenerative. Their form of education involved and energized people by engaging them in local problem solving, creativity and critical thinking, not just providing facts. The Populists also tailored their organizing to specific locales, using organizers who knew those places, spoke the language and understood local needs and concerns. This infrastructure spread across the country with some counties having hundreds of chapters of 20–50 people each — and each one had a trained local lecturer who would help them analyze the world.
- Populists recruited and engaged people by . . . focusing on practical projects that improved people’s plight and were of common concern to virtually everyone. The Populists found that the most common unifying problem was access to credit that did not bleed people dry. Consequently, their most important project was a Sub-treasuries Plan10 that, as Goodwyn says, “mobilized the capital assets of the nation in an organized way to put them at the disposal of the nation’s people” (1978, 97). In effect, the Populists democratized money by creating Co-ops that allowed the farmers to do collectively what they could not do individually: gain access to fair credit.
People joined the Co-ops because they provided a practical way out of a devastating arrangement that had previously seemed unchangeable. By the 1890s, the Populist Alliance had 2 million people in 42 states, who were actively developing new ways to think about and deal with some of Main Street’s most pressing economic problems. Once groups began to understand the combined power of community, narrative, and practical plan, they began effective lobbying campaigns and political action groups that were extremely successful in electing officials to local, regional and even national offices.
If we follow the Populist template, then we need a narrative that channels today’s massive frustration in a positive direction, and a practical plan for improving daily life that is of great interest to large numbers of people.
I believe today’s narrative should center on restoring the dream by reclaiming free enterprise democracy. I believe the focus should be on creating a robust, regenerative, global civilization to implement the dream of “One People, One Planet, One Future.”
I believe nature’s rules for healthy development can help identify some of the key features of a practical economic plan. Here’s a bit of what we have learned (Figure 19):
Because human networks are the basis of a robust economic metabolism, economic policy should focus on developing and protecting resilient real-economy networks. Some of the policies we need include:
- Infrastructure and Social Spending: In a universe where circulation is essential, austerity is insane because infrastructure and social spending our essential to economic vitality. Spending on schools, for example, develops future human capital. Healthcare, pensions, and other so-called “entitlement” monies that go to the 99% public are also good for the economy because they: (1) improve productivity by keeping people healthy; (2) reduce individual businesses’ costs, which improves business profitability and chances of survival; (3) increase people’s opportunities to develop new skills or start new businesses by decreasing their dependence on employers’ insurance; and (4) free up jobs for the next generation by allowing seniors to retire when they want. In fact, monies that go to the 99% public always stimulate economies more than what trickles down from the top because folks with lower level incomes spend more of their money than people at the top.
- Government Spending for constructive purposes — such as roads, schools, information highways, social services, and utilities. Governments should similarly minimize low synergy, low constructive uses like subsidizing huge corporations, tax breaks for the wealthy, and exorbitant military–industrial spending. (Soldiers and weapons are necessary to societal safety, but endless war siphons money away from the real economy into nothing but smoke.)
- Protectionism: contrary to oligarchic belief, there is ample evidence that protective tariffs improve economic vitality by allowing grassroots networks to develop into vibrant, resilient economies. In fact, a new protectionism is our only defense against today’s free-market free-for-all that uses usury, outsourcing, and intentional destruction as weapons of economic annihilation.
- Taxes should be progressive, not regressive, not only because those at the top afford to pay a higher rate, but because taxing the top tends to reduce concentration and increase circulation — and pumping money back into the productive economy increases vitality.
Because circulation is crucial, we need to restore robust flow, especially to the grassroots level. Intricacy says we particularly need to increase the Multiplier Effect and the “velocity of money.” The New Economy movement has a number of efforts underway to help improve monetary circulation, including:
- Public-service banks run as nonprofit organizations dedicated to loaning capital to small- and medium-sized enterprises anchored in local and regional economic networks. State Bank of North Dakota, for example, loans to North Dakota businesses, which has helped that state weather today’s economic crisis.
- Focusing on financing networks of enterprises (like Organic Valley) can help improve enterprise survival and repayment rates, while rebuilding the supply chains of industries such as textiles, furniture and organic agriculture.
- Local investment circles also help increase local vitality and circulation by investing in local real-economy networks, not in Wall Street gambling or outsourcing multinationals. The Slow Money similarly invests in local food production particularly of the organic variety.
- Properly structured complementary currencies help provide countercyclical pressures by providing alternatives to scarce national currencies. The catch is that such currencies must be designed to incentivize flow between underutilized resources and unmet needs, not just as a nice thing to do.
- Demurrage, sometimes referred to as a “carrying cost of money,” provides a more intriguing if obscure way to incentivize long-term investment and circulation by increasing the cost of owning or holding currency over a given period. For commodity money such as gold, demurrage can be nothing more than the cost of storing and securing the gold over time. But, demurrage taxes on holding money have been deliberately incorporated into various currency systems as a dis-incentive to hoarding, as well as an incentive to invest. Because demurrage fees help increase the “velocity of money,” Argentine economist Silvio Gesell11 believes it also increases overall economic activity. Intricacy scientists would agree.
Because healthy economies are regenerative, we need to learn how to align all of our subsystems to support the health of the whole. Education cannot just be about toeing some standardized line, it must be about creating empowered, critically thinking citizens fully capable of building a better world. Democracy cannot just be about voting; it must be about creating governance structures that effectively serve the whole society, not just a few oligarchs. The G.I. Bill, the interstate highway system, and German corporate boards with 50% worker representation — there is ample evidence that governance structures that serve the health of the whole are far better at creating vitality than laissez-faire corporatism under oligarchic rule. Money in particular should never be run by a private, banking cartel because they use their control of the money supply to maximize personal profits, regardless of the harm done to the real economy.
Because oligarchic practices destroy real-economy networks and the societies that depend on them, we must learn how to take back democratic power and overturn oligarchic policies. Some of the many policies we need to implement include:
- Antitrust Laws: are essential because concentration destroys small-scale networks. Reversing media consolidation is similarly important.
- Anti-corruption, anti-influence and conflict-of-interest laws: We desperately need to get the money out of politics. We can start by restricting lobbying and “revolving door” practices whereby public officials who serve corporate interests while in office, leave government for cushy private sector job in the very industries they were regulating (this is particularly common in the military and pharmaceuticals). Eventually we need publicly funded elections but we can start by reversing insane policies like the Citizens United Supreme Court case that opened the door to unlimited corporate spending on elections and lobbying. Thomas Jefferson advocated an 11th amendment to the Constitution, a “ban on monopolies of commerce.” ENS suggests it may be time to adopt this amendment, as well as one rescinding corporate personhood and rejecting the idea that money equals speech.
- Campaign financing, election honesty, and voter support laws: Oligarchs want to be able to spend as much money as they want to buy elections and to limit the number of people who vote because these arrangements help them win elections.
- Media diversity, honesty, and public service: Although many people do not know it, radio and television companies were initially required to provide public service as part of their contract for leasing the public airways. We need that back.
Still, all the policy fixes in the world will not’ save us if we ‘do not modify our corporate culture to encourage behavior that improves societal health rather than undermining it. Indeed, today’s most daunting task is to figure out how to restore partnership mores when so little remains today.
USING RECIPROCITY TO RESTORE STEWARDSHIP
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
— Franklin Delano Roosevelt, 1933
Our global civilization faces a conundrum. We absolutely need hierarchies to concentrate commonwealth for the common good and leaders who can effectively mobilize and apply that power for societal health. But, oligarchic hierarchies are driving us to extinction and seem unable to stop.
How can we turn oligarchic power-structures into stewardship hierarchies that support synergetic communities with prosperity, security, and camaraderie for all? I believe Franklin Roosevelt was right: we need to restore ancient truths and apply social values more noble than mere monetary profit.
What values are these? Family and community come to mind first, but according to anthropology and many great observers, the real trick to turning fractious groups into synergetic ones lies in incentivizing mutual benefit and reciprocity as the centerpiece of all behavior.
A true story from Edgar Cahn (2012), the founder of Time Banking, shows reciprocity’s paradoxical effects. Cahn found that Time Banking, in which individuals “deposit” some of their own time (services) and “withdraw” time / services from others, only works when people give and take in equal measure. Sociologically speaking, the problem with those who give but do not take is that they end up in a one-up position as charitable superior, while the person who receives but does not contribute, feels lesser and worthless. Since one of Cahn’s goals was to energize folks who society considers “throwaway people,” he decided to require all those nice, middle-class givers to receive services as well. The results were stunning. When poor, elderly, disabled or otherwise demoralized people found their contributions being received and valued by others, their self-esteem rose, which energized their lives.
Apparently, the key to societal vitality lies in setting up enough mutually beneficial arrangements that people find their contributions valued on a regular basis. Anthropologist Ruth Benedict’s study of the “Synergy Gamut” (1941) confirms that such arrangements have the power to transform a society’s peace, prosperity, and happiness simultaneously.
Curious about why some societies are peaceful and prosperous while others are fraught with anxiety and aggression, Benedict discovered that the degree of mutual-benefit arrangements so shaped behavioral patterns, emotional experiences, and economic outcomes that they largely determined why societies go one way or the other.
High-reciprocity societies tend to develop common-cause economies where assets and human energy are applied where they are needed and in ways that are mutually beneficial. Benedict notes that such economies tend to draw wealth away from stagnant concentrations and spread it throughout the community by encouraging wealth to pass from hand to hand (in ENS terms, they promote “circulation”). Benedict says:
. . . if one has fields, one’s neighbors gather at work bees and one feeds and entertains them at planting, hoeing and reaping seasons. The [mutual benefit] system ensures greater fluidity of wealth; if a man has meat or garden produce or horses or cattle, these give him no standing except as they pass through his hands to the tribe at large. (1994, 62)
In contrast, high-selfishness (low reciprocity) societies tend to develop coercive hierarchies that funnel wealth toward the richest persons. Such economies began with early empires and subjugation, but continue today with more civilized forms of leverage and more enlightened claims to disproportional gain. As Benedict says:
The collective wealth has only one prime destination: the person who already has valuable possessions. . . . This system depends upon certain men’s claim to the labor of others, or upon ownership or rights given to favored persons. . . . It reaches its highest development where there is ‘interest’ and where wealth can be used to obtain forced labor. (1994, 63)
The emotional consequences of the two systems are striking. High-selfishness societies breed anxiety, competitiveness and aggression that afflict all classes. As Benedict says:
No man in [an oligarchic economy] can reach a security from which he cannot be dislodged either by other rich men ganging up on him, or by failure of crops, or by death in his family. . . . His only security lies in having, not merely property, but more property than his neighbor. He is driven into rivalry with his peers and he must outdo them, or better yet, undo them if he can. He is driven into rivalry not because he is a bad man, but impersonally, because the system works that way. Copying the rich man, the poor man competes too and tries to outdo other poor men. (1994, 63)
Mutual-benefit economies, on the other hand, are reassuring places where such anxieties are largely unnecessary because the surrounding social solidarity provides support on a daily basis and backup in times of distress, as Benedict explains:
Since everyone is provided for . . . poverty is not a word to fear, and anxiety, which develops so luxuriantly in funnel societies, is absent to a degree that seems incredible to us. These are preeminently the societies of good will, where murder and suicide are rare or actually unknown. If such societies have periods of great scarcity, all members of the community cooperate to get through these periods as best they can. (1994, 63)
Sound familiar? Benedict is describing the benefits of the stakeholder-owned networks described earlier. Academics now call it resilience, but the simple fact is that people in mutual-benefit networks have less to fear because the society itself serves as a safety net.
These emotional benefits explain something most of us feel, but rarely manage to articulate, namely, that such communities serve as beacons for our dreams. Most of us do not want to live by anxiously scratching out for Number One, bravely denying the possibility that illness, divorce, accident, age, or economic downturn will leave us at the mercy of an uncaring society. We yearn for some long-past “good old days” when belonging and security were natural. We imagine that, once upon a time, work and camaraderie went hand in glove and both made life worth living.
Our imaginations are not so far off. Human beings can and do live in societies where solidarity is central. In fact, most modern societies are schizophrenic, with mutual-benefit arrangements working within a power-structure built on oligarchy and exploitation.
How can we switch from selfishness to a common cause? Benedict’s final insight is the most reassuring: she discovered that societies get the social behavior they arrange for. Those that encourage mutually beneficial behavior via customs, rewards, punishments, laws, and so on get greater synergy, prosperity, and peace. Those that reward selfishness and exploitative behaviors get anxiety, aggression and eventual collapse. Benedict summarizes saying:
To understand aggressiveness, persecution or mutual helpfulness in any social group, one must check the social order and its man-made institutions for their provisions for social synergy. . . . [Synergy] occurs not because people are unselfish and put social obligations above personal desires, but because social arrangements make these two identical.
The problem is one of social engineering and depends upon how large the areas of mutual advantage are in any society. . . . [Synergetic societies] have a social order in which the individual by the same act and at the same time serves his own advantage and that of the group . . .
The fundamental condition for peace is federation for mutual advantage. (1994, 65)
Benedict’s discovery is exciting because it illuminates a concrete path to the civilization we want. The world we have is not the result of selfishness fixed immutably in our genes, but of rewarding antisocial behaviors. Conversely, if Benedict is right, then the best way to revitalize economies and save civilization is to design incentives for mutual benefit in all areas of our life.
Create incentives for mutual-benefit teamwork in schools and business! Make societally destructive business practices cost more than a monetary slap on the wrist! These are things we might hope to arrange. A lot of people are already trying.
FROM SOCIETAL SELF-DESTRUCTION TO DEMOCRATIC VITALITY
Nothing happens unless first a dream.
— Carl Sandberg, 1970
We have come a long way to demonstrate a simple truth: our economic and environmental problems do not come from free-enterprise democracy anchored in resilient human networks; they come from oligarchic capitalism cloaked in free-market language. Not understanding how to build healthy networks, we become like the Easter Islander: we actively participate in economic self-destruction caused by our own erroneous beliefs.
We now see that a better way is possible. The New Economy is heading in the right direction. Ruth Benedict and others point to the cultural keys. ENS provides the empirical substance and mathematical precision we need to turn heartfelt hopes into a naturally regenerative, better world.
Our greatest challenge lies in restoring hierarchy to its stewardship role. There is ample evidence that this switch would improve business productivity as well as social, economic and planetary health. Ray Anderson, Warren Buffett, and the Socially Responsible Business Council show that business is already moving in the right direction.
Integrating all of these ideas into a compelling human story is even more important — and that is just beginning. Those who would build a better world must start seeing themselves as engaged in a battle of ideas, one in which the way they frame ideas is just as important as the substance they use to back them. Our goal must be to engage as much of the public as possible — right and left; top, middle and bottom — by focusing all eyes on the regenerative economic prize we can attain and the spiritual spur we can renew.
Obviously, there is a great deal more to learn, but at least the direction is clear. The only long-term way to save civilization is to learn how to develop healthy DFENs and realign our incentives, institutions, and policies accordingly. This task is not as impossible as it may seem because: pressure is building; tyrannies pass; we have a direction; and the vast majority of people across the world want this positive future — they just do not know how to get there.
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I use Energy Network Science as an umbrella term for disciplines such as Energy Network Analysis, nonlinear dynamics, non-equilibrium thermodynamics, self-organization theory, Panarchy, and Systems Theory that study energy’s role in network emergence, growth, development, and evolution.
In business, for example, organizations usually start small, tight, and agile, but the bigger the organization becomes the more bureaucratic, inflexible, and poorly connected it becomes. Consequently, organizational consultants show that businesses undergo breakpoints, which require new organizational patterns, as they grow from 10 to 50 to 500 employees.
- See http://www.cicd-volunteerinafrica.org/quotations/ghandi-quotations
- Following Lincoln’s successful Greenback experiment, Populists suggested that a warehouse to store crops after harvest be established in every county that raised at least $500,000 of farm produce each year (think of The Grange). These “sub-treasuries” became an instrument of money creation, a way for farmers to borrow against their crops and land at low interest or to sell those crops at market value and be paid in a new “Greenback” national currency. Money supply would rise or fall in tandem with the nation’s productive capacities. The cost of credit would shrink as farmers borrowed through their own system rather than a restrictive private-banking system, and agricultural prices would rise from the crushingly depressed levels the private bankers maintained.