Nov 13 2013

Hazel Henderson*

Grim recent studies reveal the shocking increase in inequality globally, both between and within countries. Anti-poverty economic policies since World War II have done little, except for their notable success in China. Worldwide, the share of nations? productivity increases going to employees is shrinking ? while the share to capital owners, financial firms, corporations and their top executives has mushroomed, as reported in the Economist, Nov. 2, 2013.

Old economic textbook remedies for rising inequality still call for more growth. Yet economic growth is slowing in most mature economies. In still growing China, India, Brazil and other emerging countries, the growth remedies lead to greater inequality as well as destroying traditional livelihoods polluting vital common resources: air, water, forests and biodiversity. Growth based on fossil energy brings the inequalities of climate change and increasing weather disasters. The social costs of rising inequality are documented by Joseph Stiglitz in The Price of Inequality (2012); James K. Galbraith in Inequality and Instability (2012); Kate Pickett and Richard Wilkinson in The Spirit Level (2011). Unpacking ?growth,? which is part of nature, must specify what is growing, what is dying and what is maintained, as physicist Fritjof Capra and I clarify in Qualitative Growth (2009).

After decades of theory-induced blindness, courageous economists are challenging textbook growth bromides and joining with many public intellectuals in targeting growing inequality in new ways. Addressing inequality beyond ?economism? at last is focusing on jobless economic growth, as I do in Building a Win-Win World (1996, now an e-book). I tracked automation since the 1960s examining how machines displaced human labor since the start of the Industrial Revolution in Britain and the rebellions of displaced workers, led by Ned Ludd, smashing the new spinning machines. These Luddites were punished, their rebellion seen as slowing progress.

Fast forward to today?s ?post-industrial? stage in many ?rich? economies where structural unemployment and jobless growth are accelerating inequality, forcing new debates. The economic textbook view claims that advancing industrial innovation, efficiency, productivity and progress as measured by GDP-growth would always create new industries and replace lost jobs with new ones. These macroeconomic theories are failing in the face of the facts of automation and information technologies advance. Former Microsoft scientist and computer guru Jaron Lanier in Who Owns the Future (2013) takes the closest look at the evidence. Aghast at the speed of the digital information takeover of more sectors, particularly in music, entertainment, news, retailing, social media and finance, Lanier calls for new rules and laws remunerating every individual who contributes any information to online companies, banks, Facebook, Google, Twitter and all such platforms. Lanier forecasts the social costs of automating vehicles and eliminating human driving: deskilling, a loss of millions of entry-level jobs, providing the unemployed, students, minorities a first step on the ladder in their lives. Deskilling is evident, for example, in fly-by-wire aircraft where pilots have crashed planes when auto-pilot systems fail (?All Can Be Lost,? The Atlantic, Nov. 2013).

Debates from the 1960s have re-emerged: how can unemployed people get purchasing power to consume the growing cornucopia of goods and services? If these machines take your job, you had better own a piece of that machine, as advised by Louis and Patricia Kelso, in Democracy and Economic Power (1986), leading to the employee-owned companies of today and their employee stock ownership plans (ESOPs). Unions joined the debate with demands that employment and retraining must be assured by unionization, national priorities for full employment, now enshrined in the USA in the Humphrey-Hawkins Full Employment Act of 1948 and the dual mandate of the Federal Reserve to focus on maintaining a stable dollar and full employment. Even more fundamentally, why should access to money and purchasing power come mostly from jobs that are increasingly scarce ? or by the luck of having wealthy parents, birth in an advanced society or some sinecure obtained through influence, politics or other power games?

I participated in that 1960s debate by forming with my late friend, Robert Theobald, a citizens committee to explore his ideas in The Guaranteed Income (1966). At a seminar in Windsor Castle in the 1970s hosted by Britain?s famed author Charles Handy, a trade unionist exclaimed in our discussion of the envisioned post-industrial world ?You?re all mad! The people with the leisure won?t have any money!? We were enthusiastic about information technology and believed that much boring repetitive work could be taken over by robots as was happening in Detroit?s automating car factories. The United Auto Workers (UAW) leader Walter Reuther agreed and the UAW spearheaded 1960s? debates at their Automation House in New York City. All the new possibilities of creating ?Leisure Societies? were examined: reducing work weeks, guaranteed incomes and evolving post-industrial societies toward education and human potentials by investing in people. Social innovation could match the technological innovation and automate drudgery!

Just as Daniel Bell described in his The Coming of the Post-Industrial Society (1976), farm mechanization had released laborers to work in factories and their subsequent automation had then steered the workforce into white collar office jobs. Now a new economy beckoned, built on social innovations like the GI Bill, Social Security, Medicare, government R&D in national labs, universities and the space program. We envisioned investments in further progress in healthcare, focusing on prevention, satisfactory lifestyles beyond the heroic feats of consumption demanded by the old, money-based GDP growth model. We explored the secretive politics of money-creation itself as in Future Work (1985) and Future Money (2012) by James Robertson. Basic minimum incomes could, like healthcare, become a right, guaranteed by sharing the productivity of the Information Age more widely ? creating millions of new jobs, also in greater leisure and expanding recreation sectors. Money-creation itself could be democratized with the budding local currencies, LETS system and community banks and credit unions!

Many parts of these scenarios have materialized. Societies? total pies did grow bigger. Tourism and hospitality are now the largest sectors of the global economy, along with movies, entertainment, sporting events and all the new industries based on the internet: from online shopping, dating, bartering and social media to banking, gambling, pornography, child trafficking and money-laundering. Local currencies, crowdfunding, credit unions, microfinance have mushroomed worldwide. All the technological advances of the information-communications revolution created all the possibilities envisioned in the 1960s! Information ? The World?s New Currency Isn?t Scarce, as I wrote in 1993.

So why instead are we still stuck with jobless economic growth, rising inequalities, a lost generation of young people, many burdened with un-repayable student debt, unable to find jobs, and millions of homeless people and empty foreclosed homes, and many employees losing pensions and mired in stagnant wages? The dismal ?economism? paradigm maintained control through creating scarcity (The Money Fix) and engendered fear, competition, hoarding ? all reinforcing our reptilian brains. This psychological model still underlies banking, finance, asset accumulation, risk and corporate management.

Another answer is that social innovation never kept pace with all that technological innovation. Investments in new infrastructure and in people lagged behind. Capital investments went global and as more and more jobs fell to automation, millions more moved offshore, looking for cheaper, unorganized labor and unprotected workplaces and environments. Pushed by corporations and their economists, political allies claimed that trade agreements like NAFTA in the 1990s between the USA and Mexico would create up to half a million new jobs. The reality is today?s estimated loss of one million jobs as US companies moved to Mexico and then to China. Today, as Chinese workers demand and get higher wages, jobs move to Vietnam and Cambodia in the now familiar global race to the bottom. Rearview central banks printed money to bail out incumbent industries of the past instead of investing in the future.

The economic textbooks? dead hand still hold sway over the debate: claiming that the greater efficiency of manufacturing and the unemployment it brought can be eased by new jobs created elsewhere and that retraining of workers is the best remedy. Private sector innovation and investment promised to trickle down to create new jobs, while public investments must be cut, so as not to ?crowd out? private companies, entrepreneurs and those job-creators. This story is best debunked by Mariana Mazzucato in The Entrepreneurial State (2013) and my ?Beyond Austerity and Stimulus?. By 2012, this ?economism? view had prevailed and restored the financial sectors with taxpayer bailouts and imposed its austerity regimes in Europe and in the budget-cuts in the USA. High-frequency, computerized trading has taken over on stock exchanges and the new electronic platforms developed by taxpayers: the internet, satellites and other communications, R&D and infrastructure. Betting on which countries? bonds will default became today?s quadrillion dollar CDS and derivatives market, and its perverse financial ?innovations? are setting up the next bubble.

Open challenges have been led by radical political parties of both the old left and right. New movements like Occupy Wall Street, the World Social Forum, the Barcelona Consensus, have reclaimed the earlier debates of the 1960s, calling for social innovations based on the vast new productivity and opportunities of the Information Age: guaranteed minimum incomes, local currencies, public banking and public sector innovations in education, health and redesigning cities and infrastructure. Global public goods are the focus of UN agencies and its Millennium Development Goals, now targeting sustainability. Shifting from fossil fueled polluting sectors to renewable energies, has become imperative as climate disruption affects millions worldwide. At the 2012 UN Summit Rio+20, 191 countries pledged to accelerate transitions to green economies. Efficiency based on Nature?s circular models is now ushering in the next stage of human evolution: the knowledge-rich economies of the emerging Solar Age.

The taboos slowly are falling on acknowledging how human activities are breaching the nine key planetary boundaries and changing the climate. Even The Economist reported more on such planetary news along with their findings on inequality that labor was losing out to capital. All this is obvious to those outside the economics profession not suffering its theory-induced blindness. Many now point to this growing global inequality as generated by faulty models of ?economic? growth ? rooted in unfair distribution due to powerful private interests, capture of governments, regulations, tax policies and even ?cognitive capture? of their mindsets and worldviews. Philosophers have wrestled with the roots of liberal versus conservative polarization, relating it to brain research as does Joshua Greene in Moral Tribes (2013). The shift from economism and its anthropocentrism toward understanding how our planetary life-support system functions has turned to real-time visual data imaging from the 12 geostationary satellites of NASA?s Earth System Science, as I report in my forthcoming ?Mapping the Global Transition to the Solar Age? (ICAEW). Money is now seen as a useful unit of account ? simply information tracking real human and natural resources and the productivity of Nature, as in the Principles of Ethical Biomimicry Finance?.

While in the USA and Europe, guaranteeing minimum incomes is still taboo, such incomes were initiated as ?Opportunidades? in Mexico and ?Bolsa Familia? in Brazil, where these direct or conditional cash payments (CCTs) brought millions out of poverty. Others followed the success of Alaska?s Permanent Fund which directs a portion of oil revenues to every citizen. The UN: Policy and Finance Alternatives (1995) I co-edited called for taxing all commercial uses of the global commons, with fines for abuses including a financial transactions tax to curb speculation. Since petroleum is a natural resource, not human-made, these ideas are espoused by two policy analysts in their ?Petroleum to the People? in the conservative journal Foreign Affairs as a way to prevent further inequality in African countries. Entrepreneurs Paul Polak and Mal Warwick recount many successes in addressing poverty worldwide in their The Business Solution to Poverty (2013), while Amy Cortese cites the rebirth of local business models in Locavesting (2011).

A longer historical view by Princeton economist Angus Deaton in the Great Escape (2013) finds the origins of inequality in the technological revolution as private innovation races ahead of social innovation and how economic elites capture political power. This is also the thesis of Daron Acemoglu and James Robinson in their Why Nations Fail (2012). Two MIT economists Erik Brynjolfsson and Andrew McAfee in Race Against the Machine (2011) buck their profession by documenting the job losses and inequalities in both technological innovation and the prevailing economic model of globalization. Brain scientist Bruce Lipton in The Biology of Belief (2006), endocrinologist John Coates in The Hour Between Dog and Wolf (2012) and psychologist Rob Williams? PSYCH-K method are introducing us to why we cling to outdated theories and allow our subconscious fears to overcome our best plans and highest goals. Ethical Markets now focuses on ways to accelerate learning ? particularly in financial sectors and for asset managers.

The new paradigms in human development are at last emerging into politics and those 1960s visions of abundant post-industrial societies are alive ? beyond ideologically-imposed scarcity regimes and fossil-fueled early industrialism. The Solar Age is now visible in the advance of green, knowledge-rich economies based on harvesting the free daily photons from the sun, as we track in our Green Transition Scoreboard? and daily updates at www.ethicalmarkets.com. Our research shows that current $1 trillion annual private investments between now and 2020 will have scaled and the world will have entered the Solar Age.

*Hazel Henderson, D.SC.Hon., FRSA, President of Ethical Markets Media (USA and Brazil) is author of Building a Win-Win World (1996) and many other books, creator of the Transforming Finance TV Series and the Green Transition Scoreboard?. Mercado ?tico, the company?s Brazilian affiliate won the prestigious Ve?culo de Comunica??o do Ano Especializado em Sustentabilidade – Media Of The Year On Sustainability Prize in 2013 in Brazil.

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