how to save the world

Yesterday I explained what JÈrÙme Guillet in the European Tribune calls The Anglo Disease, and how it has produced a completely dysfunctional economy in many affluent nations (and co-dependence with struggling nations). I used the example illustrated above of a fictitious national economy that generates its wealth entirely by printing money, persuades other nations to accept that money in return for real goods, and addicts its citizens to living off a stock market Ponzi scheme believing, because the price of their shares is ever-increasing (giving them additional borrowing collateral), that they are somehow well-off despite not producing anything of value.

I also explained the five deceptions necessary to perpetrate such a fraud, and how vulnerable the economy is to the public’s (and other nations’ citizens’) catching on to these deceptions and refusing to go on stoking this phony and worthless economy.

Part Two of this article, today, is a possible prescription for how such an economy could be transformed into a real, sustainable economy,

Before I begin, however, I want to deal with three issues that several readers raised in response to Part One. The first is the power of innovation and the capacity of affluent nations to generate real value and make their economy more sustainable through innovative products, processes and technologies. The second is the argument that the existing phony economy, through printing and distributing funny money, is actually redistributing wealth from rich to poor. And the third is that it is somehow possible to perpetually enhance wealth and well-being of all people in the economy without increasing the use of resources, without ‘growing’. Here are my responses:

1. Innovation only really occurs when people with desperate human needs can afford to pay for solutions to those needs. The great innovations of civilization generally followed either a great equalization of wealth (e.g. the printing press, the assembly line) or a huge crisis (e.g. modern ‘catastrophic’ (monoculture) agriculture, nuclear power). For the last 50 years neither has been present and innovation has arguably almost completely ceased. It is far easier and safer for corporate oligopolies to ‘create value’ for themselves by using lawyers to hoard intellectual assets and eliminate competition, and propaganda to brainwash customers into overpaying for their product, than to innovate. When it comes to real, essential goods (food, textiles, construction, transportation, health care, education) there have been almost no important innovations since before the boomers were born, and the number of innovative companies can be counted on one hand (WL Gore, Apple, a few others). The real innovators in this period have been the poor, who have learned ways to ‘work around’ the oligopoly economy and make anything that can be transmitted in bits essentially cost-free. Companies like Google and the file-sharing pioneers have supported this free-bits innovation, but unfortunately it has had little impact on innovations around real goods. This kind of innovation will have to await a crisis, such as when our house-of-cards phony economy collapses.
2. It is true that inflation can effectively redistribute wealth from rich to poor, since debts become repayable in ‘cheaper’ dollars than those originally borrowed. Unfortunately the current economy is in complete denial about the true inflation in our economy (driven by soaring health, insurance and education costs). So while large corporations can borrow money at the “official” inflation rate of almost zero, citizens are paying rates even higher than the real rate of inflation (the book The Two-Income Trap reported that average working class borrowing rates were about 16%) to subsidize the artificially-suppressed rates being paid by the rich (and by governments). So the rich borrow at 3% and earn 15% on Ponzi stock market returns, while the poor borrow at 16% to buy real goods whose value is not rising at all. The result is a massive redistribution of wealth from poor to rich, which is exactly what the rich and powerful (who realize that the whole economy is a house of cards and are busy secreting away wealth in durable goods, often offshore, to protect themselves) want.
3. You cannot create material wealth out of nothing; to do so defies the laws of physics and thermodynamics. We have reduced costs by using automation to mechanize, but this depletes non-renewable resources and reduces the value of labour — if you pay people less, or pay fewer people, to produce something automated inexpensively, then the people you want to sell it to have less money to buy it with, so you are ultimately no further ahead. The so-called ‘green revolution’, which applied industrial factory methods to agriculture, suffers from the same problems — ever-increasing use of chemicals (made from oil) and automated methods, lowering the need and value for farm labour and depleting the soil so it becomes, like its tillers, addicted to oil which is in ever-diminishing supply. You can make information free, but when it comes to hard goods, you really can’t make more out of less, and you certainly can’t continue to do so indefinitely.

So how might we transform the phony, house-of-cards economy into a truly sustainable one? As I suggested yesterday, to do so would be extremely difficult, require unprecedented cooperation and collaboration of all of us, and entail a great deal of sacrifice by people (us included) who (to put it mildly) have historically not been inclined to give up what they have so others can share. But if were able to achieve these conditions, here’s how we might be able to do it:

• First, we would have to be honest with ourselves and with all the citizens of the world about the five deceptions and about the abject failure of the current economy to create real value or well-being for more than a tiny minority of citizens. There is no chance of working together on a solution as long as we remain in denial about the problem or what, and who, has caused it, and why, selfishly, they did so. This would be extremely unpleasant for the rich. There would be a widespread desire to bring the perpetrators to account. 
• Secondly, we would have to redistribute wealth — assets, money, and position — from rich to poor, both within and between nations. To become self-sufficient, struggling nations need to be given back the resources we stole from them, and retrained how to manage their own economies and provide for themselves. Within both affluent and struggling nations, power and wealth would have to be ceded and decentralized. Corporate charters would have to be revamped to mandate responsibility to local community, to employees and to the environment, rather than to shareholders. It would probably help in this effort to do away with the concept of share ownership entirely and to convert all corporations to cooperatives, broken down into autonomous self-managed units. Oligopolies would be outlawed (as they used to be) and the corporations belonging to them disbanded, with assets redistributed to the cooperatives. If you’re a shareholder, you would be out of luck — but then, you’re going to be out of luck anyway when the existing economy collapses, so you will be no worse off. Governments (which are really another form of oligopoly corporation) would likewise have to devolve, their assets and authority redistributed to self-managing communities. This is what happens in economic depressions anyway — when central governments go broke, citizens are left to look after themselves. Without a central government, how would we defend ourselves from outside invaders? We’ll have to work that out collectively. Scary? Of course. Would governments, either in affluent or struggling nations, ever do this willingly? Probably not; they’d have to be persuaded. If this plan was easy, we’d already have done it.
• Third, we would need a program of massive re-education of citizens on how to make a living for themselves, in small, locally-focused cooperative enterprises. No one is teaching this now, but we do have a lot of good teachers who, if we taught them, could teach the rest of us. This would not be classroom education. In rich nations and poor it would be learning by doing, the way the Argentinian workers learned when they seized their padlocked factories after their economy collapsed and the factory owners had fled. It would be a very difficult and immensely valuable education. We would figure it out though — we know what we need, and we’d relearn how to provide it for ourselves.
• Fourth, we would need infrastructure to share what we know and what we learn openly with others. This would not be a competitive economy; it would be a collaborative one. We would use this ‘knowledge infrastructure’ to work around problems and to identify and cut off those who attempted to hoard or gouge. We would use it to develop Peer Production, to identify needs and to co-develop innovative solutions to those needs. We would use it to virally market, to microfinance and organically finance enterprises, and to develop the enterprise partnerships, alliances and relationships essential to creating and sustaining true business value. The line between producers and consumers would disappear, and the very concept of unemployment would become meaningless. 
• Fifth, to nurture this economy, we would need fair trade laws in place of pseudo-‘free’ trade laws. These laws would protect local industry but enable the importation of goods and services that cannot be effectively produced locally. These laws would conserve scarce natural resources and the environment. We would need laws and taxes that would require all enterprises to be indefinitely sustainable, cradle-to-cradle. These enterprises would not need to grow in order to thrive and be of use in their communities as creators of well-being. Their mandate would be to get better, not bigger.
• Sixth, we would need to pledge, both as entrepreneurs and as citizens, to take collective responsibility for the well-being of all life on Earth. There is no room for greed, waste, or heartlessness in this economy. It must be, in large part, a Gift Economy, where money becomes unimportant, and might fall into disuse entirely.

This is, of course, a tall order, and perhaps, without a massive global economic crisis at least, impossible. My only claim, based on my knowledge of history, economics and business models, is that it would work if we all wanted it to work.

We may, some day in the next couple of generations, have no choice but to find out.

Over the past year, JÈrÙme Guillet of the European Tribune has written an extensive series of articles about what he calls The Anglo Disease:

There is something happening here, and it’s been going on for a long time, driven by greed, political expediency, and a sustained and sophisticated campaign of misinformation about how a healthy economy is created and measured. It is quickly coming unglued, and the consequences of this deception are going to wreak havoc on us all for decades. It is possibly the greatest fraud and theft in the history of civilization. Here’s how it works:

1. The government has to lie about the real increase in the cost of living, and the real levels of unemployment and misery among its citizens. This is in its interest, since admitting bad economic news is hazardous to politicians’ health.
2. The government then has to artificially suppress interest rates, so that they, and corporations, can borrow money virtually free. As a consequence, since borrowing has no cost, there is no need to repay it; it can be refinanced indefinitely, and left for future generations to worry about. 
3. To keep money supply high enough that it is freely available to all borrowers, the government needs to print masses of new money. To conceal this, it needs to stop reporting the true money supply, as the US government has done.
4. To lock in foreign suppliers of cheap goods and services in struggling nations, the affluent nations need to develop co-dependent relationships with these countries, such that they are forced to accept payment in an essentially worthless currency.
5. To lock in citizens, the government and large corporations need to work together to enable the large corporations to generate staggering profits, increasing by double-digits every year. So-called ‘free’ trade agreements, massive subsidies and tax breaks, the continued availability of essentially free money, deregulation, liability indemnification, allowing price-fixing oligopolies, union-busting and massive offshoring etc. all allow this. As a result, stock markets soar, and citizens (unable to obtain any return on risk-free investments while the real cost of living is rising by 7% or more per year) are forced to pump all their investments into these stocks, including their pensions.

So now you have all the players in the economy — corporations, governments, and citizens in affluent and struggling nations alike — codependent on this house of cards and its continuation. The chart above shows the results for the US — an economy whose profits are entirely paper, not the result of work or production of anything of durable value.

To get the idea, imagine a country where everyone sells insurance, and where, in order to get reciprocal benefits from others, everyone agrees to buy $100k worth of insurance from an insurance company every year. Imagine further that in this country the government prints an extra $100k per capita of money every year, and sets interest rates at zero. People borrow money, free, from the banks, and use the proceeds to buy shares in insurance companies, which, because everyone is buying so much insurance, are amazingly profitable, and generate enough profits to the citizens every year to allow them to import things of real value (like food, clothing, and oil). This is illustrated as follows:

In this idyllic country, the government prints $100k per capita each year (or borrows it abroad at zero interest rate), which costs it nothing. In return it gets $10k per capita in taxes, which it can spend to buy campaign contributors and votes to get re-elected, and/or to spend on their pet project (a war for conservatives, a social service for liberals). Doesn’t matter who’s in power, they’re happy.

The banks get this $100k at zero interest rate from the government, and loan it to citizens. They get zero interest, but they do get $10k per capita in service charges, late fees etc. So they’re happy.

The insurance companies get $100k in premiums per capita, and only have to pay out $20k in claims, so they can give their employees, the citizens, a little folding money, and pay huge salaries to executives, and still have so much left over that the shares leap in value on the market. So they’re happy.

The citizens get their small salaries, and the $20k in insurance payouts, and make $100k on the soaring value of their shares in the insurance companies, $20k of which they invest in additional shares (pushing demand and hence prices even higher), and $80k of which they spend on imported food, clothing, oil and other ‘consumer goods’. So they’re happy.

Everyone in this country is happy, and feels affluent, despite the fact no one is producing anything of any value whatsoever. No one wants to rock the boat, or know the truth about what is really happening. as long as everyone keeps believing this is a healthy economy, it can keep going. This is exactly what the top chart above portrays.

This lovely cycle is, of course, completely unsustainable. What is keeping it going now is that the foreign countries accepting the worthless currency of the US and similar non-producing affluent nations are utterly dependent on exports to the affluent nations to fuel their own fragile economies. If they, in Asia and the Middle East, were to insist on being paid in a currency or product with real value, or insisted on a reasonable rate of interest on their holdings in these risky, worthless currencies, the whole house of cards would collapse.

Likewise, if the investors began to realize that the Ponzi scheme that is the modern stock market was not sustainable, and started taking their money out of it, then the fictitious wealth created by the expectation of eternally-increasing double-digit rates of profitability would instantly dry up. In fact, if any of the five deceptions listed above were no longer accepted by citizens, the world would be plunged into an economic depression as serious as that of the 1930s.

As JÈrÙme Guillet puts it “it is not possible to generate 15% per annum returns on capital forever when the underlying economy is growing only by 3%”.

This is the precipice on which we now sit. We can either keep on perpetuating the deception, and fooling ourselves that it can go on forever, or we can try to transition our economy to one that is durable and sustainable and based on real value (and real values, like well-being instead of wealth). The latter would require enormous, sustained, coordinated effort to move the house of cards to a stable foundation, one card at a time, taking great care not to let the rest collapse.

In the second part of this article (within a week), I will lay out a scenario for how this might happen. It’s an almost impossibly difficult prescription, and it would require a great deal of honesty about what we have been doing wrong, including possibly putting the perpetrators of the deceptions in some place where they can no longer wreak havoc on our world.

To give you some hints, it would require a massive redistribution of wealth both within and between nations. It would require a complete rebuilding of local economies around production of goods of real value. It would be an economy built on knowledge sharing and know-how, not on funny money, or oil or other non-renewable resources. There would be no room in this economy for large hierarchical companies, the hoarding of wealth or knowledge, or acquisitions or divestitures that (as most do) inhibit competition and innovation and destroy value. It would be a hands-on economy where everyone’s time would be comparably, highly valued, and where people in the economy would collaborate because it makes economic sense, and produces better products, and makes work more fun. It would be a steady-state economy, with no growth (and initially, absolute reductions) in the amount of resources or energy consumed or waste or pollution produced.

We could get there, though I doubt we have the will or capacity to sacrifice and admit failure and work togetherto do it. Stay tuned for Part Two.

I think this is what was wrong with my New Years’ Intentions list six months ago — I was totally fixated on measurable results and achievement, on Getting Things Done, on getting there, getting finished. Those intentions were very ambitious — lifelong goals that were, mostly goals of direction (love more, live simpler, converse better, be more present, move more, be more self-sufficient, be bolder, help entrepreneurs more, have more fun). These intentions were, in fact, not really about accomplishment or objectives. Rather than intentions to do, they are intentions to change the way I am (what I’ve called Let-Self-Change) — intentions to be something different. To be what I was intended to be, to be more authentically myself. To be nobody-but-myself.

In a remarkable synchronicity, Evelyn Rodriguez just twittered a link to her 2005 article about Conrad’s and Joyce’s comments on this same subject. She quotes Gandhi as saying “My life is my message.” (he also famously said “Be the change you want to see in the world” — Be, not Do). She quotes Joseph Conrad as saying that real art — infinitely present art, that is created for its own purpose, a simple representation of what is — has the enormous power to astonish, to extinguish the ego. By contrast, he says, ‘art’ that intends to persuade other people to feel or believe or do something is mere marketing, propaganda, pornography. Real artists, she quotes Tom Asacker as saying, “live worldview-disrupting lives”. And, she concludes, “if we draw from inspiration, our lives themselves can be works of art”.

As I thought about all this, I suddenly had an Aha! moment: Is my Purpose, generalist that I am, to simply be a model for others of how to be, in this terrible world where there is only so much any one person can do? And if that’s so, I wondered, how can I be better?

Then I began to completely rethink my intentions list and put them in terms of getting better, of being better. This would require that I engage regularly in practice to move towards being better. For the most part these things can never be done — there is only the striving to get better at them, a bit at a time.

What’s more, practicing getting better at these things requires that I do less of something else (there are only so many hours in a day). So I decided to take a look at how I spend my time now, and how I would have to spend my time to allow myself enough regular practice to steadily get better at these things. When I realized that I currently spend almost no time practicing these things, and that my current workload almost precludes me finding time to practice these things, I realized why I have made so little progress in achieving these intentions.

The chart above shows how, on average, my day is spent. Much of my time is taken up in the activities shown in grey, activities that do not involve practicing the things I need to in order to achieve my intentions. Embarrassingly little is spent in the activities shown in red, yellow, orange, blue, green and purple — the six activities that I get greatest satisfaction from and which will best equip me, if practiced regularly, both to achieve my intentions and to be more useful to others and the world in the years ahead. And to be more authentically myself, to be nobody-but-myself.

My intention now is to increase the time I spend practicing these six activities from 5.6 hours a day to 11.6 hours a day, as illustrated in the chart above. Here’s how I might spend that time:

In practicing these things, I intend to learn to be more myself. These are long-term intentions, totally unlike a Getting Things Done list, and I intend to practice from now on, just keep getting better. The only ‘results’ will be the self-change in me (greater competencies, self-sufficiency, self-knowledge, presence, and happiness) and being more useful (perhaps even a model) to others. The very thought of spending most of my waking hours practicing these things is exhilarating. This is what I used to be, when I was very young, naturally. This is what, I think, I am meant to be. How did I lose my way?