Toward an Economy Based on Human Well-being

From the November-December 2011 PNL #809

Saptarshi Lahiri

Occupy Wall Street (OWS) has received significant news coverage throughout October 2011. Although not making specific demands, the general message that the bottom 99% are being exploited by Wall Street elites has opened an important window to look at our economic system.

However, a large mass of people in unison have difficulty saying anything more complex than “we are the 99%!” Sure, I get that OWS is an important cultural milestone where fists are raised at the massive inequity and corporate greed that Wall Street embodies. Nevertheless, the complex toil to address this systemic failure will take place on the streets, in community organizations and government, and will involve radically changing the means of production and consumption of the economy.

Engels and Marx argued that the dominant ideologies of our time (politics, laws, morality, religion, metaphysics, etc.) are strongly influenced by the modes of production on which our society depends. Simply put, even the language of our protest, as advertised on Facebook and Twitter (underneath commercial advertisements) is mired in the cultural machinations of capitalist production and consumption.

To the planetary ecological and economic crises – we respond as consumers rather than as responsible citizens. In a jolting Orion magazine article (September/October 2011), acclaimed science writer and activist Sandra Steingraber makes the case that inadequate individual solutions have been so heavily emphasized that collective action is off the radar for most people. For example, concerned about climate change? Change your light bulbs!


GDP: A Flawed Measurement

The modern neoliberal economy is premised on endless growth. Indeed, a recession is technically defined as a period when there have been two consecutive quarters without any growth in GDP (Gross Domestic Product). The GDP is such an accepted indicator of economic progress, that it is routinely used to gauge how well countries are doing. This is perhaps why US people were surprised in late 2009 when they were told that the recession was over. Technically this was true. The economy had indeed shown signs of sluggish quarterly growth, but that fact did not affect the day-to-day reality of many millions of us. 

Not only are indices like the GDP the final word on fiscal well-being, they also influence environmental policy.  GDP hardliners believe that rising GDP leads to environmental benefits, but this is rarely the case when the analysis is comprehensive, accounting for biodiversity or land, resource and energy use.

There is powerful inertia against transforming our economic system. Corporatist forces push consumption as the answer to our economic problems. Increased consumption is obviously unsustainable. In addition, markets will never ensure that pollution is regulated, that health care has a preventive focus instead of a curative one, or that institutional racism is reversed instead of relying on the prison-industrial complex.

Forty years ago, the study Limits to Growth by Donella and Dennis Meadows and other MIT systems analysts used a complex rubric of five variables including world population, industrialization, pollution, food production and resource depletion to project a future based on increasing populations and concomitant increase in resource use, predicting a dire future for the planet: finite resources would be unable to support such growth. The study sparked heated debates and essentially gave rise to the discipline of ecological economics.

Those supporting this “limits” analysis recognize that the economy is a subset of the ecosystem and stress the preservation of natural capital – goods and services from nature which are essential for human life – emphasizing that technology cannot replace it. On that premise, ecological economists devised the theory of the ‘steady state economy’ where there is no new growth, or no irreplaceable consumption of non-renewable resources.

Herman Daly, one of the chief steady state architects, notes that, “economic growth has already ended in the sense that the growth that continues is now uneconomic – it costs more than it is worth at the margin and makes us poorer rather than richer.” Economist and Nobel Laureate Paul Krugman derided the Senate Republicans’ jobs plans saying that “there are a number of industries inflicting environmental damage that’s worth more than the sum of the wages they pay and the profits they earn — which means, in effect, that they destroy value rather than create it.”


New Modes Needed

There are alternative modes of measuring well-being that contest the mighty GDP. These include the Genuine Progress Indicator (GPI), the Index of Sustainability and Economic Welfare (ISEW), and Gross National Happiness (GNH) indices. The related field of environmental economics employs Green Accounting to measure welfare. Green Accounting attempts to value environmental and ecosystem services that do not yield profits for corporations.

Indices like the GPI or GNH are often dismissed since they don’t follow market logic or lend themselves to making money. Such approaches are labeled “new age” and have yet to seriously challenge the dominant paradigm of perpetual economic growth. The onus is largely on the individual consumer vis-à-vis environmental action, and may have its origins in the Reagan years, when individualism was treasured over collective action.

Gernot Wagner of the Environmental Defense Fund notes the limits of individual action such as recycling or micro-managing one’s personal energy footprint, when what’s required is colossal institutional change at the national and global level. This has thus far proven elusive. Ecological economics alone will not do the job. So far this discipline has been unwilling to confront perpetrators using institutional power to exploit the weak and powerless and maintain the status quo. Gross National Happiness as practiced in Bhutan may be a wonderful idea, but Bhutan is hardly a useful model; gender inequality is high by all measures, life is short, access to water and healthcare is generally poor. In that regard GNH is as ineffectual as measuring GDP in China, a very poor country in per capita terms despite its booming national growth.


A Springboard to a New World

Wall Street not only symbolizes disproportionate wealth, but is a loose cohort of colluding corporate entities – 147 corporations, mostly banks (the fabled 1%) – controlling about 40% of global wealth. In the October 22, 2011 issue of New Scientist, Swiss complex systems analysts have demonstrated that such patterns of collusion and accumulation are inevitable in our current system. Not quite a conspiracy, but a plausible self-organizing principle; this is what capitalism does (along with polarizing society and creating incentives for destructive growth).

By all means punish the wrongdoers on Wall Street. I hope the Citigroup CEOs go to jail for decades for betting on mortgage investments to fail. Increased SEC regulation of firms falls far short of addressing the gargantuan systemic exploitation 99% of us feel. The short-term outcome of this will likely be modest – but it could be a useful springboard to open the gates for far-reaching, systemic change. It would be tragic if the outcome of OWS was another fake choice between Reaganomics or the insidious free trade policies of the Clinton years. Perhaps ‘Occupy Wall Street’ will be the spark that allows us to do so.


Saptarshi is a graduate student at the SUNY College of Environmental Science and Forestry studying sustainable economics, and is a PNL editorial committee member.