On November 10, 2016 I attended an event called The Marin Equity Summit here in Marin County, California. At the beginning of the afternoon breakout sessions, when everyone choose a table and topic to join, I looked around hopefully for the “interstitial space” or “spaces in-between” table conversation. Not finding one, I decided to join the “Economy and Jobs” table. I thought to myself, “I think this is the default ‘systems’ table…” in that the economy can be seen as one of the major systems that connects all of the other tables.

From that time on I sometimes tell people that one way to think about “systems thinking” is to consider the economy; it is a major interconnecting system between nearly all aspects of society. (If you are new to systems thinking, view the 30-minute total Systems Thinking Mini-Course.) This helps us to appreciate the importance of economics in our lives. If something fundamental is amiss in the realm of economics, it’s going to be well-neigh impossible for us to create a socially and ecologically sustainable world. 

In this blog I suppose that the purpose of the global market economy is currently the growth of profit, and I propose that the purpose should instead be an increase in human well-being. The economy should serve society, rather than the other way around.

The Purpose

To understand my point, you have to get a bit of a feel for sussing out the “purpose” of a system. (The word “goal” works just as well.) A brief orientation is below, from page 14 of Donella Meadow’s Thinking In Systems: A Primer. (You can refer to pages 12 – 17 of this book for more.)

A system’s function or purpose is not necessarily spoken, written, or expressed explicitly, except through the operation of the system. The best way to deduce the system’s purpose is to watch for a while to see how the system behaves. […] Purposes are deduced from behavior, not from rhetoric or stated goals.

If the purpose of the global market economy were to be human well-being rather than profit, then for everything from a small, local business all the way up to the largest capitalist enterprises, all revenue would be utilitarian. No portion of revenue (that exceeds costs) would be deemed “profit” and held up as the goal. Yes, I am saying that profit for its own sake, in isolation, quickly loses its utility. Retaining the growth of profit as the purpose of the economy necessarily sacrifices future generations, and for no real, genuine benefit to individuals and certainly not to the world. The belief in “infinite growth on a finite planet” cannot help but slide our society into the pit.

A much more interesting, and ultimately prosperous opportunity is at hand. 

Largely I am addressing individuals who care about making the world a better place and wish to be responsible stewards of their money. If you happen to work in the corporate world some of the resources listed may help you to dig further.

For a definition of human well-being, the entirety of the Universal Declaration of Human Rights provides a robust set of attributes.

Human Well-Being Is Predicated On Earth Well-Being

Note that primarily I am an environmentalist. It would follow then that I should propose that “human and ecological well-being” should be the purpose. There are two reasons that I am sticking with “human well-being.”

  1. The economy is a sub-system of humanity, and humanity is a sub-system of Earth. Humans are a life form that has sprung from a wildly diverse ecosystem. As goes Earth, so goes her humans. From the systems perspective, a healthy ecology is obviously necessary for healthy humans.
  2. Simplicity. It’s easier to say, write, and understand “human well-being” rather than “human and ecological well-being.”

Care

There is a prevailing assumption that caring for others–for all others–at a societal level is a nice sentiment, but not a realistic goal. We have settled for pleasantries, pontificating, and straight-up lies (bringing to mind, “Welcome to Costco, I love you,” in Idiocracy). 

But this mindset is easy and reactionary; that is, it is immature. A new level of collective maturity is necessary to create social systems that are much harder to realize, and much more resilient. In the context of this blog, an economy that is no longer “extractive,” but rather, “regenerative.” (The perennial struggle between the ideology of socialism versus the ideology of capitalism is not necessarily helpful. If those who execute the system aren’t clear on a shared, common purpose, the system reverts to predictable patterns, such as “success to the successful.”)

Tim Wise is best known for his book and film, White Like Me. His 2015 book Under the Affluence is subtitled “Shaming the poor, praising the rich and sacrificing the future of America.” In it he provides an example of how failing to care for others can have a massive negative impact on the global market economy:

…in 1999 North Carolina passed a law prohibiting banks from offering predatory and deceptive loans to homeowners, in large measure because lenders were targeting the poor and people of color with these instruments. Rather than applaud the ruling and seek to extend it nationwide or with comparable national legislation, the federal government overrode the new law, paving the way for several more years of these kinds of loans, which ultimately became the fulcrum of the economic meltdown. (Pg 75)

Wise goes on to say, “Had we cared more, attended to the warning signs, and resisted the growing culture of cruelty with regard to the needy, perhaps we wouldn’t be in the predicament we’re in at all.” (For a related story, view Dirty Money’s episode “Payday” on Netflix about the infamous practice of payday loans.)

A Word on “Profit”

Strictly speaking, profit and growth are not synonymous. Any number of corporations have grown for years on the enthusiastic cash injections of investors, only to have the whole ship sink before profits are realized.

If you’re a small business person, you know that “profit” is a gray area. For legal and moral purposes, it is necessary to prioritize paying others before paying yourself, and in many instances your business doesn’t look good on paper if you were paid a living wage for every single hour you actually put in.

However, for the purposes of this blog, I am treating profit and growth as more or less synonymous. The nuances are important but not crucial to my basic argument.

Sacrificing the Grandparents

On Monday, March 23rd, 2020, the lieutenant governor of Texas, Dan Patrick, said something on Fox News that is an extreme manifestation of profit prioritized over life, or capitalism over well-being. To be sure there are very stark human well-being implications of a collapsing economy. The solution proposed–to sacrifice the most vulnerable citizens–is so dramatically uncreative, its a wonder we’ve gotten to this point. It’s also a manifestation of collective anti-social tendencies.

Mr. Patrick was endorsing the “let’s get back to work” idea promulgated by Trump, in opposition to scientific advisers urging people to stay home to stop the spread of the Coronavirus epidemic. Mr. Patrick said that, considering the risk to the economy of everyone staying home (to protect themselves and everyone else), if asked, he and many other senior citizens would take the risks of potential exposure to Coronavirus “in exchange for keeping the America that all America loves for your children and grandchildren.” (Ref)

I have to appreciate the lucid moment on the part of Tucker Carlson, the interviewer, who took the time to clarify: 

Tucker Carlson: “So you’re basically saying, this disease could take your life, but that’s not the scariest thing to you. There’s something that would be worse than dying.”

Dan Patrick: [short pause] “Yeah, uh…and look…”

If you are a warm blooded creature, this should give you pause. Even Dan Patrick wasn’t quite so sure he meant what he said when it was reflected back to him.

The video below from the Othering and Belonging Institute at UC Berkeley explores this “Are our elders expendable?” topic.

 

System Trap: Seeking the Wrong Goal

The above anecdote is just one symptom on the surface of a seething mass of cancerous undergrowth. Some may rationalize prioritizing economic growth over all else, insisting that ultimately economic growth is “good for the country” (more on why this doesn’t work later). But when economic growth is positioned as the metric for how a society is doing–i.e., our level of well-being–it doesn’t take much to see that ultimately, we are “seeking the wrong goal.”

To reiterate, in this blog I join the small but growing chorus of voices calling for a different purpose; a new goal. But first, what follows is a bit more about how our current collective goal manifests.

Gross National Product

Consider our collective measurement called “Gross National Product” (GNP). This may sound desperately boring, but considering that it has a direct bearing on your life and mine, and the fate of Earth, I’m going to tell you about it.

Gross National Product (GNP) was put in place in the 1930’s as a measure of the health of the economy, and was later largely supplanted by the Gross Domestic Product (GDP). You can read here about the difference, but the important point is provided by Donella Meadows:

If you define the goal of a society as GNP, that society will do its best to produce GNP. It will not produce welfare, equity, justice, or efficiency unless you define a goal and regularly measure and report the state of welfare, equity, justice, or efficiency. The world would be a different place if instead of competing to have the highest per capita GNP, nations competed to have the highest per capita stocks of wealth with the lowest throughput, or the lowest infant mortality, or the greatest political freedom, or the cleanest environment, or the smallest gap between the rich and the poor. (Thinking In Systems: a Primer, Pg 140)

Note that this quote is from a section of Thinking In Systems in which Meadows is communicating the central role that a metric can have on a system; in this case, a society. She says, “…that society will do its best to produce GNP.” She warns that you have to be very careful about the measure you put in place because people may very well wrap the system around that measure, good or bad. (Check out this short video, Robert F. Kennedy challenges Gross Domestic Product.)

The Trap, and the Way Out

Meadows contextualizes the observation quoted above as one of several “system traps.” She discusses the problems with GNP in the context of the system trap Seeking the Wrong Goal, going on to say “The Way Out” requires the following: “Specify indicators and goals that reflect the real welfare of the system. Be especially careful not to confuse effort with result or you will end up with a system that is producing effort, not result” (pg. 140).

Just to comment for a moment on “indicators and goals that reflect the real welfare of the system,” Meadows says the following in Thinking In Systems:

Pretending that something doesn’t exist if it’s hard to quantify leads to faulty models…Human beings have been endowed not only with the ability to count, but also with the ability to assess quality […] If something is ugly, say so. If it is tacky, inappropriate, out of proportion, unsustainable, morally degrading, ecologically improverishing, or humanely demeaning, don’t let it pass. Don’t be stopped by the “if you can’t define it and measure it, I don’t have to pay attention to it” ploy. (Pg 176-177)

This is where it’s really important to develop the capacity to hold “the one and the many” at the same time. If you happen to be pro-capitalism, you can nevertheless understand that *at a certain point* increased income to an individual produces only diminishing returns. Considering the vast and increasing gap between the wealthy and the poor in the United States (the “success to the successful” systems trap is delineated in this blog entry), the erosion of the middle class, the costs to the environment and climate change, the monstrous inefficiency, and the considerably lower well-being of the United States population in comparison to other “first world” countries, it’s really hard to make a convincing case for continuing capitalism as it is.

Indeed, many people feel trapped in a system they never signed up for.

Capitalism as Saviour

What is fascinating to me as a myth scholar (I have a PhD in mythological studies) is seeing in this Fox News example a type of religion. (Some have called this “market fundamentalism.”) Carlson and Patrick just happen to make a very explicit statement in this particular instance, but far more pernicious are the myriad institutions, policies and laws, and whole professions that carry out this quasi-religious fervor on an ongoing basis, often in sneaky ways. These two literally gave voice to prioritizing the market over life. This is an example of seeking the wrong goal, to be sure, but perhaps there is something else at work here.

Renaissance Florence

Once upon a time (in early Renaissance Italy), the emergence of the merchant class enabled a greater variety of families to establish themselves at a moderate level of comfort at a time when few-to-zero options were available to healthy white males, much less women or the infirm, and outsiders of various kinds. Florence was an epicenter for the evolution of the merchant class, and the political struggles that came with it. (See this interesting history.)

While we have historical records to paint the picture of Florence in the early Renaissance, it is not an exaggeration to say that the presence of a local economy in some form has been the lifeline for the human species for thousands of years. We cannot overestimate the importance of trade and some basic form of what may or may not accurately be termed “capitalism” for enabling families and whole towns to simply avoid extinction, and in some cases, thrive.

For more than 10,000 years, the economy of North America was of a kind that would be unrecognizable to modern economists, though it was a multi-faceted, complex network of trade routes that extended across the continent, reshaping itself again and again (ref). The economic system of today has only been in existence for a few hundred years, and, being cradle-to-grave, is unsustainable.

But whereas small, person-to-person economic systems have been the very fabric of many human societies, the relatively recent advent of industrialization followed by globalization (of industrialization) and the market have become utterly monstrous. The great majority of financial transactions are totally divorced from actual, tangible goods and services, as described in this quote from Leading from the Emerging Future: From Ego-System to Eco-System Economies.

The total value of foreign exchange transactions worldwide amounted to US$1.5 quadrillion (1 quadrillion is 1,000 trillion) in 2010, whereas the total value of international trade was only US$20 trillion, or less than 1.4 percent of all foreign exchange transactions. Says Lawrence Lau, professor of economic development…”The overwhelming majority of foreign exchange transactions are thus purely speculative, in effect, pure gambles, and serve no useful social purposes.” (Pg 5)

I am not qualified to update these numbers, but I presume the present situation has not altered dramatically. 

Just as agriculture can be the basis for the existence of a community yet has turned into a grossly polluting, diabolical industry driving global warming and threatening extinction, so too has the global market economy as a whole become nothing short of cancerous.

Yet making the argument that society should prioritize human well-being over profit and growth per se is still quite a fringe idea, even among fairly liberal communities. Instead, many promulgate the idea of making a profit and a contribution to society.

Truth

I get a bit tired of hearing the proclamation, “You can make a profit and do good!” I understand the reason for pushing this particular belief, but I am totally over the forced attempt to make this reconciliation at a simplistic level. Strictly speaking, yes, a person or group can make a profit in some businesses while at the same time contributing something of benefit to the world. However, the reality is far, far more complicated, and the realization of this trope is unlikely. In short, it is wiser to presume that in fact this is not possible, and go from there.

“It makes all the difference in the world whether we put Truth in the first place or the second place.” Archbishop Richard Whately 

This is why: profit and truth make uncomfortable bedfellows. Truth is indispensable to making the world a better place; to improving the human condition. If profit is the priority, truth is forced to take a back seat the moment reality threatens profit. If human well-being is the priority (and we are clear that detriments to ecological well-being undermine human well-being), even when it is terribly painful, the truth must come out. 

As with all things, there are exceptions. There are small, isolated instances in which a lie in a moment has saved a life, or at least someone’s hide. This helps us illuminate that truth has a certain power that transcends the question of “true” versus false statements. Rather, truth is a spirit that can pervade human activities, or, not. (For the spiritually-minded, I am making an oblique reference to talks by my meditation teacher Samuel Sagan on this topic of Truth.)

Is “Profit” a Bad Word?

No. Rather, we’ve been thinking about it all wrong; it is not inherently bad nor good. Put in its place, it’s simply a functional word. Held up as the measure of achievement and the goal of a global economy, it leads to an extractive mindset. That is another way of saying that profit as the goal will run humanity into the ground.

Why can’t profit be the goal?

“…growth is one of the stupidest purposes ever invented by any culture. We’ve got to have an ‘enough.'” Donella “Dana” Meadows (Ref 7:55)

Can you have two purposes? Yes, if those two purposes are fundamentally compatible. You can run a hospital that has “serving the well-being of children” and “serving the well-being of adults” as complimentary purposes. But can you have a hospital whose primary purpose is both profit *and* human well-being? No, because the two purposes are–on this earthly plane–fundamentally incompatible.

What is profit anyway? At the end of the day profit is primarily personal gain. What is well-being? A shared, interconnected state. 

If “profit” in your enterprise is shared among a relatively large proportion of individuals who are themselves intimately involved in the daily work of the organization, then the profit of the enterprise is in fact contributing directly to the well-being of the individual participants. Moreover, if the profit is distributed not just among employees, but also turned over to patients who can’t pay, or need financial help whilst laid-up in the hospital, then in this example, profit is directly serving human well-being; it has a utility.

In these illustrations profit remains subservient to well-being. The moment this ratio flips, the moment profit trumps well-being, well-being is diminished. When profit is the top priority–when profit is the purpose–profit extracts a mega-uber price. So no, profit in and of itself cannot be on a par with well-being or any other high moral value, because as the purpose it is fundamentally incompatible with high moral values. Again, not because profit is bad. Profit is necessary, like utilities. It just can’t be the end goal, or every single high moral value will be necessarily sacrificed on the altar of profit. It has to be a means to an end, and then it can fulfill its appropriate role. So I repeat the words quoted above:

“It makes all the difference in the world whether we put Truth in the first place or the second place.”

Why Profit Cannot Rule Sustainably

Just in case this is not clear, let me try again. Profit is personal gain. Well-being is wider, bigger, collective. You may think that personal profit will increase your well-being. It will, to a point, then the “diminishing returns” thing kicks in.

Once you have access to the basics of life, health, and reasonable comfort, no amount of profit can substantially improve your level of well-being. (In fact, children of wealthy families frequently suffer the opposite, including the stigma of feeling that everything has been handed to them, and thus failing to gain a solid sense of self-worth. See The Golden Ghetto.) And your attempts to grow your profit–in the context of our current economic system–erode the well-being of the natural world, and other people.

There are some short-term community benefits to your profitability: you hire people, you buy stuff, you travel, each of which plays a role in some form of employment of others. But the long-term picture is quite different. If you prioritize profit, you pay people as little as you can get away with. You buy stuff at the lowest possible price and insist on at least obtaining “market value” for anything you have to sell. (This is not necessarily the case in small, close-knit, more traditional communities, by the way.) These strategies “make sense,” and, are examples of prioritizing profit over human well-being.

The reality in practice is often more nuanced. A CEO of a private firm will tell you he (usually a he) “balances” profit with other priorities. Well, thanks to laws and regulations, this happens far more than would otherwise be the case. But embedded as he is in a global financial system that prioritizes growth and profit, this is a situation in which those who mean well are nearly forced into making pro-profit decisions they would otherwise avoid, particularly if they want to grow, or choose or are forced to hand over control to outsiders.

“But I make money to support my family.”

No doubt there is a nagging little thought in your head to the effect of, “But I make money to support my family,” or my dog or my volunteer work or what-have-you. This may be true of you as an individual, however, it’s not true of our society. If it were, we would have in place those challenging qualitative metrics that Meadows discusses in the quote above. If it were true, GNP would have long ago been usurped in our global conversation by Gross National Happiness or some such thing.

Moreover, while you may tell yourself you are taking in this profit for your family, don’t forget about that diminishing returns line, or to ask yourself the question Donella insists we must ask, saying, “There has to be an ‘enough.'” If you are lacking a clear “enough” line, then you are operating in the weeds, and likely unclear about the ecological and social impacts of your financial assets.

Demoting Profit to the Status of (a) Utility

Consider that if you run a business, you need access to power, usually in the form of electricity, if not fossil fuels. If your electricity is cut off, then unless you are a fisherperson who catches fish from the banks of a body of water and turns around and sells them to passers-by, you’re going to need electricity at some point in your system of commerce. 

Similarly, most businesses today need running water, shelter, and access to transportation. I am suggesting that profit can likewise be categorized.

Some will say, yeah, well, you need profit to purchase electricity and water. Not really; you need access to those resources, and usually that means the money to pay for them; not always, but usually. And anyway, the cost of supplying your business with utilities comes from gross, not net, income. If the fisherperson selling fish on the banks of a river wants to power a neon sign advertising his or her catch, that person will have to make at least enough money from sales to purchase and power that sign (in addition to enough money to live on and to keep supplied with fishing equipment). 

So sustainable revenue, not necessarily profit, is the requirement. 

This is an interesting thought: what if the purpose of any business was human well-being, and to meet that goal or purpose, the organization needed to secure “sustainable revenue” rather than “profit” or growth in some form? What if “profit” in-and-of-itself fell out of favor as an empty, useless aim when it wasn’t serving a robust, helpful goal?

Can This Be Done?

I am not currently in business myself (though I do have an MBA). And further, there are few large corporations that function in this matter; with human well-being as the purpose. (See Patagonia and Eileen Fisher as two potential examples of larger businesses.) There are thousands of small businesses that do, or try to put human well-being first. If the market system in which they are embedded was reformed to make this possible, a whole legion of small business people would shift in this direction.

Hobbled By Integrity

Unfortunately, to be something like a B Corporation is a bit like being an acrobat. You have to find ways to do business that enable you to stay in business while at the same time ensuring you attend to your social and/or ecological mission, and all the while competing for the consumer’s attention in a marketplace that is packed with competitors who are not hobbled by integrity.

This right here is the problem. Our current global market economy rewards non-integrity and penalize integrity. Why? Because growth / GNP is the mandate. If human well-being was the mandate and we had measures in place to continuously monitor that, then the system would find ways to wrap itself around human well-being. Since integrity and human well-being are inherently complimentary, this other system would inherently tend to reward integrity and penalize non-integrity.

As long as the growth of profit remains the goal–from the tiny home office to the president’s desk–integrity cannot help but be thwarted. 

Q. So what can I do?

A. TAKE RESPONSIBILITY FOR YOUR MONEY.

This is one area where individual consumers have terrific power. (If you don’t believe me, check out this podcast, How to Start Impact Investing with Beth Bafford.)

  1. Desert large banks. You have a relationship with any institution you bank with. Large banks are anti-social institutions; profit, not society, is first. (Here’s just one example: Chase.) Taking all of your assets out of large financial institutions is the single most important, powerful way you can contribute actively to a healthy, well-being-first economy. Check out your local public bank or small credit union, ideally with a Community Development Financial Institution (CDFI) component. This includes ditching large bank credit cards. See this article, and this January 2020 video wherein Jane Fonda cuts up her Chase credit card. 
  2. Make cool investments. [Disclaimer: I am not an investment professional, so don’t take this as professional investment advice.] Pull your money out of oil and gas, heartless tech, and the financial voodoo industries. (No insult to voodoo practitioners meant.) Put your money into socially and environmentally responsible alternative energy companies that you research first, tech companies with aggressive human well-being policies (open source is often a good sign), and alternative investment models, such as low, zero, and negative-growth investment opportunities (see the Post-Growth Institute) that pay dividends in social and ecological health and well-being. Maybe you start with “ESG” companies, but don’t stop there. Move along to organizations that directly and explicitly support social well-being (such as the East Bay Permanent Real Estate Cooperative) or micro enterprise, such as WCCN, buy in to direct public offerings with responsible companies via Cutting Edge X, or join The Next Egg to learn with others. 
  3. Shop and do business locally (and/or with small businesses). When you can chase people down–because you are old school chums, or your dogs go to the same park–they have a much harder time giving the local environment and community the shaft. When they are headquartered “somewhere else,” the further the better, the more abstract you and your well-being is to the company. (This is one sneaky reason offshoring is really attractive.)
  4. Don’t buy or sell on Amazon. Or limit as much as possible. See the link for reasons why. (By the way, if local businesses want to overpower Amazon, they’d have to digitize their inventory on a shared, easy-to-use, consumer-friendly platform and offer delivery. Think how useful that would be right now, in COVID-19 times…)
  5. If you are a business person, BE TRANSPARENT. Educate your consumers, about you, about the ecological and social costs of your goods and services, and about how you are working to do better, but need their help. Discuss, out loud, the gory details of the barriers to doing and being better. (For example, every business needs insurance. But where do insurance companies invest your dollars? Hard to tell…) Learn systems thinking to help you make better decisions in your life and work. If you are really serious, attend SOCAP.  

A More Awesome World

What might be possible if we were to collectively agree that the purpose of the global economic system should put human well-being in the first place? We’d have a dramatically better chance of meeting the United Nations Sustainable Development Goals. Human rights–including fulfillment of the Universal Declaration on Human Rights–would be much more wide-spread. Reducing global warming would be good business, rather than the other way around, as is the current state. We wouldn’t be relying on an anemic nonprofit sector to solve our problems, or foundations to coerce nonprofits into being more effective. We would be fostering what Otto Scharmer and Theory U calls “Economy 4.0: Co-creative and ecosystem-centric.”

Honestly, the mind boggles at the possibilities. But just to think out loud, as it were, just a tad bit more, I have noticed a trend along the lines of the following:

When you ask people to “imagine the world they want to live in,” time and again I am supremely underwhelmed when I hear what people come up with. “Better bike paths.” Sure, but how about a road system that prioritizes pedestrians and bikes (and the welfare of wildlife) over automobiles? (Does anyone else want air gondolas?) “Equal pay for women.” I myself would like to see a society in which “work” in the conventional sense is no longer the case; in which the inborn desire of the human spirit to contribute value to the world is fostered to the degree that prosperity for all is an assumed basic right. “No plastics in the ocean.” How about no plastics at all, at least not remotely as we have come to know them? 

Don’t let the cynicism voice in the head stop you from thinking actually-really outside of the box. Don’t let the blustering people toddling around with their ties and briefcases tell you that business is no place for opening your heart. Start a co-op. Prioritize relationships. Save the world.

 

Further Resources

Books

Leading from the Emerging Future: From Ego-System to Eco-System Economies

Lengthy excerpt

Thinking In Systems: A Primer

Under the Affluence: Shaming the Poor, Praising the Rich and Sacrificing the Future of America

Owning Our Future: The Emerging Ownership Revolution

The Making of a Democratic Economy: Building Prosperity for the Many, Not Just the Few

Runaway Inequality: An Activist’s Guide to Economic Justice

Capital in the 21st Century

Other

SOCAP

Just Money: Banking as if Society Mattered (Theory U related)

Doughnut Economics

Teal Organizations

Capital in the 21st Century film 

Noam Chomsky on Worker Ownership and Markets

Replace the GDP with the SDGs, Hazel Henderson

Upstream Podcast: Unlearn everything you thought you knew about economics