Can Earth Survive Capitalism ?

 Can Earth Survive Capitalism? ( 2008)  Jonathan Crinion 

ABSTRACT

 This paper is an analysis of  a three week  ’Can Earth Survive Capitalism’ course held at Schumacher College, UK, in March 2008. The Schumacher module consisted of a number of different speakers talking about various aspects of capitalism and proposing how we might make changes to the capitalist system or create a new one.

 In the first week Marjorie Kelly presented the work she has done at the Tellus Institute in Boston, USA. She proposed that a sector of the market for human benefit be developed called the ‘fourth Sector’.  Part of her presentation was to invite the retired Chairman of John Lewis Partnership to present his corporate model of ‘Happiness’. In the second week Peter Barnes presented his model of a new capitalist economy from the Tomales Bay Institute, USA in which he envisioned the State being the balance between the commons and the corporation. The second week also included John Whitmore talking about performance coaching with corporations. In the final week Economist, Richard Douthwaite gave a brilliant overview of the money system and spoke about his recent book, The Ecology of Money. While the previous speakers spoke of small changes to the failing capitalist system, Douthwaite offered many exciting alternatives as opposed to simply attempting to tweek the existing system.

 This essay offers a critical review of the presentations made by the speakers, over the three weeks, viewed in light of the question posed in the module title ‘Can Earth Survive Capitalism’.

INTRODUCTION

Some will tell you we can solve the worlds problems using science to out smart Gaia, the Engineer will tell you we can do it with new technology, the Economist will tell you we need new economic systems and the capitalist will say we need to reinvent capitalism. An Ecologist will tell you they were the ones that created the problems we face in the first place.  A comment by Margaret Wheatley in her book ‘Ways of Seeing’ examines natural systems and is perhaps a prelude to the answer to the question posed by course’s title.

‘ When individuals fail to experiment or when the system refuses their offers of new ideas, then the system becomes moribund. Without constant, interior change, it sinks into the death grip of equilibrium. It no longer participates in coevolution. The system becomes vulnerable; its destruction is self imposed.’ (1) 

Wheatley’s insight offers a glimpse of the direction and the context within which we might consider our present situation with respect to capitalism. At present the system favours those with money and those without are simply left to work for those that have it. The basic premise of capitalism is that everything works around creating money from debt, that money is the objective in life and that the more money you have the happier you will be. Money is seen as a measure of wealth, but what type of wealth? Corporations seemingly exist for no other reason than to create wealth for their owners. Capital appreciation appears to be the goal devoid of meaning.

It’s true that some people go to work each day because they love their work and that money is not the motivating factor, but as we move through life the money game creeps in and permeates virtually every aspect of our lives. Seemingly without money you can’t eat, you can’t get to work if you live some distance and you can’t afford a roof over your head. All around us on every available surface and in every media available there is advertising portraying a life style you could have if you only had more money. It’s inescapable but what are the alternatives?

The change to a new way of being is already underway and a new consciousness about sustainability has already begun to permeate every aspect of life. This change is an emerging phenomenon and a case of many small actions, all in one direction, having a global effect.  It is this phenomenon that gives me great hope. John Whitmore in his Schumacher lectures said that the concept of consumerism in which we consume more and more, is fundamentally incompatible with the concept of sustainability wherein we need to live with less. He enlightens us with the idea that the technological advances that have brought us to this point in our evolution are an externalising quantitative force and we have allowed this to far exceed our qualitative wisdom. At the end of the day it is very clear that tweaking capitalism from the inside is simply not the answer. So long as we have government colluding with business they are not impartial bodies acting on behalf of citizen interests. As we will see, models that rely on the government to play a role in change are rendered ineffective.  The attached section of a much larger poster by Jonathan Barnbrook is from a recent exhibition at the Design Museum in London and illustrates the connection between big business and the present Bush administration in the USA. The poster shows each member of the administration and the companies with which they are either shareholders, directors or major players. This scenario is played out not only in the USA but also in the UK and all over the world in democracies that allow politicians to accept  ‘campaign contributions’ in return for favours if they are elected. President Bush’s connection to the oil industry is well documented as is the millions his election campaign collected from the oil industry to ensure his election. Only the Green Party has spoken out about this impediment to change by stating that they will not take funds from corporations to fund their campaigns. In 2008 the newspapers covering the US elections showed daily images of the corporate elite and dilettante all making contributions to their favourite candidates campaign. The Guardian newspaper reported that the 2008 US election contributions given to candidates campaign funds will reach 1 billion US dollars and that one candidate, Barack Obama had raised a staggering £16 million in one week alone.(3) This system in which we buy politicians and the bigger the contribution the bigger the favour they owe is what led the Bush administration to war in Afghanistan and Iraq and now the push against Iran. His campaign was largely endorsed and supported by the oil companies who unabashedly admit that they needed a president that would serve their business interests. Creating a financial system to serve the public’s interest will first require the dismantling of the current government/corporate business alliance.

WEEK 1:  MARJORIE KELLY

In a paper called Corporation 2020 Marjorie Kelly together with Allen White at the Tellus Institute in Boston, propose a model for the corporation of the future Called ‘The fourth Sector’. This new corporation would be a blend of a social, environmental and financial mission. The existing models adopted by corporations are typically based on short-term financial goals to meet quarterly shareholder returns on investment. The leaders of these organisations will focus on cost cutting measures and market expansion to ensure they meet quarterly returns. Kelly poses numerous questions about the ability of corporations to move social issues from the periphery to the core of company operations and cites examples such as Nike reacting to pressure to put in place protection for employees of overseas factories but failing to deal with the realities of how their demands for the supply of products at low prices forces suppliers to ignore rules of conduct. In another example Kelly singles out British Petroleum (BP) for it’s green wash campaign ‘Beyond Petroleum’ while at the same time 180 people are injured by an explosion caused by scrimping on maintenance costs and another for numerous oil spills also attributed to cuts in maintanance budgets. Marjorie believes that these examples are caused by a ‘deep-seated yet invisible issue – a problem that has no name, that remains absent from public discourse. That issue is corporate design.’ (5)

Kelly lists six noble and didactic principles of corporate design ranging from the need for a corporation to have a stated purpose and that corporations shall accrue fair returns for share holders but not at the expense of the legitimate interests of other stake holders, She believes that the wealth of a company should be shared equitably but she makes only one small mention that corporations should act in a sustainable way and says:

‘The role of government is to create environmental policy – such as carbon limits – and the role of business is to adapt in flexible ways.’ (6) ( Image 4)

Throughout Kelly’s presentation it became clear that the environment was not truly a part of her agenda. Kelly’s vision is that the corporation and that the various alternative models simply served to make the corporation more responsible to the people that worked for them but all under the guise of business as usual and with the profit motive firmly a the fore front. Her simplistic model relied on government intervention and business was left to simply ‘adapt in flexible ways’ to any constraints that may be put on them. In conclusion, Kelly is fast to point out all the failings of capitalism and her simplistic model that relies on the government to intervene in an unspecified manner does little to alleviate the problems she so eloquently brings to our attention. She presented her model but gave no indication as to how it might be achieved.

On her final day Kelly presented The John Lewis Partnership with a profit of 9 billion dollars in 2006 as a model of an employee owned company with a mission to‘Serve the happiness of employee-partners’.  While the company appears to have been created with the good intention of its founder, John Spedan Lewis in 1928, the very hierarchical structure that resulted may no longer be appropriate in today’s changing world.  All employees of the John Lewis Partnership are shareholders and are organised under an extremely hierarchical corporate structure, which ensures that the masses of employees at the bottom of the structure cannot influence the overall corporate structure with its various levels of boards, director’s and trust mechanism that actually controls the corporation. To their credit the trust says it pays it’s employees wages comparative to any other high street store but the employees have the added benefit of (questionably) being called owners of the company and thus entitled to a portion of the annual profits. All owners receive the same percentage of the profit from the Chief Executive Officer (CEO) to the lowly packing person in the shipping department. This arrangement does not prevent the CEO from earning a salary of hundreds of thousands of pounds and then receiving a bonus on top of that. The share distribution scheme is based on a percentage of salary, so the more your salary the bigger the bonus. The argument for the high salaries of the board members and ruling elite was that they should be paid salaries comparable to other people in the same position within the industry. This notion however precludes the idea that people may simply wish to work for an organisation that has a social consciousness because they actually enjoy the work and that their motivation could be something other than for the monetary reward. When challenged on this idea the spokes person for John Lewis found the idea absurd, and could not contemplate a world in which people might be motivated beyond capital rewards. He went on to argue that persons willing to work for less, and only because they liked their work, indicated to him that they would be inexperienced and would not be considered for executive employment! In the end it appears that the John Lewis Trust was essentially like any other profit seeking corporation, which had devised a clever trust system that ensured that the trust owners could not buy out the corporation but gave employees the impression that they were owners of the company. A rotating system of employee appointments ensured that the lower staff would have a presence on one of the operational committees thus giving the impression that they were actually partaking in the running of the company.

The stated objective of the John Lewis Partnership was to make people happy but within this model the company could equally be making chemical weapons and be very happy. There was no mention of environmental responsibility in the company’s manifesto. An additional stated goal was to increase the number of ‘owner’s (sales staff) from sixty thousand to one hundred thousand and with the news that they are now expanding into Dubai with a licensed franchise it became even harder to imagine that the purported altruistic employee share holder scheme met with the initial good faith put forward by John Lewis in 1928. The announcement that John Lewis was jumping on the band wagon for the cash grab in Dubai, possibly the most unsustainable area of growth in the world today, leaves one with the distinct and uncomfortable feeling that the underlying motivation remained growth and profit. Without a doubt from Corporate perspective the additional dividends received by the lowly staff on top of their average clerks wages is a welcome incentive to entice staff to work longer and harder that they might normally.

As a model for an ethical and sustainable business the John Lewis Partnership is outdated and their motivation remains capital gains. The 9 billion pound profit comes from selling standard products and food sourced globally with the exception of a small organic section in their Waitrose stores, which they promote avidly.

WEEK 2:  PETER BARNES

Peter Barnes is one of the editors of the Tomales Bay Institute’s brochure who’s stated purpose is:’ To promote pubilc understanding of the commons through publications, gatherings and media’ (7)  The Commons is described as

gifts of nature and society; the wealth we inherit or create together and must pass on, undiminished or enhanced, to our children; a sector of the economy that complements the corporate sector.

The Institute’s publication proposes a political model that includes the Commons and highlights a collection of social innovations in the USA.  The institute has taken the role of finding and bringing to our attention some of the innovative solutions that people have created to solve local problems.

Barnes envisions the State acting as the balance between the commons and the corporation.  As their description of the commons points out, they believe the commons is ‘a sector of the economy that complements the corporate sector’.  In the introduction to the report published by the institute called ‘ The Commons Rising’, The Chair person, Harriet Barlow says ” Natural gifts like air and water, and social creations like culture and the internet – are being grossly miss-managed. Maintenance is terrible, theft is rampant, and rents often go uncollected’. Like Margorie Kelly’s report The Commons Rising report is big on the problems and thin on the solutions. One can’t help but speculate that the inclusion of liberal acknowledgement to the corporate sector is somehow related to the Institutes need to solicit funds from them without offending them. The report does cite many examples of initiatives by local interest groups to create cooperatives or social innovation projects such as the removal of dams to ensure salmon spawning is not disrupted. The report highlights some very interesting and important examples of social innovation but unfortunately the examples have nothing to do with the Tomales Bay’s proposed program. Within their own strategy they see the ‘commons’ as something to be managed as a shared asset rather than only by corporations.(Image 8) To this end they believe that the government should grant property rights to commons institutions of which they are one. (9) This formula would allow the institute to generate income by selling pollution permits to corporations. ‘Supply and demand would then set the price.’ While the overall intentions of the institution appear on the surface to be noble the model is not based on a strong and well though out economic model. In addition the proposed model relies heavily on government intervention and control but with out any indication as to how this might take place. As we saw in the introduction with the current system that allows government officials to collude with business it is unlikely that this scenario could be made to work.  The pollution trading system appears to be a method of allowing institutions to profit from pollution. Even though their desire is to reduce pollution and misuse of land, the system actually rewards land owners in the process and thus gives corporations great incentive to buy up land and create their own land trust that they can then profit from by polluting. All in all the presentation appeared very thin on the practical workings of the model, which was not based on any solid economic concept. The Institution appeared to rely on donations from corporations and while I believe that their mission was noble and genuine in their quest to highlight social innovation one comes away with an uneasy feeling that they find themselves in a position of not wanting to bite the hand that feeds them.

WEEK 2 Continued:  JOHN WHITMORE

John Whitmore is the owner of a company called Performance Consultants, which is involved in performance coaching for large corporations. Whitmore believes that Corporations have three drivers. 1 Everything must be done on time, 2 The fear of failure and 3 Short-term financial goals. By developing ‘trust’ rather than the three afore mentioned ‘fear’ reactions it is possible to create a new consciousness of change in which capitalism will simply fall away and be replaced by an as yet unknown emerging system. His belief is that we cannot set some future goal that must replace capitalism but rather a ground swell will emerge that takes us to an unknow destination. By using Maslow’s hierarchy of needs he envisions a transition to self-realisation wherein we have meaning and purpose in our lives again. His hypotheses is that once you have reached a level of self belief you won’t need a fancy car anymore, for example, because this desire is associated with the adolescent stage in human development. Ultimately he believes that everything comes from a collective consciousness and this is what will allow capitalism to die a natural death.

On a more controversial note Whitmore discussed how population growth plays a very large role in the rapid utilisation and destruction of Earth’s resources. ‘ Our quantitative technical advance is far ahead of our Qualitative internal wisdom’ Whitmore raised a few eyebrows when he suggested that we might need to consider actively reducing the population. He didn’t use the word culling but it was implied. The ensuing debate ranged from outrage to resignation that forced population reduction might be necessary was to me indicative of scared reductionist thinking. In reality nature will take it’s own course. Given an enclosed field of cabbage a population of rabbits will either find a balance that can support a given population or simply eat all the cabbage and wipe themselves out. External forces and the local conditions will determine the outcome.  The population of the world is now over 7 billion and rising; this is due in part to the ease with which we move food around the planet to feed ourselves. As oil nears depletion all traditional forms of transportation from ships, trains, trucks and cars will simply not be able to deliver food. The result will necessarily be local production, which will have the net effect of stabilising population after many people have unfortunately starved to death. Those that can adapt to local conditions will survive. What remains to be seen is will we have learned the lesson to limit our growth or immediately begin again to follow what seems to be our natural tendency towards growth even under adverse conditions.

WEEK 3:  RICHARD DOUTHWAITE

Richard Douthwaite is an economist and was a breath of fresh air given the preceding two weeks where many good and bad examples where put forth but no realistic proposals to move forward with. In sharp contrast Richard provided a wealth of knowledge and gave us the tools to begin to think about and design our own economic models. Rather than proposing a single model for all situations Richard proposes that the model must fit the location and need.  In his book ‘ The Ecology of Money’ Douthwaite points out that if we had allowed the many monetary systems that have evolved over time to continue, our current world of unsustainable and unstable global monoculture would look quite different. (10)  Douthwaite shows how different money systems can affect the world in very different ways. Within the title of his book he uses the word Ecology to highlight that  ‘ Ecology is defined as ‘ the study of the set of relationships of a particular organism with its environment’ thus inferring that money acts like an organism. Douthwaite is fast to point out that the noted economist Paul Ormerod agrees with his premise when he says ‘Conventional economics is mistaken when it views the economy and society as a machine whose behaviour, no matter how complicated, is ultimately predictable and controllable. On the contrary, human society is much more like a living organism – a living creature whose behaviour can only be understood by looking at the complex interactions of the individual parts. (11)

One of the most remarkable stories Douthwaite tells is how money is created. When we consider that money was first invented simply as a means of payment or exchange for small transactions it is staggering to imagine the process that lead to Banks creating trillions of pounds and the necessity for growth in order for the whole system to work.  He tells a simple story about the origin of paper money in which a gold smith storing other people’s gold began issuing receipts ‘Payable to the Bearer’. This simple action creates the means so that valuable sacs of gold did not have to be carried around by the owners. As the story goes, the gold smith soon learned that nobody ever came to claim their gold, having passed on their receipts to other people and so he began to make loans on the gold with interest. It soon became apparent that it was possible to make loans far exceeding the actual amount of money saved in the vault. The gold smith was in effect creating money that did not exist.  Amazingly we have allowed this system to perpetuate itself and today banks don’t even have any gold to back up its loans. What is more important is, that this monetary system is based on debt and growth is required to keep it all working. In order to create the money in the first place, it needs to be loaned to someone and for it to accrue interest. We call this system ‘fractional reserve banking’ which simply means that the bank can only lend an ever decreasing portion of the money it has on hand to stop the whole process from getting totally out of control. In order for there to be money for us all to use means that all over the world people have to constantly borrow money and pay interest on it. Banks can obviously stimulate the borrowing of money by lowering interest rates to make it even more tempting. If every one decided to pay off their loans all at once the whole system starts to falter because there would then be no money in circulation for normal trading of goods. If people loose confidence in the economy or loose their job and are not prepared to borrow more the whole economy can fall into a depression. As Douthwaite points out the other side of the coin caused by this debt method of creating money is that ‘because interest has to be paid on almost all of it, the economy must grow continuously if it is not to collapse. (12) I t must grow because we need to create the money to pay the debt on the money that we have borrowed. Clearly this basic concept of debt and growth plays an enormous role in creating the problems we have in over exploitation of the planet. As Douthwaite says under the chapter heading of ‘The impossibility of Perpetual Growth’:  ‘ Continuous economic growth is impossible in a finite world’ (13) To this end Douthwaite proposes three important features that money should have:

1. All monies should be created by, or on behalf of, their users, and not by institutions wishing to profit from the activity.

2. Different types of currency have to be used concurrently if the three key functions of money are to be adequately performed

3. The international unit-of-account currency, to which all other monies would be related, has to represent, and thus protect, a truly scarce resource. In other words, when we save money, we should also be saving something vitally important, like the integrity of the natural world. (14)

Douthwaite is a member of FEASTA, an organisation that has proposed an emissions trading system as an alternative to the one currently in place within the EU. Their proposal has may clever ideas related to how we could change our currency system and has elaborated on a method of addressing the build up of CO2 in the atmosphere. Key to their proposal is that the planet belongs to all of us and that the currency of any emissions trading scheme should be given to the general public. The emissions entitlements could be cashed in thus allowing a corporation to buy them in order to offset pollution of the owner could simply let them expire.

It occurred to me during our discussions that a positive change to the global currency system, that is no longer backed by gold, would be to back currencies against virgin land.  If the wealth of a nation was measured by how much land it had preserved and that the amount of currency available for circulation was related to the care of land we would have a feedback loop that reinforced the protection of the land. If all countries were divided into the same number of parcels of land all nations would be equally wealthy and in proportion to their landmasses. In effect all nations would be equal and with the incentive to protect their natural resources in order to have tradable and a non ‘ fractional reserve system’ where the banks just get bigger and bigger and the environmental destruction is encouraged through perpetual growth. A system such as this would open the way for local currencies such as the Totnes pound to become the norm and the opportunity to open more banks that don’t charge or pay interest such as the cooperative, member owned JAK bank in Sweden. The JAK bank operates independently and is not part of the general financial market. The bank charges a small administrative fee to members and all loans are financed from member’s savings.

As Douthwaite proposes, Earth needs a diversity of economic and monetary systems that are based on local conditions. I would add to that, that basing the value of any currency on the things we wish to protect would further strengthen the system.

REFERENCES:

1) Wheatley, Margaret, A Simpler Way, Berrett-Koehler Publishers Inc. 1996,  pg. 33

2) Barnbrook, Jonathan, Design Mueum, Graphic design exhibition, London,2008

3) The Guardian, The Race for the White House, London,1 Feb 08

4) Kelly, Marjorie, Corporation 2020,  Tellus Institute, Boston 2007

5) IBID:  pg. 3

6) IBID: pg. 7

7) Barnes, Peter, The Commons Rising, Tomales Bay Institute, 2008, pg. 25

8) IBID:  pg. 3

9) IBID:  pg. 2

10) Douthwaite, Richard, The Ecology of Money,  Green Books, Dartington, 1999, pg. 8

11) Ormerod, Paul, Butterfly  Economics, Faber, London,1998, pg. 7.)

12) Douthwaite, Richard, The Ecology of Money, Green Books, Dartington, 1999, pg. 25

13) IBID: pg. 25

14) IBID: pg. 14