Forwardeconomics

“The biased perceptions that prevent us from understanding the big picture”

The terms ‘growing inequality’ and ‘environmental degradation’ are used quite often in almost every media outlet of the modern world. While readers may think they are very familiar with the isolated meaning of these terms, very few people understand the structural impact of these two factors on a system that depends on unlimited consumption of scarce resources, and a fairly even distribution of wealth in order to create demand and maintain employment. Neither environmental degradation nor economic inequality are supportive of such a system. We are living in what Professor Immanuel Wallenstein calls “The Structural Crisis of the Modern World System.” The last three decades have shown signs of exponentially growing systemic risks, and the 2008 crisis has proven that even global coordinated action is doing very little to reverse the final stages of “a system that has fallen victim of its own success” (Ian Goldin). Yes, we have been very successful at increasing life expectancy around the world and decreasing mortality rates, and these accomplishments have brought brand new challenges that have exposed the weakness of the capitalist paradigm. All historical systems descend into chaos in their final stages before being replaced by a new structure. This is nothing new, it has happened before during the Middle Ages, the fall of monarchies and imperialistic regimes. However gloomy this may sound, this is the first time in history that we have the technology to create a smarter system avoiding the descent into chaos. So why wouldn’t we?

The concept of a Smart Economy should come as a natural progression of social evolution. After all, we have smart phones, smart satellites, smart driving cars, smart medical equipment and smart boards in our schools. Why would we deprive ourselves from developing a smarter economy? What this concept would look like and how fast it can be implemented, it will depend on defining its core value proposition and being able to look at existing research from a fresh perspective. Some requirements of this new system should include: detaching basic needs from exposure to systemic risk, implementing concrete practices to reverse climate change, maintaining appropriate incentives for upwards mobility and creating enhancements to human security: including access to food, sanitary conditions, and minimal shelter, health and education. Perhaps this time we can define ‘equality’ in terms of minimum standards of living instead of setting this requirement in abstract terms. The abstract concept of equality used by the current system has led to an equally poor wealth distribution among the ninety-nine percent and a fairly equal chance of suffering the shortcomings of environmental degradation for all human beings.

Creating a Smarter Economy requires looking at the wonderful wealth of knowledge accumulated by existing theories and detaching these ideas from existing labels and discourses. One of the biggest challenges posed by inequality and environmental degradation is the issue of food security. J. Galtung suggest that failure of a state to provide access to the basics needed to sustain life is the number one cause for armed conflict. In lieu of this fact, minimizing exposure of the basic necessities to fluctuations caused by systemic risk would seem as a logical and essential requirement of a new economic system. This of course would imply thinking a new way of entitlement to the basics through means other than money. This is the point where human difficulty on challenging accepted rhetoric gets in the way of practical thinking. Western discourse implies that the word ‘equality’ next to the word ‘capital’ leads to an acceptable system, while the word ‘equality’ achieved in ways other than by monetary means is ‘socialist,’ and therefore non-viable. However, It is not the idea of equality that deter respected scholars from looking deeper into the possible benefits of alternative egalitarian systems, but the stigma associated with socialist states, what has prevented theoretical debates to focus on the practical strengths of this concept.

For years we have focused on creating theories that are particularly good at pointing out the weaknesses of existing processes but offer no practical alternative to their criticisms. The many flaws of philosophical concepts such as liberalism, capitalism, socialism, constructivism and mercantilism can be debated for decades, and they have been. However, the orthodoxy of these debates focuses on gathering evidence to disprove other theories instead of attempting to understand if these ideas could help solve a particular problem. Subscribing individual identity to a particular school of thought implies siding with a dichotomy that makes different theories feel ‘foreign’ and therefore worthy of suspicion. This approach is not conducive to developing a Smarter Economy that efficiently delivers an incentive based system and minimizes exposure to globalized disruptions. Ideas are resources and they should be valued for their strengths and ability to solve a particular problem. There is no single solution to all of the world’s challenges. Judging socialism on its ability to provide an incentive for economic mobility is equivalent to judging a fish for its ability to climb a tree. The same can be said when judging capitalism for its ability to address environmental degradation. However, these weaknesses don’t undermine the strength of capitalism on fueling innovation or the ability of socialism to minimize exposure of basic necessities to systemic risk. Additionally, both systems rely heavily on centralized planning, but from different approaches. One of them exercises central planning by controlling the supply of money hoping that the natural distribution of the markets will result on general welfare if it is combined with certain ‘corrective’ policies to offset externalities.This technique reflects a reactive approach to centralized planning. while socialism relies on allocating physical goods to people instead of hoping for a natural allocation, reflecting a proactive approach to centralized planning. At the very core, both systems are aimed at maintaining a civilized social structure through controlling different resources.

The brief deconstruction of two concepts that appear to contradict each other, Capitalism and Socialism, exposes their commonalities and provides a glimpse of how implementing their core strengths in a single system can deliver a more robust social structure stable enough to tackle global problems in a peaceful manner, instead of relying on armed conflict. The biggest challenge to creating a Smart Economy that ensures human survival without reversing the progress made by the current system, is not technological or even intellectual. The greatest obstacle remains the current inability of world leaders to detach negative labels associated with alternative theories, and embrace the possibility that applying a combination of ideas may strengthen social structures instead of weakening them. We have the technology and intellectual wealth needed to put today’s global challenges behind, what we lack is a fresh perspective.

Dear world leaders, we know that nothing could have prepared you for the burden you carry on your shoulders today, but there are seven billion lives at stake dependent on your ability to see through old discourse and find a practical solution to this systemic crisis. We are aware that the current system is approaching its final stages, but our technology provides an unprecedented opportunity for global collaboration. This is a historical chance to challenge the notion that one theory alone has the answers to all of the world’s problems, and open the dialog to how we can benefit from pluralism. The critical approach (Cohen) most specifically, focuses on revealing how a combination of theories can form a more robust system that is practical by nature. One important step towards creating a Smarter Economy is to begin using world summits to embrace differences as a strength, instead of debating military action against states filled with human beings who have resorted to violence probably because they are struggling to survive, but are too blinded by the concept of sovereignty to ask for help. People will try to label this effort in many different ways. However, a solution that enhances human security and living standards for all, while providing a long term stable environment for free markets to exist has only one name, and that is ‘smart.’

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