Climate change is the symptom of an imbalance at the core of our economic system. Our world needs to make sense, not just money. To get passed the failed ideology of neoliberalism, a renewed intelligence of Democracy is key.
Assuming that global warming is not a Chinese hoax, one might think that answering the issue requires mostly some level of economic and technical re-engineering. Practical matters have to be dealt with in a practical way in order to provide results. If this was entirely true, however, the world should by now be well on its way to implement 100% renewable energy sources, have energy-efficient buildings, and sustainably manage the remaining forests it has. The alleged scope and emergency of the issue would have commanded it. Apparently, the world did not get the memo.
Some countries do better than others but, on a global scale, we are far from having reached the necessary steps to keep an average increase of global temperatures below two degree Celsius by the end of the century. Why? The immediate answer is the forceful lobbying of fossil fuels companies. Yet, this, in turn, has to be questioned. What kind of power could these companies have that would convince the rest of the world to do next to nothing in regard to the seriousness of a runaway global warming threat? None. More appropriately, just the one we allow them to have. Corporate interests can only do so much in financing disinformation campaigns, bribing politicians, and making sure that the mass media they support with advertising money keep in line and remain “neutral”. The responsibility is primarily ours as citizens.
It is an upward battle because money is power and any occasion to foster legal privileges allowing to rig the market and undermine the institutions will be taken. Compared to other basic forms of power that can turn into tyranny, such as personal dictatorship and ideology or religion, money is without any doubt the most insidious and the most efficient. For those who already enjoy its power, it is a silent but immediately effective asset that can be used to rewrite the rules in their favor. The mere fact that the economic world is, today, unable to reinvent itself in the face of the looming catastrophe of a constant rise in temperature squarely shows how reckless the power of money can be.
Notwithstanding, this power is not a fatality. The original Greek root of the word economy means “household management”. How could we consider that Earth is not our house? The crucial task on our hands to preserve the balance of physical life on the planet is a stark reminder that thriving and flourishing can only be done interdependently with nature and people. This is why Democracy is at the core of the answer to climate change. Only this particular form of government is based on the recognition of the universality of human rights, among which the right to live is a pre-condition of all others. But to achieve anything, Democracy needs to not be subverted by money.The original Greek root of the word "economy" means “household management”. How could we consider that Earth is not our house? Click To Tweet
The confrontation between moneyed interests and the democratic ideal of governance is not new. What is new is that it has now turned into an opposition between life and death on a global scale. To understand how humanity has got there and why no binding collective political answer to climate change has been agreed upon yet, it is necessary to dive into the intellectual background guiding public affairs in most parts of the world. Three questions have more particularly to be answered: What narrative does the power of money justify itself behind at present? Which vision of the world and of humanity does this narrative imply? Beyond human rights, does Democracy guarantee also a sustainable form of civilization?
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When it comes to economic growth, the common wisdom could be summed up by “The freer the market, the better”. It has forged national and international economic policies for several decades now, almost systematically presented as the holy grail of a modern and prosperous world. Assimilated to the principle itself of trading, this abstract guideline is nevertheless intellectual baloney. One way or another, rules apply; simply because nothing exists out of context ever.
If rules do not come from a collective consent, they will come from the wants of those who already have an edge in a given situation. Saying that the market is neutral and should be free of regulations is akin to saying that a football match would be better played without any delimitation regarding what can and cannot be done on the field. It is a total abstraction that contradicts itself by denying the very possibility of competition; if there are no rules to the game, there is no game.Saying that the market is neutral and should be free of regulations is akin to saying that a football match would be better played without any delimitation regarding what can and cannot be done on the field. Click To Tweet
What about the invisible hand of the market, then? Adam Smith was right in the sense that the norm for mutual enrichment is to let demand and offer find their own balance to the satisfaction of all parties. He never said, however, that this balance could occur regardless of a set of necessary conditions. Perfect competition, full information, and rational actors, notably, are all assumed to play together for the market to find its balance.
Needless to say that in the real world this narrow path is never followed to a significant degree. The intricacies of economic life do not follow the simple mechanic of Newton’s law of gravity. For that reason, it makes no sense to postulate that all parties will most of the time have the proportionate bargain power that makes a deal advantageous to both sides. Without proper rules, on the contrary, those who have next to nothing to deal with aside from their work power will easily become economic slaves. Eventually and because of the strains of a low income, they are cut off from any real possibility to enrich themselves and the economy at large.
Perfect competition, full information, and rational actors are the basic building blocks of conventional economics. They were postulated to mimicking the same path of certainty that experimental sciences evolve upon. This has led mainstream economists to ignore the broader and much-varied conditions of effective economic success. It has also opened the door to a very imbalanced situation for the world.
Reality works as a whole. Seeing it through a few simple abstract laws is a requirement for experimental sciences only. The world of economics, for its part, deals with a non-linear, turbulent, and chaotic system of systems. We can make sense of it by discerning how these systems relate to each other, not by decreeing absolute laws that have never been confirmed through experience. This methodological blindness, unfortunately, has served as a blueprint for unsustainably exploiting resources, be it people forced into hopeless misery or disrupting the conditions for life as we know it on the planet.
We are part of a whole that regulates itself dynamically, hence the need for recognizing how it does it if we want to get out of the social, economic, and environmental dead-end we have eventually thrown ourselves into. At a human level, this translates by opposing well-discerned regulations to the whims and wilful blindness of those who rely on perfect competition, full information, and rational actors as a convenient dogma.
But, again, money is power. And this power has all interests in sacralizing profit-making and in ignoring the cost for those who are not at the high end of the game. This is why it prefers conveying the message that a market free of all pesky and useless regulations is the only path to sound business practice. To that effect and in order to get people distracted away from the real issues of income inequality or environmental unsustainability, the trick is to repeatedly use slogans that speak to the imagination. “Big government vs small government” is undoubtedly one of the most popular in the U.S.
Not only is “big government” a catchphrase easy to remember and somehow to visualize, but it keeps people quiet by making any concern about financial redistribution inherently suspicious. This works like the “good medicine” that pioneers loved Native Americans to drink. Those who sell it have a clear interest in keeping their victims numb regarding the real cause of their dire situation. Fortunately, to prevent falling for the seduction of the big government vs small government mantra, some logic along with basic facts checking is all you need. So, let’s have a look at the reality behind the narrative.
Whether you favor more or less of government intervention, not looking beyond that point implies that the market knows best anyway and that the government is there in the second instance only, just to prevent things from going too awry. This is once again forgetting that rules are the game’s matrix. In modern democracies, such rules emanate from legislatures, administrative agencies, and courts. The government does not “intrude” on the “free market”; it creates the market. Even in the most libertarian society, what would be allowed or not in business life would have to be formalized in order to maintain fair rules and practices. None other than public institutions acting in the name of all and on the base of a thorough debating process can do that. This is what governments are: a debating space to which citizens have delegated the authority to enforce the law. Properly conducted, they are our key to political and economic freedom. Absent, they can only be replaced by the rule of those who already can leverage money.
“Yet, says Robert Reich in his book Saving Capitalism: for the many, not the few, the interminable debate over whether the “free market” is better than “government” makes it impossible for us to examine who exercises this power [of writing the rules], how they benefit from doing so, and whether such rules need to be altered so that more people benefit from them.” After the logic, then, let’s do some facts checking.
In this day and age, moneyed interests are by far the real beneficiaries of governmental policies in the U.S., whether through subsidies or through lenient rules in favor of corporations over the public interest. Favoring corporations can have a practical and economic benefit but it has to be done in a balanced way. Unfortunately, making as much money as quickly as possible has long become the exclusive guideline for the country’s economic policies. The creation of wealth has been almost entirely decoupled from long-term investments in infrastructures and people. As a result, while investments in the public sector have been shrinking since the beginning of the 1980s, the U.S. economy has gradually morphed into a money game with very little benefit to workers, local executives, and the consumers themselves.
Let’s take a few examples. Antitrust laws have been relaxed for big corporations in the agroindustry, telecommunications, airlines, banking, etc. Consequently, U.S. consumers pay the highest bills in the world for basic commodities such as their medication or their internet subscription. Bankruptcy laws have been loosened for large corporations, but homeowners and students will see their debt forgiven under almost no circumstance. The bailout of the largest banks and auto manufacturers in 2008 clearly showed that economic failure is of small consequence for big corporation; they will be backed-up by taxpayers’ money.
That is exactly what a casino or junk economy is. The chain-value of individuals grounding the economy and creating real assets by their skills and efforts is being ignored for the benefit of financial engineering and unbridled profit-making. Instead of investing in the country, i.e. in its people and its local economies, it is a race to the bottom toward the cheapest solutions for the largest short-term financial gains. When corporations are exclusively turned into cash machines for their CEOs and administrators, the economy goes down the drain.
If you need some more examples to get convinced of the total hijacking of the U.S. economy by moneyed interests, think about contract laws requiring mandatory arbitration before private judges selected by big corporations; securities laws designed to allow insider trading of confidential information; CEOs using stock buybacks to boost share prices when they cash in their own stock options; tax loopholes for hedge funds and private-equity funds; lower marginal income-tax rates on the highest incomes and reduced estate taxes on great wealth; etc. The pseudo-debate about big government vs small government is a convenient smokescreen to keep the public attention away from what really matters: a government for who?The pseudo-debate about big government vs small government is a convenient smokescreen to keep the public attention away from what really matters: a government for who? Click To Tweet
The main public excuse of corporatocracy—our modern version of oligarchy—is economic growth. Understand the growth of Gross Domestic Product. But contrary to what classic economics manuals assert, this does not equate with the enrichment of a country. The exclusive search for profits may well increase the overall Gross Domestic Product while only fat cats will see the color of the money. If investments are not being made in infrastructures through taxes, in R&D by companies, and in the employees by offering decent wages, then the so-called economy is paying itself off of the beast while there is still a beast to feast on.
In theory—and in many political speeches—liberalism is for small businesses to have a chance to thrive on their own merits. In practice and because good liberalism is supposed to be deregulated liberalism, competition is being killed by those who have enough clout and financial leverage to then impose their own rules. That’s how the narrative of the power of money ends.
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The blatant official favoritism of many governments toward the fossil fuel industry is a direct confirmation of the raw power of money. It is bad for the climate but it is good for Exxon and other oil majors, highly subsidized by public money even though representing one of the most profitable industries on earth. Beyond the inadequacy of a flawed economic system, the objective message from fossil fuel lobbies and our obliged governments is that the fate of humanity comes second after moneyed interests. How is that even possible, since we supposedly live in civilized and mostly democratic societies?
At a deeper level than the raw corrupting power of money, the weakness of the political system can only stem from a lack of perspective regarding economics. Two angles have to be considered. The first one is that measurable growth is still the alpha and the omega of economic life for most decision-makers in political and business circles. Accustomed to evaluating progress primarily from a material standpoint, they simply have a hard time to consider economics in a more integrated way. As a result and since the complexity of human and environmental interactions as a whole is not as readily measurable as what money can buy, they have so far opted for the myopic vision that the mere addition of quantities equates to economic health.
The other angle of the perspective is that economics is an interpretative science, not an experimental one like physics or chemistry. It follows that, from Adam Smith to Karl Marx and from Friedrich Hayek to Joseph Stiglitz, many interpretations of how economics really work have been and will continue to be provided. The point is that these interpretations are necessarily linked to specific underlying views about mankind and the world. Since the end of the seventies, neoliberalism is the one most in vogue the world over.
In opposing “Free market” to “Big government” as a useful mental signpost for the masses, neoliberalism assumption is that public interest is not a relevant category for driving social and economic progress. The underlying view of the world, here, is that the individual makes the whole of her own fate and that we are social beings by choice, not by nature. In that sense, neoliberalism is the most serious obstacle to any cohesive and concerted global action for the common good. The mobilization against climate change, for one, cannot happen at the required level as a meaningful collective endeavor if we do not believe in society.
The challenge, therefore, is not only to frame a model of sustainable development beyond the mechanics of capitalism left to itself but to address, once and for all, the shortcomings of a specific ideology that considers public concerns as dangerous lunacies.
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Some may remember Gordon Gekko character’s line in the 1987 movie Wall Street: “Greed, for lack of another word, is good! Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit!” That greed is good has been notably theorized by the economist Milton Friedman (1912–2006). In his mind this was not, indeed, an invitation to become evil people but the expression of the basic fact that, as himself repeatedly said, “The world runs on individuals pursuing their own interests.”
The real problem with this view is not that it does provide an excuse to some insecure egos for effectively letting their greed run wild. The real problem is its superficiality. Like any ideology that can reduce itself to a few slogans, neoliberalism has become a popular intellectual doggy bag that never questions its underlying philosophy.“The world runs on individuals pursuing their own interests.” (Milton Friedman) The real problem with this view is its superficiality. Click To Tweet
According to Friedman, individuals should pursue their own interests because their respective actions will always balance out in the best possible way if unfettered. But what if there is a natural world out there with its own balancing needs? And what if there are more fundamental characteristics defining mankind than greed? Chances are that by denying the practical and psychological importance of shared interest, neoliberalism puts itself out of the pale of genuine progress from the get-go. In order to figure this out, we have to question its coherence from all relevant perspectives, namely from the economic, human, political, and moral points of view
Economically speaking, neoliberalism assumes that the creation of wealth depends on those who know how to accumulate it for themselves, consequently creating opportunities for others. The reverse is true. Ford, for instance, did not become one of the largest U.S. companies during the twentieth century just because Henry Ford was, indeed, a business genius, but primarily because he fully recognized that the creation of wealth for his company could come only from its customers, and first among them Ford workers.
Money flows in the economy from the customers’ wallet, not from the CEOs’. Knowing this, Henry Ford did not wait for opportunities to create themselves in his wake. He forced them by giving his employees wages allowing them to buy the cars they built, therefore taking the first step in bringing about the mass market he had always envisioned. If the story is well-known, its lesson is hardly ever acknowledged. Customers create economic wealth, companies seize opportunities.
Humanly speaking, pursuing our own individual interests necessarily defines boundaries to what we see as such. These interests are ours, not anyone else’s, and shine therefore in a particular and delimited place in our life context. But what is of true value is precisely what has no boundaries. No external goodie, be it a new car or a promotion at work, can in and by itself make us happy—since happiness is an inner work totally foreign to the realm of what can be measured and compared. Taking the path of a forceful individualism can have some relevance in the world of trade and at the moment we are trading, but the inner richness of being human, as well as all the free and immeasurable wonders of life, are a much more genuine expression of what we truly seek. And, like anything that has true value, they are for free.
Milton Friedman’s statement that the world runs on individuals pursuing their own interests may sound smart at first, as this is apparently what takes place at an immediate level, but this is also what makes his judgment a superficial one. Our real interest can be neither delimited nor limited. Being unassessable, it cannot be defined in an individualistic way. The Dalai-lama expressed this paradox in a striking formula: “Be egoist: love each other.” Putting this motto in practice certainly produces happier human beings than hiding behind stuff and power with the cheap “Greed is good”."Be egoist: love each other" (The Dalai-Lama). "Greed is good" (Milton Friedman). Which works best? Click To Tweet
Even at the most practical level, experience teaches us that seeing the individual as the central unit of her personal achievements contradicts the possibility of her effective success. The same way, basically, that considering the market as some kind of absolute reality contradicts the very possibility of competition. Whatever our individual merits can be, the contribution of countless other individuals has helped as well our personal realizations in many different ways, and our own success in any field is proportionate to the accuracy with which we were able to recognize and take advantage of others’ legacy.
In that respect, the idea that the “survival of the fittest” is the commanding principle of human lives is a sorry philosophical excuse of neoliberalism and a wrong interpretation of Darwin’s theory of the evolution of species (not individuals). As in any system, a society needs as many interconnections as possible to thrive, not less. Helping when and where help is needed to bring back one element into full functionality is more often than not a better bet than letting it stall. The freedom of achieving success on one’s own merits is intrinsically linked to shared progress.
Politically speaking, furthermore, that the world runs “on individuals pursuing their own interests” refers to a democracy by default only. Democracy was not instituted simply to prevent enslaving each other but for sharing the best of what humans can be and do. If the freedom of running aside from each other in our quest for more material goods and social recognition has obviously to be guaranteed, the democratic project itself is nevertheless much broader than that.Democracy was not instituted simply to prevent enslaving each other but for sharing the best of what humans can be and do. Click To Tweet
As humans, our true freedom lies in leading a meaningful life. Even though we usually consider that making sense of our own life is a purely personal matter, if we look deeper we can see that all people are longing for this same sense of inner fulfillment and that it is what makes us members of the same human family. Democracy is the political system that is based on the very recognition that we thrive and evolve by mutual enrichment. The role of democratic institutions, consequently, is to make possible for this greatness to be achieved according to each of our personal vocation.
It follows that in a democracy the government is not the enemy or some formal institution strictly bound to protect our personal freedom of speech, movement, and enterprise. The government is us. We give ourselves, by delegation, the power to create a healthy and respectful human collectivity through public debates and a transparent implementation of public policies. Then it is up to each and everyone to thrive in life if we choose to. Nowhere is personal freedom being denied by effective democratic institutions; on the contrary, it is reinforced by the clear distinction between the collective and the individual dimensions of human life. It so happens that there is not just the individual one.
Stating that the world runs on individuals pursuing their own interests implies that democracy can only be defined by the practical ability to move around, possibly get wealthy, and say what we please. But ignoring the social nature by which we can become genuinely human is equally ignoring the specificity of the democratic project and, thus, undermining the very possibility of practical freedom itself. In more layman terms, when some wacko boasts that she or he can run a country, a state, or a city on the sole ground that they know how to run a company, they are simply telling you that they see no specificity of the political sphere as such. The best you can expect, then, is a banana republic run by their cronies.
One thing that cannot be denied to Milton Friedman is that he is morally coherent. In his world, society is just a collection of individuals that have found more expedient to aggregate under common laws than to stay totally on their own. But this does not mean that we owe anything to each other. The freedom of each individual to fight for herself has to guide public policies, not empathy. In this perspective, our social concerns undermine the possibility for the best of us to show the way out of poverty and can just foster, on the contrary, a permanent state of resentment and class warfare.
If most people still cringe when confronted with the idea that as a society we must be indifferent to the pleas of others, this is because, in Friedman’s mind, they do not understand what works. All that is needed is to respect the absolute liberty of the individual to thrive for herself, instead of redirecting the results of her efforts to the benefit of an undifferentiated crowd that did nothing to deserve it. This is also why raising taxes in order to keep the possibility of a fighting chance for all is an attack on the personal freedom of those who have succeeded in finding their way ahead.
Even though very familiar, this line of thinking is a pure abstraction. In the U.S., for example, the notion stubbornly held by many lawmakers that people with a serious medical condition should pay higher premiums—meaning that if you cannot afford them you go either bankrupt or dead—is a pathetic illustration of this intellectual and moral wreckage. People may die in misery but at least the absolute freedom of the absolute individual is safe!
The ideological standpoint of these U.S. lawmakers, most of them personally benefiting from a system of crony capitalism—and whose health insurance, moreover, is carefully mutualized through a set of specific rules—, is as seductive as it is devoid of any reality. Philosophically speaking, making the individual the absolute principle of our human reality is denying the interconnectedness and relativity at the core of any reality, including ours. As a consequence and under the guise of individual freedom, millions of Americans are serenely deemed better off without any proper health coverage.
[To be continued]