Creating a New Economy That Goes Well Beyond Optimizing Financial Returns for Shareholders

Read page 1

Q. If changes are not made to our current economic structure, what will be the toll on our climate and natural resources? Can you describe what you believe our planet will look like in 20 years if we don’t make this shift and what it would look like if we do?

A. It is becoming very clear that the system will collapse if we keep on doing what we are doing. In fact, the accelerating chaos—social, economic, financial, ecological—we have been experiencing since the turn of the millennium can be seen as a pattern of “pre-collapse” rumbling, like mini quakes before an earthquake to release pressure. Releasing pressure is necessary, and if it catalyzes change, we can avoid the big one. Maybe we could call the current accelerating chaos the “early collapse” phase of collapse. Regardless it serves the same purpose. It releases pressure and wakes us up.

I don’t say this as an alarmist, but as a calm rational observer of the pattern. The only questions are, what does “collapse” really mean? And, is it possible to change the system? I don’t have a good answer for either question if I’m being honest. For example, if we don’t course correct, I suspect we will collapse the economy before we collapse the Earth support systems we rely on. And that will relieve pressure on the Earth systems, but create massive social upheaval. But I can’t predict that with any real conviction. One of the things about holistic thinking is an awareness for the need to be humble. We simply cannot anticipate how complex systems evolve and adapt to accelerating change. Who predicted social media and the consequences that flow from it when the Internet was invented? 

Q. Are you familiar with B Corporations? Do you believe that baking sustainability into a company’s DNA can change the way business is done today and in the future, by giving the legal protection to directors and officers to consider the interests of all stakeholders, not just shareholders, when making decisions?

A. What many call “stakeholder capitalism” is very much in alignment with the regenerative principles at the level of the firm. But of course, firm level management is microeconomics, absent the macro context that is rapidly becoming THE CRITICAL issue. We have just woken up to the concept that we have an aggregate carbon budget for the entire global economy. That is the context of what matters for individual businesses and society as a whole (holistic thinking). So doing less bad at the micro level is not good enough, no matter how well intended.

It’s a great way to begin, so I’m a huge cheerleader for B Corps! Some current businesses (and entire industries) cannot exist in their current form without driving us toward collapse. The same goes for some consumption behavior. The growing popularity of B Corps (Etsy is the first B Corp to go public last month), naming an idea that began long before the invention of B Corps (Patagonia, Ben & Jerry’s, Stonyfield), like the idea of impact investing, which existed long before the term became fashionable, is evidence that the our free market capitalist system is evolving in alignment with the regenerative framework.

Codifying legal protection for directors in fresh legislation is a useful tool to shine a light on the issue. Legal scholars such as Lynn Stout would argue that the “business judgment” rule already allows directors all the discretion they need. But of course we live in a litigious society so more clarity is good. But the power of B Corps is at least to a significant degree in their power to change the story, the narrative of how business can and must be done.

Nevertheless, and this is crucial, I would suggest that we can’t address a macro systemic crisis by looking at micro management alone. All business management is essentially microeconomics. We need an overarching macro framework—a coherent theory that is aligned with how the universe actually works—that holds everything together.

Q. Clearly we live in a world of overconsumption. What role do you believe the consumer has in changing our economic system?

A. Every one of us living in America, particularly those of us living a middle class lifestyle or above, are complicit in the unsustainable system. So we all play a role in changing the system. There are no silver bullets, it’s all important beginning with our light bulbs. But it is disingenuous for business to hide behind consumer demand when business uses huge advertising budgets to manipulate consumer “desires” and creates needs out of wants. And it is naive to assume that “the market” will resolve these challenges though some magical invisible hand.

I’m no fan of regulation and appreciate unintended consequences. I much prefer a system that has self-regulation built in via incentives. The capital surplus rule for “systemically important” (too big to fail) banks and regulatory relief for simple productive lending banks in the real economy is a great example of the kind of self-regulating incentives I favor. But, we desperately need policymakers to do their job, yesterday.

Consumers can help, but they can’t do government’s job. Nothing could be more naive. We managed to outlaw slavery for our own self-interest and because it was morally right rather than “leave it to the market.” To fix our most egregious and immoral over-consumption habit, we need our elected officials to do their job and enact a policy that sets a serious and rising price on carbon, uniformly enforced. And that’s for starters. Government must do its job. And given the power of big business in modern society, I believe it is incumbent upon big business to use that power to exercise leadership where government is failing to do their job. Business should come together and demand a price on carbon. Just like it demanded a discriminatory law be fixed in Indiana—in a week!—rather than “leaving it to the consumer and the invisible hand.”

Q. Is there anything else you’d like to share with EcoWatch readers?

A. I’ve overburdened them enough. It’s important to keep a good sense of humor folks, it’s going to be interesting!

I hope you’ve enjoyed John’s candid answers. And, in case you want more, here’s John’s White Paper Cheat Sheet:

• There are universal principles and patterns that describe all living and non-living systems in the cosmos. This is understood by modern science, in particular energy flow science (everything is energy) which encompasses complexity science and ecology as well as quantum physics and modern biology (web of life, not misconstrued Darwinism)

• These principles are remarkably in alignment with several of the core insights of many of the world’s wisdom traditions—Western, Eastern, and indigenous—but they’re often in conflict with modern economics and finance.

• The hypothesis is that human economies are examples of such energy flow networks, and therefore must be grounded in these same principles and patterns if they are to be healthy (sustainable). We need to see where conventional economics (of both the left and the right) and finance are in alignment, and where they are in conflict. But if one rejects the hypothesis, then one needs to make the case as to why human economies and our financial system are not subject to the principles that guide all systems in the universe, or quibble with the principles which of course can always be done …

• The paper identifies the 8 principles we see as most relevant to human economies, and their critical inter-relationships.

• To transition to an economic system aligned with these principles requires a new way of thinking.  We need to transcend the reductionist thinking of the Enlightenment, to holistic or integral thinking. This is new and hard. It is not hippie mumbo jumbo, but scientifically rigorous. It is transforming every discipline from medicine to management, from urban planning to architecture, and yes I suggest, it must and is transforming economics and finance!

• And systems scientists (including our own Dr. Sally Goerner) are now developing metrics for “regenerativeness” across most of these principles so they can be measured empirically and with rigor. This will inform an entirely new policy agenda.  For example, it will lead to policies that promote robust circulation of materials, information, and money (rather than GDP growth) because circulation is more important than rate of growth for our health.  To quote Jane Jacobs (whose work was informed by the same energy flow science), “It’s not how big you grow, it’s how you grow big.”.

• The paper suggests that it is the regenerative process itself that leads to health (sustainability) as the outcome of the system design. Current approaches to sustainability tend to focus on addressing the problems (symptoms) of the current system in a reductionist and ultimately losing battle.

YOU MIGHT ALSO LIKE

Net Zero Carbon Emissions: An Idea Whose Time Has Come

Elon Musk: Tesla Battery Will ‘Fundamentally Change the Way the World Uses Energy’

Fortune 500s Hit the Hill on Earth Day to Urge Congress to Take Action on Climate Change