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Great Transformations



ARTICLE | | BY Orio Giarini, Garry Jacobs, Ivo Šlaus

Author(s)

Orio Giarini
Garry Jacobs
Ivo Šlaus

Great landmarks of history are few and far between. Normally they are recognized by scholars only long after the fact. Those in the thick of the fray may often be consciously inspired by the significance of their actions, but rarely does history come to share that perception. The rise of individualism in ancient Greece, its revival during the Italian Renaissance and the radical transformation of society following American, French and Industrial Revolutions retain a claim to lasting significance. Could it be that we are now on the cusp of another?

If so, the most evident signs are signs of crisis – a near perfect storm of social turbulence shaking the pillars of modern society and undermining confidence in cherished assumptions. The resurgence of Asia has challenged five centuries of Western political and economic supremacy and its more subtle claims of cultural superiority. The decline of autocracy in its many forms – first in Eastern Europe and Latin America, now in the Middle East, and inevitably in China – marks the beginning of the end of domination of the individual by the self-appointed authority of the State. The sudden and explosive growth of the Internet as the first global social system has empowered the individual as never before in history and laid the foundation for emergence of shared human consciousness and world culture that transcend nationality, race, religion, language and culture, ending humanity’s long experiment with isolationism, self-assertive national sovereignty and cultural egoism. The end of the Cold War a half century after the second of two devastating world wars undoubtedly marks the end of imperialism as it has been known throughout history, yet the residual legacy and on-going proliferation of nuclear weapons have so far leveled the equation between the weak and the powerful that even a small state or splinter group can rob mighty military powers of their security or hold the whole world at ransom.

"The world has developed the technological and organizational capabilities to totally eradicate poverty and usher in prosperity; yet it operates by a dogma and reward system that make human labor increasingly obsolete."

These social, cultural and political transformations are now being capped by a multidimensional economic revolution with several notable characteristics. The globalization of financial markets has created a wild and ruthless frontier of speculation that whimsically topples national governments and devastates real economies mindless of its impact on human welfare and social stability. This has subjected the world economy to more than 250 financial and banking crises over the last 3 decades. The divorce between finance and economy has liberated the power of money to multiply itself without the necessity of producing either useful commodities or gainful employment opportunities, spurring an eighteen-fold multiplication of global financial assets in three decades and rivaling the power of monarchs and maharajahs to disengage their lavish lifestyles from the welfare of the people. Thus, Louis XIV built Versailles, unaware that he was condemning his own descendant and namesake to the guillotine. The globalization of production, markets and ownership has undermined the power of national governments and irrevocably blurred notions of national interest, as the incestuous relationship between a still communist China and capitalist America and the current crisis in Europe so aptly illustrates.

The world has developed the technological and organizational capabilities to totally eradicate poverty and usher in prosperity; yet it operates by a dogma and reward system that make human labor increasingly obsolete, rendering billions of people, including a whole generation of youth, underemployed and superfluous. Plutocracy has replaced monarchy as the prevailing system of government engendered by the widening disparities between the rich and poor, which exceed those in 18th century feudal Europe. At a time when the globalization of information and communication has stirred the aspirations and raised the expectations of human beings everywhere for a share in the good life, these growing disparities coupled with the blatant injustice of the present system feed a surging revolt of the excluded everywhere, sufficient to topple long entrenched governments by ballot or battle, while spurring social protest, crime, armed insurgency and terrorism. Growth rates surge in developing countries which strive aggressively to catch up by emulating strategies that already tax the carrying capacity of the earth. Yet, those they emulate find their economies stagnant, their youth unemployed and real living standards in decline. Meanwhile, billions of people remain in persistent poverty.

Given the remarkable progress of humanity over the past two centuries, the persistence of poverty might not be so alarming, were it not for the persistent poverty of new ideas and fresh thinking on how to eliminate the recurring crises, rectify the blatant injustices and replace unsustainable patterns with a new paradigm capable of addressing the deep flaws in the current paradigm. Meanwhile, economists take shelter in an outmoded theoretical framework that is increasingly removed from the real world. Indeed, neoliberal ideologues of market capitalism bask in unrivalled supremacy with not even a contender in sight. Didn’t the collapse of communism in Eastern Europe prove once and for all that there is simply no alternative to the wisdom of the marketplace? Isn’t it self-evident that economy like biology is governed by natural laws acting with mathematical precision to arrive at the best possible result? If that result happens to reward the strongest and most competitively fit and wipe out the weak, it is simply a law of nature that must be respected. Anything else smacks of hubris and risks disturbing the whole edifice of civilization. Communism is dead. Socialism is in retreat. Money rules. It’s every man for himself. Environmental alarmism is spurred by the jealousy of those who cannot make it or the pessimism of those who lack faith in the unfailing power of science and technology to conquer every problem and overcome every limitation.

This ideology would seem a lot more humorous were it not so close to the pragmatic truth of the philosophy that governs the world today. Yet unperceived by the ideologues, the collapse of communism removed the final barrier to the assault on capitalism. Even while the threat of communism silently transformed capitalism into market socialism during the 20thcentury, its gross inadequacies remained capitalism’s best defense. For so long as the threat of state socialism loomed large, there was no possibility of fresh creative thinking about other alternatives. The dissolution of USSR and the economic conversion of China eliminated that opposition. With the triumphal arrogance characteristic of the victors, neoliberals interpreted the collapse of the Soviet system as a writ for universal supremacy, little realizing they had just lost their best friend. Today we are no longer blinded by ideologies.

“There can be no equality without freedom and no real freedom without equality of opportunity, access to employment and basic human security. The opposition between human freedom and social justice is a false conception. Indeed, the world abandoned this op¬position in practice long ago, while clinging to it in theory.”

We see all too plainly the gross inadequacies, injustice and unsustainability of prevailing dogma. The myths are exposed, the superstitions rent. A slight reduction in unemployment rates here or rise in growth rates there can never alter the ultimate judgment on the present system.

Nor is there any longer traction in the mindless dichotomy between freedom and equality so long foisted as a defense of social injustice. It is now apparent that there can be no equality without freedom and no real freedom without equality of opportunity, access to employment and basic human security. The opposition between human freedom and social justice is a false conception. Indeed, the world abandoned this opposition in practice long ago, while clinging to it in theory. We know today that in the absence of regulation, the market system would be consumed by its

Freedom of the market and social regulation are complements, not contradictions.

own inherent principle and self-destruct. Everywhere that markets work, they work because they are supervised, regulated and subject to strict norms. Unbridled speculation, monopolistic concentration of power, insider trading, incestuous relations between lenders and borrowers, business and banking have been at the root of every economic crisis in modern times. The very excesses that have led to an enormous concentration of wealth have been the cause of crises that destroyed so much wealth and disrupted so many lives. Freedom of the market and social regulation are complements, not contradictions.

But the intellectual impoverishment extends far beyond the superficial debate regarding the isms. The real problem lies in our very conception of social science and its two century long quest to achieve legitimacy by imitating the natural sciences. The search for natural laws of society is rooted in a fallacious analogy. While the laws governing physical phenomenon may be determined by nature, the laws governing human existence are strictly man-made. The behavior of matter and energy systems may be determined by physical values and deterministic equations, but the behavior of people and social systems is determined by human values and human choice. We cannot alter the laws of gravity, electromagnetism and relativity, but we can and do alter the laws governing the distribution of political, economic and social power. We may have little say over the right equations governing the conversion of free energy into work, but we have full authority to alter the equations that govern the freedom and rights of human beings.

Economics today is a relic of the mechanistic utilitarian rationalistic period of the Enlightenment before modern conceptions of human rights and social justice gained prevalence.

Even while the debate continues, the demands of reality have compelled society to act contrary to its own outmoded beliefs. That is why in the name of markets, the public sector already contributes 30 to 50 percent of national income in most countries, including the USA. And while neoliberals shout about fiscal deficits, almost invariably when they come to power those very deficits soar to record levels, as they did in the USA during the 1980s under Reagan and again in the 2000s under Bush. Enough of facile dogma!

“Like all good scientists, let us not rest content with rehashing old theories or reconfirming old beliefs, as if humanity were to be forever ruled by truisms valid for 18th century agrarian Europe.”

Economics today is a relic of the mechanistic utilitarian rationalistic period of the Enlightenment before modern conceptions of human rights and social justice gained prevalence. It is still founded upon the long discredited notion that all economic activity constitutes a net contribution to the wealth and welfare of society. From a Cartesian vantage point, it regards economy as a thing separate and independent from the rest of society, to be evaluated regardless of its impact on the wider society of which it is a part. It assigns value according to the monetary cost of extracting raw materials, unmindful if those materials are non-renewable yet essential for the welfare of future generations. It allocates benefits based on a system of accounts that assigns inordinate value to the owners and managers of private capital, overlooking or severely discounting the essential cumulative contribution of the entire society, living and dead to every current achievement.

Regardless of past failures, let us engage in intelligent discussion. Let us strive once again to establish a real science of society. For without it, we will continue to be the blind leading or led by the blind. Let us go back to fundamental questions regarding the sources of wealth and welfare, as Adam Smith attempted two centuries ago, and look for new and more adequate answers relevant to a world that has been radically transformed.  And like all good scientists, let us not rest content with rehashing old theories or reconfirming old beliefs, as if humanity were to be forever ruled by truisms valid for 18th century agrarian Europe.

Orio Giarini, Garry Jacobs & Ivo Šlaus

About the Author(s)

Orio Giarini

Director, The Risk Institute, Geneva, Switzerland; Fellow, World Academy of Art & Science; Email - oriogiarini@cadmusjournal.org

Garry Jacobs

Chief Executive Officer, World Academy of Art & Science; Vice-President, The Mother’s Service Society, Pondicherry, India; International Fellow, Club of Rome.  
Email - garryj29@gmail.com Website: www.mssresearch.org

Ivo Šlaus

Honarary President, World Academy of Art & Science; Member, Club of Rome, European Leadership Network and Pugwash Council; Dean, Dag Hammarskjold University College for International Relations & Diplomacy, Zagreb.

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