A call for a living economy
Felwine Sarr about fault lines in the neo-liberal economic system which the Covid-19 crisis laid bare
18 June 2020
The Covid-19 crisis has definitively laid bare the fault lines in the neo-liberal economic system. For several decades now numerous scientific studies published since the Meadows (1972) and Brundtland (1987) reports have been calling the sustainability of this system into question.
The world economy, as currently deployed and operated, is an entropy economy that carbonizes living things, resulting in a negative large-scale ecological footprint. It emits more waste into the biosphere than the biosphere can absorb. It relocates industrial production to places where production factors are cheapest, thereby creating circuitous international supply chains in order to produce goods and services at lower cost.
The crisis we are experiencing has revealed the limits of organizing production in this manner. A majority of nations depend on agricultural production thousands of kilometers away from home to feed their populations. Transporting these agricultural products increases greenhouse gas emissions and accelerates biodiversity reduction. This growing interdependence puts all of the world’s products within our reach, and yet constitutes a vulnerability when international trade is disrupted by factors (pandemics, wars, trade shut-downs, economic sanctions, etc.) that curtail the availability of agricultural products in our markets.
While autarky is not the answer, we will still need to work towards food security and sovereignty in this area. Any given territory must be able to meet its food needs by producing locally what is needed, by diversifying its sources of supply and by rediscovering the primary function of agriculture, feeding human beings.
Moreover, designing international supply chains in this manner ends up fragmenting and hyper-concentrating the production process. The production of certain goods is almost exclusive to a few companies in a handful of countries. The shortage of masks when the Covid-19 pandemic broke out perfectly illustrated the shortcomings of such a configuration.
At the start of the pandemic, the United States, the world’s largest economy, was at full employment with unemployment at 3.5%. Three months later, its unemployment levels approached those of the 1929 Great Depression (25%); 30 million people were out of work.
When they anticipate a decline in activity in the months ahead, they downsize employees. Investment, and consequently current business, is strongly linked to the ability to anticipate the future. Debt constitutes a transfer of resources from the future to the present; in other words tomorrow’s resources are being tapped to finance today’s economy. The system has a strong preference for the present, whose value is given excessive weight.
Debt constitutes a transfer of resources from the future to the present; in other words tomorrow’s resources are being tapped to finance today’s economy. The system has a strong preference for the present, whose value is given excessive weight.
An economy set up in this way operates beyond its means, clinging to the illusion of its capacity and power. Uncertainty about the future triggers a retroactive effect on the present on which consumption and economic activity levels depend. We are experiencing an economy that depletes the planet’s biocapacity, overexploits its resources, hinders its ability to regenerate and transfers future income to the present in order to produce consumer goods, often in excess of need. It is an economy of “presentism”, excess, widespread precariousness and suffocation. Rethinking our economy’s structural foundations, modes of operation and objectives is vital for the survival of our societies.
One of the questions this economy raises is how to remunerate work and what its value is. During this crisis nurses, doctors, supermarket cashiers, bus drivers, in short all jobs involving caregiving have been revealed as essential to the life of our societies, despite being the lowest paid jobs in the current economic system. Our current system overpays shareholders, brokers, “bullshit”See David Graeber (2018). Bullshit Jobs : A Theory. Simon and Schuster jobs and captive market jobs, while underpaying those who contribute to feeding, sustaining and caring for lifeFrance has decided to increase the salaries of healthcare workers, whose contribution to mitigating the health crisis has been recognized as essential. . The market value of work and how it is remunerated could be reassessed based on its relative contribution to sustaining life, preserving a healthy environment and adding to our collective intelligence and the culture of the mind.
The world economy produces inequalities between and within nations. These fault lines have materialized at several levels, in the unequal distribution of access to savings or assets that enable people to get through difficult times, in providing access to quality healthcare, but also in the various vulnerabilities of demographic groups arising from existing historical fragilities, in particular the co-morbidities resulting from lower-quality living conditions.
These inequalities stem from the world economy’s value-added production system and its modes of redistribution, the rules of international trade and the international division of labor. The world economic system is structurally designed to produce inequality and accelerate entropy.
It is this architecture that must be dismantled; its underlying institutions must be rebuilt, their missions rethought (WTO, multilateral institutions …) and new processes invented to regulate macro and microeconomic relations in order to shrink the concentration of power and break up monopolies. We live in a world where a single individual holds more wealth than the GDP of 179 countries combined representing 3.4 billion people or 43.7 % of humanity. This is the scope of the madness. It speaks for itself. We could devise rules that put a ceiling on wealth held by individuals; after all, above a certain threshold a minority engaged in pathological hoarding hampers the majority’s ability to access the resources necessary to live a dignified life or deprives them of these resources altogether.
The global division of labor has turned emerging and developing nations into producers of raw materials that are processed in the industries of the North. Consequently, the value-added is transferred from the countries of the Global South to those of the Global North. Current conventions measure the wealth that is generated by tallying the value-added produced on an annual basis. This concept of GDP growth does not take into account the environmental, human and social costs of the world’s production apparatus, raising the question of how to calculate the value of what is produced, as well as its usefulness and its cost.
In reality, we are in an economy of deformed growth that is based on a bogus accounting system that fails to calculate true costs and inadequately identifies assets and liabilities. The price affixed to our products should incorporate their environmental cost and reflect their carbon content. What we call economic growth diminishes life.
From the airline industry Air Canada has laid off 70 % of its workforce. Air France needed an injection of € 7 billion from the French and Dutch governments to cope with the effects of the crisis. The German government has acquired an equity stake in Lufthansa in exchange for an investment of € 3 billion. to the production of goods and services, not to mention the tourism, culture and food service sectors, the crisis has brought to light an economy structured around a short-term time horizon where economic activity is reliant on revenues generated on a day-to-day basis. Especially for SMEs, an economy such as this requires a daily, piecemeal accumulation of cash flow to meet monthly operating expenses and to cover bank drafts. Large firms enjoy open lines of credit with banks, enabling them to finance a large part of their business through debt.
The current economic system promotes entropy. We are overpaying to produce goods; some of these goods are superfluous and useless, and only serve to keep industries afloat at an exorbitant cost to the planet.
A living economy would be based on a reappraisal of the usefulness of all sectors of economic activity in terms of how they contribute to health, care, well-being, preserving life and sustaining life and enhancing social cohesion. This is what Isabelle Delannoy calls a symbiotic economy, i.e. an economy whose metabolism does not negatively affect the existing social, environmental and relational orders.
One of the thornier issues countries have faced during the Covid-19 crisis has been to strike the right balance between preserving health and restarting the economic activity required to meet our needs. The two are mutually dependent in a recursive loop. Gradually lifting the coronavirus lockdown meant resuming the activities deemed essential to social life. This does not mean that economic life must be confined to satisfying basic biological needs, such as food, health care and clothing.
The needs of culture and the mind are also fundamental to our societies.
The needs of culture and the mind are also fundamental to our societies. However, it does mean that we must question the usefulness and necessity of the goods produced, the way they are produced and their social and environmental impact. We can no longer afford the luxury of not questioning the purpose of economic activity and its modes of production, nor of failing to place these aspects within a cosmopolitan framework of life.
An economy of commons
In an era characterized by an ecological crisis and deepening economic and social disparities on a global scale, establishing commons, preserving non-rival and non-exclusive spaces and guaranteeing the right of use and access to common resources for the greatest number of people is imperative.
Biodiversity, water, air, geostationary orbits, fishing wharves, human rights are all part of the commons, and the rules for managing these must be defined by all stakeholders equally. We must establish these commons and address the important question of how they are to be created and managed.
Before getting into the discourse, a common first and foremost constitutes the social practices of engaging in activities together. Each time a community decides to manage a collective resource with an eye toward equitable access, sustainability and inclusiveness, a common emerges.
Elinor Ostrom raised the question of how a group of interdependent actors could organize and govern themselves to preserve the continuity of common advantages when they all face the temptation to act opportunistically. Empirical findings show that communities, most often in rural areas, can manage natural resources sustainably, and that social relations play an important role in this regard.
A common according to Hardin is seen as an unmanaged resource that belongs to no one. The policy trend has been to consider Hardin’s understanding of the commons.
In practice, however, a common is not just a resource, but a living social system made up of creative agents, a community managing its resources by developing its own rules, traditions and values. This vision is not popular among economists because it shifts the debate beyond the theoretical framework of Homo economicus, while also drawing on other human and social sciences such as anthropology, sociology and psychology. But most of all, this vision makes developing reassuring quantitative models difficult. In reality, the economy’s nomological temptation to transform any statistical regularity into a norm is undercut when a large number of idiosyncratic local, historical, cultural factors hinder the proposition of such a standard universal norm.
A common establishes a set of social values that exist outside of market pricing mechanisms and private and exclusive appropriation. They reflect informal, intergenerational, experiential, ecological realities that cannot be understood solely by the rational actor theory or the neo-Darwinian narratives of neo-liberal economics.
Why is it important to develop a language of the commons?
Developing a language of the commons helps to name and shed light on the realities of walled off areas of the market and the value of common action. It is an instrument for reorienting perception and understanding. Without a language of the commons, the social realities they describe will remain invisible or culturally marginalized, and therefore politically inconsequential.
Without a language of the commons, the social realities they describe will remain invisible or culturally marginalized, and therefore politically inconsequential.
Consequently, discourse on the commons is an epistemological action that allows social, ecological and ethical values to be reintegrated into the management of our shared wealth. This language enables us to formulate political demands and shape value hierarchies. It also allows us to free ourselves from the narrow social roles we are locked into (consumer, voter, citizen).
We are governed by an order of discourse, international expertise that gives embodiment to a system. This system is substantiated in many different dimensions (economic theories, trade agreements, mainstream management literature) that are subject to a mixture of theoretical and systemic registers, languages that are recognized and reinforced through heterogeneous discursivities. This is what Foucault refers to as an “archive”. Nowadays, a powerful philosophical theory has no more effect than a catchphrase.
We are governed by a language that gives rise to a system. Shedding this language and the reality it creates necessitates crafting a language of a living economy and establishing the commons as a prelude to shaping the expressions of its ethics and purposes. A living economy requires a complete overhaul of the economy as a practice and order of discourse. It is a matter of rebuilding the discipline, its foundations, its practice, its axiology and its aims, and integrating these into the highest of purposes: Nurturing life.
Original in French.
Translation into Englisch by Jill Kreuer.
This text is protected by copyright: © Felwine Sarr / ERSTE Foundation. If you are interested in republication, please contact the editorial team.
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Cover picture: The sun sets behind burnt trees of the Amazon rainforest, south of Porto Velho, Brazil. Four people accused of starting fires in the Amazon rainforest to later receive international funds to combat them. They were arrested in Brazil on 26 November 2019. Photo: © Carl de Souza / AFP / picturedesk.com