A Global Learning Opportunity

Global Economic Crisis – many Canadians are now intimately familiar with this term. Perhaps it hasn’t yet affected you personally, but for many people, this is real. Since talk of the crisis began I’ve been conjuring up my own reasons for why this was suddenly happening to us. Often, I hear media reports forecasting a looming second depression; this speculation became more real to me when I read the recent 8.1% unemployment statistic for the United States. In response to all this gloom and doom, we see governments and inter-governmental panels scrambling through papers and projections hoping to pull together a solution. Hence, we now have nations forking out trillions of dollars worth of bailouts to save what’s left of our economies, but is this being prudent or reckless? Maybe it’s time for the “western world” to take a good look in the mirror and ask, “Can I keep living like this?” Instead of looking at our current situation as a global crisis why don’t we think of it as a global learning opportunity? Injecting trillions of dollars worldwide into a broken system may temporarily postpone the recession, but it will not get us past our greatest obstacle, irresponsibility. What is required is a fundamental realization, at the level of the individual, that all things are interconnected. Then two movements must occur: first, the individual must take responsibility for his role in building an ever-advancing and responsible civilization; second, institutions, in all their forms, must re-align their vision to that of serving the betterment of humanity.

To understand what motivates modern economists in advising government executives to write public policy, we must review some basic economic principles. Of course, I don’t claim to be an expert in this regard, however, I am making the assumption that capitalist economies still refer to the following principles when discussing the market. Of these principles, the most well known is supply and demand. This model, made popular by Alfred Marshall (1920), assumes that the market acts like a pendulum: a shortage in supply is matched by an increase in demand, and a surplus in supply is matched by a decrease in a demand. Both of these reactions are determined by the price of the commodity, and the price of the commodity is determined by the quantity of product available to the seller. Another major assumption made in economics is that of the “rational consumer.” Marshall (1920) states that a person’s needs change as he develops in his rational powers, and as he becomes more advanced “He desires not merely larger quantities of the things he has been accustomed to consume, but better qualities of those things; he desires a greater choice of things, and things that will satisfy new wants growing up in him.” And finally, the theme tying these two principles together is the concept of the Invisible-hand, introduced by Adam Smith. This concept refers to the idea that if the economy is left alone, it will find it’s own equilibrium.

When the economy fails to do what economics assumes it should do than the only way to save it is to give it the equivalent of a “blood transfusion.” This intercession takes place in two parts: tax cuts and fiscal stimulus. The hope is that by implementing tax cuts individuals will have more disposable income that can be spent back into the economy, and a stimulus package will keep the economy afloat during the lag of a recession (Weil, 2008) –only if it was that simple.

If you’re banging your head against a wall trying to come up with a solution, sometimes the best thing to do is to remove the wall. The United States has gone through 11 recessions and three depressions since 1920 (Moore, 1993). Many would argue that, as a result of initiatives such as unemployment insurance, our recessions are getting shorter and less steep than they used to be. It may be time, however, to reconsider the value of modern economic theory in an evolving global community. We may even wish to consider the words of Marshall himself: “Though economic analysis and general reasoning are of wide application, yet every age and every country has its own problems; and every change in social conditions is likely to require a new development of economic doctrines” Marshall (1920).

The first concept that needs to be challenged is that of supply and demand. In 1909, 11 years before the American depression began, Ely and Wicker wrote the following:

Producers are more and more separated in time and space from those who are to consume their products. It follows that only the shrewdest producers can calculate with any approach to accuracy how intense will be the wants for their goods, and in what quantities rival producers will furnish goods to the market. Mistakes in judgment result in over-production in particular industries, and over-production in a few industries often leads to the spread of doubt and uncertainty throughout the business world. Then men in their fear restrict production and thus incidentally close the market for labor. Laborers seeking and failing to find regular employment lose their purchasing power, with the result that the underconsumption [sic] spreads all along the line, and society passes through what is called an industrial crisis or panic.

Suppliers will simply continue to produce as long as there is a profitable demand for their product. And because of innovative automation technologies, we are now capable of producing well beyond aggregate demand. The theory of supply and demand implicitly assumes that one will stop when the other reaches a consumer-determined margin. However, the lucrative field of market research more-or-less manipulates the average consumer. For example, something as simple and as accessible as water is now sold for three dollars a bottle at most Canadian movie theaters, well over the price of gasoline.

The second concept to be re-examined is the idea of the rational consumer. I’ll admit that as a youth an advertisement that read “MUST SEE!” was enough to draw me into the mile long line-up at the movie theatres. Maybe, overall things have not changed; people still look for relationship advice from magazines, teenagers still emulate their favorite celebrities fashion style, and I do, at times, purchase a three dollar bottle of water. Should we, however, just accept this as human nature: our selfish desire for stuff? Or do we have the potential to become more refined in our motivations? In recent decades, many new ideas have entered our collective consciousness. Concepts such as human rights, welfare, environmentalism, sustainability, animal rights, social and economic empowerment programs, woman’s rights, wage equity, local economies, consuming organic, renewable energy; this list continues to grow as our desire for accountability and truth grows. This new self-awareness is not only accessible, but is increasingly fashionable. So powerful are these ideas that the rational consumer has been replaced by a new term: the socially responsible consumer.

To put it in perspective let’s look at some alarming statistics: the wealthiest 20% of the world consumes 76.6%, while the poor (5%) consume 1.5%. The richest 5th consume 45% of all meat and fish, 58% of total energy, have 74% of all telephone lines, consume 84% of all paper, and own 87% of the world’s vehicle fleet. Emerging nations are also following these same patterns of consumption (Shah, 2008). Recently, the United Nations reported that by the end of 2009 one sixth of the world’s population would go hungry; this is a devastating landmark for humanity.

Temporary measures are often necessary to ward off immediate threats; therefore, I will accept the idea that stimulus packages and tax cuts are part of the solution to solving this global crisis. I will not, however, accept that they are the means to an end. Fundamental changes need to take place in our patterns of consumption, and our understanding of citizenship. Primarily, schools need to enhance their curriculum to teach our children and junior youth to think critically about the world they will be inheriting. I’m not talking about an extra-credit program to bolster the reputation of a local junior high. Schools need a complete overhaul from math to physical education. If children and junior youth are trained from their early years to honor the environment, to have a world-embracing vision, to independently investigate truth regardless of their cultural traditions or the trends of their time, and to appreciate the value of work, art, and agriculture then will we see changes occur from one generation to the next. Ideally, the individual must be nurtured to realize that he has a role in building an ever-advancing and responsible civilization.

The second movement that I had mentioned in the introductory paragraph refers to the role of institutions in the betterment of humanity. In an article by Maria Ivanova (2002) of the Yale School of Forestry and Environmental Studies, she suggests three ways for governments to prioritize their spending to boost the economy and raise living standards.

1)    Augment revenue for \”front-line\” services such as hospitals, schools, and child and elderly care. Increased construction of social facilities and higher salaries for trained nurses, doctors, and teachers will spur the economy and benefit society.

2)    We should develop physical infrastructure. Better and faster railroads would shift the demand for cheap gasoline. It would also alleviate dependence on foreign oil. More bus routes would connect more people to working places, increasing fuel efficiency, diminishing commutes, and alleviating stress. Rather than asking the rich to buy more cars and bigger houses to revitalize the economy, the government should spend more on housing.

3)    We should invest in beauty and sustainable livelihoods. Construction and improvement of parks might not seem a conventional economic remedy. Nonetheless, it would create jobs while leaving a long-term mark on the national social fabric.

Ivanova also suggests that businesses and consumers use their respective influence to demand “cleaner, longer-lasting, and more efficient products.” Finally, Ivanova makes a point that draws all these ideas into perspective: what is required at this point in our history is a shift from material social values to spiritual social values.

This is truly a global learning opportunity. We now have the opportunity to participate in a spiritual enterprise of historic proportions. Certainly, it can all seem so daunting, and many of us may choose to be complacent when the stakes are so high. For many, religion is considered the opiate of the masses; yet in the western world, consumerism is what sedates us. Have we become so comfortable in our giant bubble of available resources that we no longer feel the suffering of a crippling humanity as our responsibility? Is passive acceptance of the need for change an acceptable response at this juncture?

What do you think?

1 Comment

  1. Very good paper! I like it! Actually it seems to me that your 3rd choice to some degree is appropriate. It is not as easy as yes and no! Do this and that will happen! But the mechanics of how to accelerate the process you’ve suggested and of which has already shown itself on the horizon of social and economic development is definitely an asset to our declining social/spiritual values and responsibilities. The big question is how to get the masses to buy into this clear message and equally clear solution. Not easy I suspect!

    Society, at least at this juncture in our evolutionary development, forces us individually and collectively to point the finger away from ourselves. The poor find it difficult to take any responsibility for the woes of the world, not recognizing the power they have if they choose to organize themselves. There are many examples of this in western society. The rich, with much more to lose, definitely will not take on the burden of responsibility! Also, if individuals do attempt to change their patterns as you suggest and if immediate result are not forthcoming, they’ll turn their backs and say: “That doesn’t work!” “They were wrong!” and not continue the process! It this point at least, if institutes are not ‘forced’ with greater efficiency to curb their desire for profit, their perceived responsibility to the share holder will take front stage and they too will abandon the process. A clear and blatant example is the tobacco industry!

    The bottom line … While what you suggest as a cure is happening to some degree and in small pocket around the world, how does one get the individual and the institutions of the world (as opposed to just Western society) to change directions at a much faster pace. The pace now is forced feeding, so to speak and will not win the day as we’ve seen in the past with other bandage and short sighted efforts …
    Just some thoughts for what they maybe worth …

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