Tag: economy

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Human Economics

Throughout all of history, humanity has never lived in an era of such intimate globalization, as we do today… Never has any one country’s economy been so dependent upon the economy of other countries, and never has the fate of people in any one country been so dependent upon the fate of people in other countries. Indeed, the current crisis is affecting everyone, everywhere.

It is with good reason that journalist, Thomas Friedman, argued in the midst of the crisis that it was “Time to Reboot America.” The laws that define relationships among individuals in society have changed dramatically, hence economy—which reflects those interconnections—must follow suit.

Yet, this cannot happen by means of restrictions and regulations, since it is evident that our desire to enjoy is only growing through the years. Therefore, even if we truly want it, we will never be able to turn back time. As we develop, we constantly devise new ways to “beat the system.” Instead of wasting taxpayers’ money trying to reverse an irreversible situation, we must change our approach toward economy and business from the root level.

The solution is to start from the place where the crisis began—the lost trust in human relationships. What has become clear is that we no longer trust one another: people don’t trust banks; banks don’t trust the rating firms, who don’t trust company shareholders, who have no trust in financial advisors, who have no trust in traders, who have zero trust in governments, who simply trust no one. Period. Nevertheless, despite the mistrust, we find that we are still dependent upon each other. And the more aware of it we become, the less we will want to harm one another. Many people already realize it; now we must turn this realization into action.

 

Step One: Restore Trust

Alongside the offering of aid to ailing economies, countries must explain to their citizens that we are now living in a new world. Thus, the first step in the bailout plan is to make people understand and feel how interdependent we are. When people realize that their personal well-being depends on their relation to others, they will become the natural regulators that policy makers are looking for.

In fact, when a strong enough public opinion promotes values of collaboration, it will affect even those who initially want to continue living by the old self-centered rules. An illustration of this principle was shown when a week after it became known that AIG, which received hundreds of billions in bailout money, gave out fat bonuses to its executives, the majority of them gave it back. They couldn’t face the mounting public criticism. Hence, awareness of the detrimental nature of our egotistical approach will naturally make us want to restrict our self-centered attitudes, and this will facilitate the beginning of a crisis-free era.

 

Step Two: Rethinking Consumption

Consumerism causes us to want products we have no real need for, simply to improve social status. Conveying information about the rules of the new world will help us understand which values should prevail in our society, so that we can create a more balanced way of life. As a result, products that will remain on the shelves will be the ones that are truly necessary, and the advertising of product causing us to make yet another redundant purchase will be condemned. Applying this necessary shift in priorities will greatly free resources and time, and will allow us to invest in the currently neglected realms of our lives, such as friends and family, thereby significantly enhancing the overall quality of our lives.

 

Step Three: Social-Capitalism

In the January–February 2011 edition of Harvard Business Review, Profs. Michael Porter and Mark Kramer published a revolutionary concept. Traditional capitalism belongs to history, they wrote. Now is the moment for “a new conception of capitalism,” such that will move “social responsibility from the periphery to the core of the companies’ mind-set.”

Companies should still endeavor to produce profit and create economic value, yet not for the shareholders and their owners, but rather for the good of society “by addressing its needs and challenges. Businesses must reconnect company success with social progress,” otherwise, conclude Porter and Kramer, businesses will never escape the vicious cycle in which they are trapped today and their situation will only worsen over time.

Indeed, there is much truth to the words of Porter and Kramer. Today, when a company releases a new product to the market, it wishes to “broaden its market share,” or in simpler words “to steal” clients from other companies in the marketplace. But this is exactly the approach that led to the financial crisis to begin with! Rather than trying to gain profit at the expense of others, companies should compete to create the greatest benefit to the whole of society.

When signing a contract, a company owner should ponder: “Does everyone gain from the deal I am closing now?” If the contract truly benefits everyone, then everyone, including the owner of the company, will gain from it. After all, in today’s world, we are all interconnected, and each individual action makes an impact on us all.

Step Four: The New Kind of Companies and Businesses

It’s time to redefine business and financial success. A successful firm should be one that sells products to customers, pays decent wages to its employees (including pension, insurance, and vacations), and is founded on a balanced operation. A balanced operation means that the profits of a business cover all of its investments and expenses, but it does not profit beyond that.

In this way, the owners of such companies could afford to reduce the prices of their products to make the product affordable to many more people. If some profit still remains, it could be donated to a fund that helps guarantee that all people in the world have a good basic standard of living. To be sure, we are not talking about abstention or austerity. Quite the opposite, if all of the players change their financial mindset from maximum profit for themselves regardless of consequences, to earning as much as is required to live respectably, we will discover that the planet has many more resources to offer than we can actually use, and together all of us will prosper.

 

Much More Motivation and Satisfaction

How will owners of companies and their employees draw motivation to wake up in the morning and excel when no financial stimulus is involved? The answer is simple: The stimulus will stem from the new social standard—people and companies are appreciated according to their contribution to society. In this case, our natural urge to compete—with the benefit of society as our goal—will cause us to create a more just and equal society.

Let us clarify. Try to answer the following question: What do company owners gain by having additional zeros in their bank accounts? Do they actually use all the millions they have? Do they truly enjoy those added “zeros”? The satisfaction they draw from the zeros is purely conditional, dependent upon the sense of power and mainly respect that comes with wealth.

But what if company owners were to sense the same satisfaction they derive from excessive wealth, out of actions to benefit society? If society respected people who contribute to society and condemned people who exploited it, powerful people would naturally use their power to contribute to society, because we are all social beings and all of us, including company owners, are influenced by society. While this proposal may seem utopian, it can materialize if our environment begins to appreciate pro-social values.

The bottom line is that capitalism should remain capitalism, but instead of trampling each other, we should compete in contributing the most to society and creating the best and most qualitative products for the best price, so that as many people as possible can enjoy them. Sir Richard Layard’s article titled “Now is the time for a less selfish capitalism,” published March 11, 2009 in The Financial Times, summed up quite well the new approach we have suggested here, where he writes, “We do need a more humane brand of capitalism, based not only on better regulation but on better value. We do not need a society based on Darwinian competition between individuals. Beyond subsistence, the best experience any society can provide is the feeling that other people are on your side. That is the kind of capitalism we want.”

 

 

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Ecologize Growth

The words “Economy” and “Ecology” both come from the Greek word “Ecos,” meaning “household.” In other words, Ecology is the science about how to arrange our household on the planet Earth, and Economy sets forth the rules by which this household should operate. Therefore, we shouldn’t separate ecology from economy.

Economy and ecology both have their own natural laws. And if we’re building an artificial economy, one that’s based on our own invented rules instead of the rules embedded in nature, then we’re leading ourselves to bankruptcy. Nature is a massive, complex, harmoniously designed, living household. By meddling in it and violating its laws, we induce the crisis. The entire economy must be reconstructed from being an economy of consumption to an ecologically correct economy – an economy of sensible consumption.

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Superbroke, Superfrugal, Superpower?

What Thomas L. Friedman predicted a year ago in his article, we are living today. He was then expressing his view on America’s transition from being the world’s superpower to becoming a “frugal superpower” whose frugality would impact the world even more. He claimed that since the Great Recession of 2008, “the nature of being a leader, political and corporate, has been changing in America,” and now its leaders have been taking things away rather than giving to people. Freedman said America’s leaders, while depriving their voters, were not going to save money on foreign policy and wars. Yet, sooner or later, they would have to. He cited the Secretary of Defense Robert Gates, who had been warning that the cuts are coming, which would affect the globe.

The journalist referred to the book (America’s Global Leadership in a Cash-Strapped Era), written by Michael Mandelbaum, the John Hopkins University foreign policy expert, to emphasize that by 2050, all forms of government supplied pensions and health care would account for an 18% of everything the United States produces. He wrote: “This… will fundamentally transform the public life in the United States and therefore the country’s foreign policy” and added that our defining watchword “more” was being replaced with “less”.

Friedman continued to build his analysis on the information provided by Mandelbaum, who states that when the world’s only superpower is burdened with heavy debt, it will reflect on everyone. He also remarked that for the past century, the US foreign policy provided global public with many benefits – from open trade and containment to counterterrorism, and that US power had been the key to maintaining global stability. Although Mandelbaum is confident that it will not disappear, he thinks that role will certainly shrink and concludes that “no country stands ready to replace the United States.”

Looking at the possibilities of who might, he labels Europe as rich but wimpy and China as “rich nationally but still dirt poor on a per capita basis”, which will not allow them to remain focused inwardly and regionally. As to Russia, he claims “drunk on oil, it can cause trouble but not project power.” Thus, Mandelbaum predicts for the world to become a more disorderly and dangerous place.

To mitigate this trend, he suggests:

1. To get ourselves back on a sustainable path to economic growth and reindustrialization, with whatever sacrifices, hard work and political consensus that requires, which implies considering common interests.

2. To set priorities: even though the US desires to succeed in Afghanistan, it is not vital; therefore, the war must cease.

3. Finally, we need to cut our balance sheet and the best way to do that in one move is with a much higher gasoline tax.

Friedman summarizes that America is about to learn a very hard lesson: You can borrow your way to prosperity over the short run but not to geopolitical power over the long run.

http://www.nytimes.com/2010/09/05/opinion/05friedman.html



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Integrative Education for the Integrated World

According to a year-old report, there are more than two hundred million unemployed in the world. Over the coming year, this number will grow astronomically, as global production wanes and natural resources continue to dwindle. This development constitutes an enormous problem for the unemployed themselves, as well as for society and governments, which are utterly powerless to stop it.

As the ranks of the unemployed grow worldwide, the need for a comprehensive educational course, explaining the new integrated world and its governing laws, will be indispensable in preventing the kind of bloodshed and unrest that we’re already beginning to see materialize.

So what is this “new world” that the global crisis is ushering us into? Well, if we take a step back and analyze the word “crisis,” it actually doesn’t have a negative connotation. Rather, it signifies a new stage that is similar to birth.

We know from experience that transitioning from one state to another is hard, as it entails coming out of your comfort zone. Whether it’s changing jobs or modifying any other aspect of life, we tend to resist change and prefer to stay within a familiar operating system.

With that in mind, there are two sides to this global crisis. On the one hand, we are experiencing genuinely awful and dramatic afflictions: horrendous floods, earthquakes, tsunamis, volcano eruptions, riots and wars, revolutionary coups, bloodshed in the streets, and increasingly dimming prospects of a bright future. On the other hand, we may view our current predicament as the normal pains of a process we don’t yet acknowledge, one in which we transition from one state to another.

These pains can be likened to a baby going through the process of birth. Picture a child peacefully growing inside the mother’s womb—a safe and protected place. Delivery, however, is triggered by a rather “unpleasant” process: the mother feels immense tension and experiences contractions, while the child also feels tremendous pressure but doesn’t have any idea what’s going on. Thus, our present state is similar to birth pains.

We have been through similar states at other times in history, although they weren’t as tragic or radical to justify calling them a “birth.” We regard them as developmental or transitional phases in human history.

And yet our current state is different. In the past we’ve always striven to reveal or attain new heights. We foresaw potential revolutionary conditions of a social or technical nature, and change was effected as a result of new breakthroughs, whether via discovery of new lands, inventions of innovative weapons, or implementation of new technologies such as the Internet, which have unveiled a completely new level of connection between us.

The difference is that those innovations never have been global in nature. They have never influenced all aspects of human life, nor have they impacted humankind on a larger scale, including every country and continent, every family and individual. Nowadays, the new revolutionary (evolutionary!) spin involves all of the above.

Disoriented and bewildered, we’re growing increasingly aware of the fact that something is happening, but we’re not quite yet certain what that “something” is. The crisis we’re experiencing is similar to the state that precedes delivery. It presses us more and more with each passing day, both individually and collectively.

Just as we cannot seem to solve the tumbling economy, we are utterly powerless to reverse the decades-old trend of families falling apart or the astronomical rise in depression, suicide and substance abuse. If anything, the one common denominator here is that in all areas of our lives we suffer from a complete absence of understanding as to the root cause of these problems.

Moreover, for the first time in human history, this is happening on a global, integrated scale. There’s literally “nowhere to run” to escape these issues, even if one had the means. And the worst thing is that we don’t know what the future holds.

In revolutions past, the social and economic structures we aspired to were more progressive than the ones they replaced. The abolition of slavery, for instance, paved the way toward a more civilized society. Even though drastic changes triggered new uprisings, religious and civil wars, people nonetheless anticipated a brighter future at the end of it all.

Presently, however, we all are undergoing a global process the likes of which we’ve never seen. This process encompasses not only the society and the individual, but actually extends to climate and ecology. (Looking back at the evolution of our species, global warming and cooling periods have always necessitated vast adaptations in humankind, such as huge communities being forced to migrate from Siberia and Asia to Europe.)

Whereas in the past revolutions happened for concrete reasons (climate change, new technology, despotic regime, etc.), today all the changes are happening simultaneously and on every level. Simply speaking, people no longer can reconcile with the world we live in.

Even the systems we have come to depend on for our very survival are on the fritz, including the food industry, the job market, the family unit, the educational and security systems, and so on.

We have arrived at a general state in all areas of our lives where nothing seems to work as it should. And with the tools currently at our disposal, we cannot predict with any degree of certainty what our future phase on this evolutionary path might look like.

Is it possible to study the laws of this new integrated world and thereby learn to meet its demands? Can we look ahead and be sure that the path we’ve chosen is correct? Can we calculate our future beforehand?

If the answer is yes, we can facilitate our progress and avoid needless wandering in darkness. If not, we will continue making the same old blunders, only now the stakes are much, much greater.

In light of the above, we must aim to develop an educational course for the whole world. The goal is as vital as it is straightforward: to open people’s eyes to the new reality we find ourselves in, to glimpse a future that’s not only possible but unavoidable (indeed, for the baby there’s only one way out), and to teach the world how to transition from the existing state to the future in the quickest and most painless way possible.