America the Possible: Manifesto for a New Economy by James Gustave Speth (Yale University Press 2011) hard cover 249 pp.
The importance of this book is such that Americans can ill afford to ignore it, while the rest of the world can derive many useful concepts from its middle chapters. Speth’s career has earned him distinction and we should be thankful he has turned his hand to “bring together,” in Herman Daly’s words, “the best thinking on the American political economic crisis and related policies.” Since air, waterways, ocean and often land link us all, the problems are global and ultimately the solutions must be global. Gus Speth is outlining the part the USA must play in inventing the New Economy for the world.
The United States occupies a special place among nations of high ecological footprint, namely, that it is among the very few such nations that could reduce its footprint quickly through a change in its handling of resources and resource use. Sustainability could be achieved through various steps, the principal one being to stop burning fossil fuels, a technological and economic challenge that the US is clearly capable of responding to (my assertion, not Speth’s), easier though much grander than the Manhattan Project of the 1940s, and even more urgent. Speth’s book shows clearly what stands in the way of such an ambition: very successful lobbying by the fossil-fuel industries in a political arena where only money now talks; and he discusses the whole gamut of campaign funds, electioneering, and the lack of cohesion of the political left in his country to force a revision of the system.
The first 65 pages of his book (Part One) and the last two chapters (“Realizing Democracy” and “The Movement”) are directed at American readers and what they need to face up to and achieve politically.
It leaves for the rest of us the three middle chapters – Five through Seven – dealing with generalities and specifics of the New Economy, a mere 83 pages; but these direct the reader to 186 footnotes.
In those central chapters Speth maintains the careful tone, as did Victor and Jackson before him [1,2], to prevent arousal of a strong gut reaction to the idea of cessation of growth. Since there are many who deny the need to slow down the throughput of primary resources and eventually eliminate growth, it is important to stress the no-growth concept in physical terms, because it is the throughput of primary resources from source to landfill or pollution that must cease to grow and then decline. There need never be an end to growth in terms of wellbeing. But current economics measures neither; growth is determined from GDP, which tells us little that is useful, since GDP includes goods and bads, evaluated in terms of money. It is the pollution that must above all be reduced and a major reduction in pollution, even this late stage, could make a huge difference and rekindle hope. The three central chapters cover or touch upon all the policies that will be important to achieving a post-growth economy: social wellbeing, shorter working hours (where relevant) labour protection, rights, new designs for corporations embracing rechartering, a new order of things for advertising, local and locally owned production, rigorous environmental health provisions, human health, greater economic equality, and so on. If the GDP should drop, then it is the quality of life that must improve, “and that’s what matters.”
Speth puts jobs and meaningful work at the top of his list “because unemployment is so devastating.” He further puts emphasis “where there is a huge backlog of needs.”
On p.98 he lists the rules for keeping the scale of economic activity sustainable; and on p.100 there is a brief discussion of the Ownership Solution, relating to workers’ ownership of enterprises. From there the discussion goes on the co-ops, and several groundbreaking patterns in the current US economy. The foregoing imply that the new economy is already being created piecemeal, before some of its eventual requirements and details have begun to be worked out.
Chapter Seven deals with “Transforming the Market” and “Transforming the Corporation”, leading to Marjory Kelly and Allan White’s six new principles of corporate design (pp.109-10). This knowledge and these ideas approach much that is needed in the New Economy.
Next follows “Transforming Money and Finance”, in which it was gratifying to find so much detail already in print, especially the 2001 report: “How to Liberate America from Wall Street Rule.” But the results are not entirely convincing, because Korten, Greider and their fellow travelers, to whom Speth gives appropriate attention, are missing the most important of the needed fiscal steps. This is easier to understand in the global context than in the strictly American one, which could explain why they missed it, and it is this, which I offer as item 4a) to replace their item 4), which deals with changes in banking:
4a) Create a publicly owned federal bank to replace the Fed, or nationalize the Fed.
The purpose of 4a) is to promote a duality in banking, wherein normal banking for individuals and businesses requiring loans would remain similar to what we already have. But there is a host of public needs for which chartered banks cannot possibly be asked to create funds at nominal or zero interest for the public good, at least not unless the terms of their charters were radically altered. The second channel in banking would thus amount to a federal channel in which major infrastructure improvements would be funded at nominal interest federally as would be restoration of the commons, a huge field that has been ignored altogether by economic commentators and fiscal commentators since the 2008 crash. Yet the need is there, and there is massive employment to be created in these endeavours. Note that these are not profit-making enterprises, but nevertheless create wealth. The present economy sacrifices wealth for profit. The New Economy may sacrifice some profit (here and there) but must concentrate on rebuilding wealth, and this can be achieved through a federally owned bank. This is the point that most writers have missed in recent years.
When 4a) is taken in the global context, it takes the form of item k) in the list a) through m), below.
Under Transforming Social Conditions, I sensed much optimism, but witnessed again the usual aversion to arithmetic when it came to negative income tax, which is a form of guaranteed annual income (GAI) first proposed decades ago. The problem with all guaranteed income schemes is that their proponents work out the advantages of the scheme but then don’t follow through with the considerable arithmetic needed to show the net cost and calculate the new taxes required to implement the scheme. They also don’t factor in the political opposition their scheme is likely to meet, irrational though that opposition may be. The 11th North American Basic Income Guarantee Congress, held in Toronto 3-5 May 2012, contained several discussions of negative income tax, but there was not one paper showing the arithmetic for any country. An Irish couple, Sean Healy and Brigid Reynolds, however, put forward a fully worked-out, practicable scheme for Ireland, but it was based on a demogrant [3], not negative-income tax.
Next follows “Transforming the Measure of Progress”. The case against the GDP has been made many times by economists these last 20 years or more, but it is naïve to attempt to replace GDP with a single new composite index. Nevertheless, this is what most authors are proposing, and it turns out various progress indices can be shown to be much preferable to GDP. Such indices, however, do not remove the need for separate wealth indices representing specific resources or types of resource. The creators of New Economics would be therefore wise to adopt a range of resource or capital indices in addition to a progress index. Speth would have done well to delve into this.
The section entitled “Transforming Consumption” deals principally with consumerism, which it carefully differentiates from consumption that satisfies basic needs. The problem of what is basic then takes one into wellbeing and what, economically, brings happiness, complex matters that have been extensively studied these last decades. Speth says it should be possible to build a project counteracts American consumerism, aimed at something better, for example: reducing America’s ecological footprint, expanding investment and public goods, bolstering retirement security, reducing corporate power, and so on. I have cut Speth’s list at this point simply because he and other authors generally fail to say how to confront corporate power, a question wisely raised by Ely Culbertson many years ago [4]. That need is however always present in discussions of New Economics, though it isn’t ountered.
The section ends with a well-referenced discussion of advertising, a matter of great importance in the reduction of consumerism. The confrontation could be maximal here as it is advertising that underlies the style of operation of many a corporation.
Chapter Seven ends with sections entitled “Transforming Communities”, which includes a box on the measurement of community programs, and “Transforming Foreign Affairs”, which refocuses the text to what is happening within the USA. The view from within is by no means unimportant, but I leave off describing details here since I believe that it is the view from without that has exposed the way in which the deliberate choice of a wrong economic theory has consolidated neoliberal thought in the USA, to the point it now occupies a place parallel to religious fundamentalism in US affairs. There would appear to be two ways out of this entrapment: the soft though strong path adopted by Speth and by Smith and Max-Neef [5]; or a sharper but jarring statement that neoclassical economics must be abandoned because it is driving civilization to an early collapse at the maximum rate; and it is driving the planet to its next extinction, which has already begun, though the whole process may not yet be irreversible.
Throughout the text, the thoroughness of Speth’s scholarship is remarkable. I nevertheless feel bound to comment on deficiencies in his list of key features in a steady-state economy, ignoring for the present that fact that a sustainable economy needn’t be steady-state; in fact the steady state might be moribund in one of several ways. His list of key features is stated on p.98 to be: 1) sustainable scale 2) fair distribution and equal opportunity 3) efficient allocation of resources 4) deferral to matters that really matter.
Apart from the fact that 3) doesn’t go far enough and 4) is too vague, I would suggest that a more detailed list would be useful in addition, to include:
a) assessment and measurement of wealth in terms of resources – natural, built and human capital – and accounting both nationally and by corporations in these terms b) use of new indices to replace GDP in terms of the above, a) c) an end to fossil-fuel burning d) minimum extraction of primary resources, including trees, and maximum recycling e) adoption by industries of Extended Producer Responsibility f) an end of planned obsolescence g) controls on advertising and awareness of it h) encouragement of benefit corporations and perhaps global standardization of their legal basis; and encouragement of other ecologically benign enterprises i) establishment of publicly owned banks in all single-currency areas j) maintenance as far as practicable of full employment k) restoring the Commons l) greatly reduced social inequities m) establishment of population policies in all regions.
Items i), j), and k) may not be found in any parallel lists up to the present but these are vitally important. The need for duality in the global banking system has been explained above; see 4a).
Restoring the Commons is essential in an economy that is fast declining because of past neglect; and only publicly owned banks that need not make profits can be given the responsibility of funding such work. Because of the lack of a nationally owned bank, restoring the Commons in the United Sates has not advanced significantly.
In Speth’s last two chapters, it is clear that the new social movement must become cohesive so as to force government to reverse its present path to oblivion. But nowhere is it suggested that the movement form a new political party. Seen from across Lake Ontario, outside the USA, the need for a new political party looks more obvious than it does to Speth. It may be that the Republican Party is more hawkish than the Democratic Party, but both cater to addictions to weapons, militarism and greed, diseases that are wasting the planet. Speth himself draws attention to the trillion dollars spent annually on defence and comes down heavily on the wastefulness of it as well as militarism’s other social woes. The annual trillion feeds the addiction. An Occupy Party would change that. Historically new political parties have arisen, and it will be easier to obtain real reforms from a new party than to teach an old one to change from within.
Derek Paul is Professor Emeritus, University of Toronto and a long-time member of Science for Peace.
Notes 1. Peter A. Victor, Managing Without Growth: Slower by Design, not Disaster (Edward Elgar Publishing 2008) 260pp. including bibliography and index. 2. Tim Jackson, Prosperity Without Growth: Economics for a Finite Planet (Earthscan 2009) 264 pp. 3. A demogrant is an income supplement that is given to everyone, regardless of other income. Negative income tax is an income supplement that has a maximum for those of zero other income, and decreases gradually to zero for those with increasingly higher other incomes. Negative income tax supplements are by definition not subject to income tax. Elsewhere I have named analogous income supplements that are subject to income tax, “wedge supplements,” and have argued that they are preferable to negative income tax because they cost less and, unlike negative income tax, do not give rise to disparity in income tax thresholds. The OAS in Canada is a wedge supplement. 4. Ely Culbertson, Total Peace (Doubleday, Goren and Co. 1943) 344 pp. 5. Philip Smith and Manfred Max-Neef, Economics Unmasked: from Power and Greed to Compassion and the Common Good (Green Books 2011) 200 pp.