What do we mean when we talk about “the economy”? The word is derived from the Greek and means “household management”.
But the implication of the first part of the word, eco or oikos (in Greek) is more than just financial management. In addition to family members, “household” includes the family’s land, livestock, and property as well. Originally then, oikonomos meant management of everything that is touched by the family and everything that touches them.
Just as we cannot work to make our communities more resilient without addressing issues of social justice, likewise we cannot talk about changing our economic system without taking into account our community’s wellbeing.
Wendell Berry put it this way:
The “environmental crisis” has happened because the human household…is in conflict at almost every point with the household of Nature.In the Presence of Fear, 2001, pg 12
We have all heard it said that capitalism is the worst economic system, except for all the others. We are told that our “free market” system is superior to one based on “central planning” by the government. There are many examples of this story. You can sample just one of them here.
There are almost 600,000 people without homes in the United States.
Unemployment statistics are difficult to quantify due to the complexity of the data used and numbers of “unemployed” that are not reflected in official counts. This Forbes article is a good illustration of the data collected and what is used.
In addition to unemployment, “underemployment” has become an increasing phenomenon over the years. Today many people have become a “Gig worker”, a nonchalant term for people who have been driven to self-employment, working as a “contractor” for someone who provides no medical benefits or vacation or holiday time off and often not even wages.
We can see the growth of work insecurity over time in this chart.
This chart also depicts the economic crises that occur with troubling regularity within the economy. These “recessions”, often referred to as “corrections” to the markets occur in a consistent 10-year cycle. We see the steady rise in gig-oriented work over the decades. This temporary work environment creates economic insecurity, stress on the work and the worker’s family and can lead to food insecurity and homelessness.
This is the economic system under which we live.
What happens when the economy is not embedded in a due regard for the natural world…is not only that it wreaks its harm throughout the biosphere in indiscriminate and ultimately unsustainable ways…It also loses its sense of the human as a species and the individual as an animal needing certain basic physical elements for successful survival.Rebels Against the Future, Sale, 1995, pg 266
Figure B. Wealth distributions, Bulletin (dashed line) versus Augmented (solid line) Measures, 1989-2019
The above chart was generated by the U.S. Federal Reserve. Consider the dashed and solid blue lines at the bottom of the chart. They represent fully one half of the population of the United States. That bottom 50% have essentially no meaningful share of the nation’s wealth. The other 49% is not doing that well either.
Libertarians try to make the case that this concentration of wealth is actually a good thing, making everyone, even those at the bottom better off.
There is a great deal to unpack in their argument, and many people are doing just that. We have heard of some of them, such as Bernie Sanders. In the Democratic Party 2020 presidential debates, he questioned the morality of great wealth inequality in an exchange with Michael Bloomberg.
Our current economic system is based on 2 fundamentally untrue suppositions:
- The Earth’s natural resources are free to use and unlimited and
- That human beings are distinctly separate and disconnected from Nature.
Many people are awakening to the fact that these assumptions, on which all capitalist economic activity is based is not only false but unsustainable.
“anything we can’t do forever is, by definition, unsustainable,”
Sir David Attenborough
There are many alternatives to the economic system we have, a system some consider to be unsustainable and destructive. Some make the argument that the consistent messages of competition, accumulation, and consumption affect us psychologically. Some believe that very developed nations, the so called Global North are in fact over developed and that over consumption is destroying the environment.
Regardless of one’s views on capitalism, the interconnection of the environment, consumption, social justice, and the economy cannot be discounted or ignored. Most conventional analyses, as we have seen, do not take this relationship into account. And when they do, it usually takes the form of claims that an increase in production and consumption (growing GDP) will solve the problem. Others contend that growing GDP IS the problem.
That is why, as part of this initiative we look at both alternatives to the existing economic system but also its standard measurement, GDP.
Some people believe that “tinkering” with capitalism is all that is needed, with increased government oversight, tax law changes and the like. The Green New Deal is an example of an attempt to bring economic activity more in line with environmental sustainability.
We explore some of the modifications that have been experimented with at various times in our history as well as some current thinking on ways to make the economy more just for more people in our section on Economic Adaptation.
We also examine approaches that envision fundamental change in the way the economy is constructed. You can further explore them in our section on Alternative Economies.
A different but related aspect of our economy is how we measure economic progress and quality of life.
Currently we have one, and only one way to measure: Gross Domestic Product (GDP). By definition, GDP is the monetary value of all goods and services produced in a country. In essence, GDP measures a nation’s (or state or municipality’s) spending. GDP is a rather recent creation, initially developed in the 1930’s in response to the Great Depression and then refined as World War II began.
In 1944, the Allies held a meeting in New Hampshire to determine how the world’s economy would function. It was at this Bretton Woods Conference where they agreed to establish the International Monetary Fund (IMF) and the World Bank, among other things. They also agreed to use GDP as the standard measure of economic growth and wellbeing.
Today GDP growth is viewed almost as a sacred objective. Every economic as well as most political decisions are made based on how they will affect economic growth and GDP. Economic decisions are mostly driven by unabated acceptance of Okun’s Law of the relationship between economic growth and unemployment. High rates of GDP growth are used to express economic success.
Regardless of the concerns and many criticisms of reliance on GDP alone, local governments and nations rely on it almost exclusively to tout their economic success. And the criticisms are many, for example here and here. And there is this recent critique by Democratic presidential candidate Andrew Yang:
What we have to do is, we have to say, ‘look, there’s record high GDP and stock market prices, you know what else there are record highs [of]? Suicides, drug overdoses, depression, anxiety.’ It’s gotten so bad that American life expectancy has declined for the last three years.”
“The way we win this election is we redefine economic progress to include all the things that matter to the people in Michigan and all of us like our own heath, our well-being, our mental health, our clean air and clean water, how our kids are doing.”
There are alternatives to using GDP to measure economic progress and quality of life. Measures such as the Genuine Progress Indicator (GPI), the Index of Sustainable Economic Welfare (ISEW), the UN’s World Happiness Index, and many others.
In our project on Genuine Progress, we look at GDP use in more depth and explore other ways of measuring our economic wellbeing and our impact on the natural world. We also question what may be the most insidious aspect of economic activity: Economic Growth itself.