In recent decades, we have been led to believe that the capitalist economy is the best and even the only viable option, as encapsulated in TINA (There Is No Alternative). The main goal of this chapter is to demonstrate that TINA is nothing more than window dressing, that there can be an alternative, and that we can make it work. To do so, we need to bear in mind two sets of conditions: one that encapsulate pre-crisis (where we are now) and possible crisis, and the other one of the post-crisis period. Thus, we are faced with two challenges:
- Breaking the fall (minimising the damage that the existing system is inflicting): this requires reducing the dominance and effects of corrosive and unsustainable economic practices and, at the same time, developing parallel structures independent from the mainstream to cushion the blow of the next crisis.
- Building the new: creating a new sustainable economic model that can replace the old one after the crisis.
Although these two are interwoven, it is worth considering them separately, as one is reactive and the other is proactive. We will begin in this chapter with the latter: conceptualising a new economic model (what the new economy could look like), even though chronologically it comes after. This is because it can then act as a benchmark, providing a compass when thinking about what to do now. As this new system endeavours to bring together various economic elements, including those that may look like opposites, it can be called the synthesis economy. Let’s start with proposing the basic principles around which this economy can be constructed.
Basic principles
The purpose of the economy from the synthesis perspective is to contribute to social harmonisation and development[1]. This may sound vague, but if applied to the present situation, a lot that is going on today would not qualify. So, it can be a good way to separate the wheat from the chaff, which hopefully will be demonstrated in this and in the following chapter. In addition, such a purpose is considered beneficial for the economy too. The economy and society need each other; seeing the economy in this light can contribute to it running more smoothly, and to creating an upward rather than a downward spiral. Bearing this purpose in mind, some basic principles of the new economic model can be discerned:
- Non-zero-sum principle: the economy needs to be a productive, non-zero-sum game – which means that all involved get something out of it. When losses are greater, or when wins are equal to losses (as in zero-sum transactions), this is considered unproductive. Let’s take an example of buying a loaf of bread as an economic transaction. I make bread and you buy it. I get money, you get bread. One may think that this is an example of a zero-sum transaction (I lose bread, you lose money), but this is not the case. It is actually a positive sum transaction. I earn a bit more money than the production costs, so I can support my children, for example. You also get a bit more. The sustenance enables you to work enough to earn more than what you paid for the bread, so that you can support your children. Thus, the gains on both sides are slightly greater than the losses. It would have been a zero-sum or negative sum game if I had sold you poor-quality bread or charged you too much, or if you had stolen the bread instead of paying me, or had paid me less than the cost of making it. In those situations, one of us wins more but the other loses. One can spoil their children, while the other one cannot feed them. To summarise, in non-zero-sum games everybody gains something, while in zero-sum games one gains at the expense of others (currency trading, for example, is a zero-sum game – for somebody to win, somebody else must lose – and is not productive). One consequence of this principle is that the provision of the use-value (e.g. the usefulness of a commodity in terms of the needs it fulfils) is prioritised over the provision of the exchange or market value.
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- Ethics: ethics needs to be factored in. Indifferent, cut-throat competition is not innate to the economy – it is a choice. Including ethics primarily means taking into account all the consequences of one’s actions (rather than just for oneself or one’s company, as is the norm nowadays). An objection may be raised that in the real world this will not work because it can be a competitive disadvantage. This may be true in a very narrow way and in the short term. No society and economy (as an integral part of society) can survive and thrive without taking into account fairness and justice, not only because fairness and justice matter to people intrinsically, but also because they form the basis of trust that plays an important role in the economy on all levels. In the prisoner’s dilemma (from game theory), the only win-win solution is mutual trust. In complex systems, the ‘invisible hand’ cannot guarantee that acting in self-interest is always and necessarily in the interest of others too. In other words, competition cannot replace ethics. Even in ideal conditions, a baker who cuts corners (self-interest only) can sometimes win against a conscientious one (self-interest and the interest of others). And yet, it is common sense that the latter is socially preferable to the former. Would you rather have as a neighbour someone who only cares about himself and doesn’t give a damn about you, or somebody who takes into account your interests in addition to his own? Ask a Chinese, Russian, Iranian, American, or Kenyan, and the likelihood is that they will all say the same. Having economics that completely disregard this feature is absurd. In the real world, it actually does make sense to reintegrate ethics into economy.
- Contribution principle: we need to give up on the idea that we can get something out of nothing, so the synthesis economy has no room for social / economic parasitism (those who do not contribute even if they are able to). This refers to parasitism both at the bottom and at the top. However, those at the bottom who take advantage in this way have a relatively small effect on the overall economy. Much greater social parasitism can be found at the top (e.g. renters who make money out of their assets without contributing, or financial speculators who make money out of the work and contribution of others). This principle requires minimising the parasitism of both kinds and ensuring the contribution of everybody according to their abilities.
- Democratisation: the bottom line is that the economy should serve people rather than the other way around. This shift will not happen unless everybody takes responsibility for the economy, which, in turn, necessitates democratisation of work. It is ironic that even in democracies the top-down approach is still dominant in business settings. As a rule, CEOs can hire and fire and make decisions without much consultation with their workforce. The employees often don’t even know what decisions are made and why, and are expected to blindly follow orders. This kind of economic dictatorship is hardly different from the communist way of doing things. We do not want to suggest though that collective ownership or decision making is always best for business. However, between these two ends there is a whole spectrum of possibilities for a greater involvement of all the stakeholders. But is democratisation good for the economy? Empirical evidence indicates that democratising workplace has a positive effect on productivity or efficiency. For example, in Germany workers’ representatives sit on all board meetings, so they know what’s going on and can make an input – the German economy does not seem to be doing any worse for that.
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- Contextualisation: the economy needs to be seen in the context of being a part of the larger system. The economic sociologist Karl Polanyi (1886–1964) made a good point when he stated that social factors that glue communities together make the market and other forms of economic activity possible. Even large corporations that have done all they could to create a self-sufficient bubble, cannot remove themselves from the social context completely. Of course, the context becomes even more important if we take on board the proposed purpose of the economy (to contribute to social harmonisation and development). It should be added, though, that the context needs to include not only social factors but the natural environment too, as this is the context within which the harmonisation and development of society take place.
- Sustainability: sustainability means taking into account both short-term and long-terms goals and effects. In other words, this is the non-zero-sum principle applied to the time line – the sum of short-term and long-term effects must be positive. On some occasions, and only if necessary, short-term effects may be negative for the benefit of the long-term effects (in similar vein, cutting a patient open to operate on them has a short-term negative effect for the sake of long-term benefits). The reverse does not apply, though – even small negative long-term effects should trump greater positive short-term effects as, by definition, long-term effects are longer, and therefore they multiply. Norway is a good example of a country that already practices this principle and has heavily invested in its future (through, for example, its Oil Fund built on surpluses from North Sea oil). It should come as no surprise that it is one of the happiest countries in the world.
- The Goldilocks zone principle: growth is the essence of capitalism – indeed, capitalism cannot exist without it. Let’s not forget that investment is one of the legs of capitalism on which it relies. But investment requires repayments with interest. And such repayments necessitate growth. However, there is no future if economic growth remains an imperative. It was argued earlier that unrestrained growth is unsustainable. This means that a future economy will have to avoid hitting the ceiling in terms of resources, investment and the environment, and at the same time provide for at least the essential needs of society as a whole. The Goldilocks zone principle is essential to achieving this: the economy needs to be within a certain range (similarly to doughnut economics proposed by economist Kate Raworth). This principle is different from the steady state model though, as it allows for some growth as well as different rates of growth in different regions. Growth is considered possible and desirable as long as it remains within the zone. This requires, defining its boundaries, which is, of course, a complex task and may vary from case to case (some of which will be addressed in this and the following chapters) but it is feasible, if the principles discussed here are taken into account. Note that this involves a combination of the top-down and bottom-up approaches of running the economy: some boundaries need to be set in place, but within them the market can operate freely. Let’s now examine in more detail how these and other approaches can be used to serve the economy best.
[1] Sustenance or fulfilling the material needs of those living in the economy is often seen as its purpose. However, such a characterisation is far too narrow for the modern world, and is considered in this context a subset of social harmonisation.
