This paper was produced by the participants in the Asian NGO Regional Fellows Program held in Baguio, Philippines, in October 1992, under the joint sponsorship of the Asian NGO Coalition and the Institute for Development Research, with funding from the Ford Foundation. Participants included Chandra de Fonseca (Sri Lanka), Sunimal Femando (Sri Lanka), David Korten (US), Tony Quizon (Philippines), Sixto Roxas (Philippines), Bishan Singh (Malaysia), and Felix Sugirtharaj (India).
David C. Korten, who edited the following piece, can be reached at the People-Centered Development Forum, 14 E. 17th St., Suite 5, New York, NY, 10003, tel. 212/620-7137; fax 212/242-1901.
We in Asia have long defined our choices as between the Western capitalist system of economic theory and practice, and the theory and practice of Marxist socialism. It is ironic that while Marxist theory predicted the collapse of the capitalist economic system and presented itself as the single viable alternative to capitalist hegemony, its practice in the countries of Eastern Europe and Eurasia has collapsed in disarray. Now flush with a sense of victory over its fallen opponent, capitalism seems resolutely blinded to the self-destructive consequences of its own present path.
The evidence is mounting that both Marxist socialism and free-market capitalism have failed the majority of human society, and for strikingly similar reasons:
- They both built economic systems that celebrated the destruction of the living systems of the Earth.
- They both ignored the social and political consequences of concentrating economic power in unaccountable, centralizing institutions – the state in the case of Marxism and the transnational corporation in the case of capitalism.
- Both took a narrow, economistic view of human needs.
- Both equated growth in the economic output of the firm with improved human well-being and neglected the community as a natural economic unit. Both used essentially the same models of national income accounting.
- Both systems were basically Western constructs, products of Western thought and experience.
Neither system is a suitable guide for Asia, which is home to more than half the world’s people, as well as half the world’s 1.2 billion people who live in absolute poverty. Asia’s economic miracle has been a miracle only for a small fraction of Asia’s peoples and holds little real promise for the rest.
Asia faces a stark reality. The industrialism-consumerism model on which the practice of free-market capitalism has been based has depended historically on the ability of industrializing countries to colonize the resources of others. The scramble for the forests, lands, and minerals of Indo-China, Irian Jaya, and Papua New Guinea is already underway. Where will Asia turn once these are exhausted?
Furthermore, if only China and India, with a combined population of some 2 billion people, were to heed the call of transnational capital and Western governments to pursue the unsustainable Western economic model, they would surely push the global ecological system into collapse long before providing over-consuming lifestyles for even a fraction of their citizens.
Asia’s hope for the future lies in an alternative model of human progress. That model would combine efficiency of resource use with a rediscovery of life’s innate spiritual character and the inseparable spiritual connection of every person to nature and community.
We believe that the essential elements of an alternative model are at hand. The breakthrough in our own thinking came when we realized that what we were looking for was not an alternative theory of development, which almost inevitably buys into many of the assumptions of the prevailing growth model. The alternative we sought was a theory of sustainability, which begins from a wholly different set of premises.
Our theory of sustainability draws its premises from the critiques of the two failed dominant systems of economic thought and practice, insights from Asia’s rich cultural and spiritual heritage, and the wisdom of indigenous peoples. The emergent theory takes a holistic view of human needs. It at once identifies the roots of the ecological crisis and helps us to predict the conditions under which the dynamics of human social processes are most likely to work toward a balanced relationship between human society and the planet’s ecology.
BONDING SPIRIT, COMMUNITY, PLACE
Our theory of sustainability is grounded in the most fundamental of insights: that all life is an expression of a single spiritual unity and that the spiritual growth of the individual consists of advancement toward the full, conscious realization of this unity.
Spirituality, community, and a bonding to place or habitat are central values that have unified the Asian cultures over centuries. This was manifest in countless cultural norms, such as the injunction that when a tree is harvested, two must be planted. Where nature has been scarred, it must be given time and opportunity to heal. In these many ways, sustainability is integral to Asia’s cultural tradition.
A balanced and harmonious relationship between human communities and their natural environment is associated with a reverence for the spiritual unity of life and a strong bonding to community and place. Such communities almost universally develop cultural values that maintain a sense of continuity linking past and future generations to physical place.
HUMANITY’S SPECIAL GIFT
In addition to the gift of life shared by all of nature, the human species was endowed with the special gift of self-awareness. With this powerful gift, our species set out on a unique evolutionary course of social, material, and spiritual advancement as we consciously reshaped our relationship with the living Earth. Yet, as with all powerful abilities, this gift contained both creative and destructive potentials.
In his book The Dream of the Earth,1 Thomas Berry refers to the dynamics of our consumer society as the supreme pathology of all history, a pathology in which humanity has virtually defined consumption as the highest human purpose.2 He suggests we have lost our way due to the lack of a story that gives meaning to our existence. This is something a dedication to consumption can never provide. That story must give us a sense of our special role and purpose in life’s evolutionary journey.
The gift of awareness conveyed an awesome responsibility not shared by other species. To accept responsibility for life does not imply rejecting modern technology or returning to the lifestyles of those groups that continue to live untouched by the modern world. We are poised to reach for new levels of social, intellectual, and spiritual advancement far beyond the reach of previous generations specifically because of the current potential to meld both ancient and modern wisdom to this end.
However, to prepare the way we must replace the prevailing economics of alienation with its antithesis, the economics of community.
THE ECONOMICS OF COMMUNITY
Moving toward a sustainable human societies involves far more than making a few adjustments at the margins of the economy and investing in conserving technologies. It means creating a framework of economic institutions and management practices that anchor economic power in community and achieve a substantial degree of equity in power relationships.
An economics of community provides the foundation for an economic practice aimed at restoring a necessary balance in the relationships among people, place and community. Spirituality and community – not money – define the dominant binding ties in such an economics. The preservation of the long-term productive potential of ecological resources receives a high priority, and long-term returns to community take precedence over short-term returns to the individual investor.
ENTERPRISE-BASED ACCOUNTING
The economics of alienation (see below) is deeply imbedded in society’s dominant institutional systems and procedures. This includes the national income accounting systems by which gross national product (GNP) – the universal proxy for national well-being – is measured. One basic flaw of the GNP accounting system is that what it measures isn’t really national product. It is simply the aggregate product of the business enterprises from whose accounting records it is compiled. There is no accounting for gross natural product, or gross people’s product.
The firm is not expected even to be aware of, let alone manage, the external social and environmental costs of its production. This same externalization is carried all the way through the aggregation process. Consequently, GNP takes no account of such things as the loss of environmental resources or deterioration in the educational level of the work force over time – even though these represent clear losses to society.
The clean-up of the Exxon Valdez oil spill was counted as a net gain for the Alaskan economy, and the insurance payments for the bombing of the World Trade Center in New York showed up as a net gain for the economy of New York City. Thus both were good for the economy by current accounting practice.
Furthermore, GNP includes only the income and costs reflected in the income statements and balance sheets of business firms operating in the formal sector. Subsistence production, household labor, and the rental value of owner occupied dwellings are all excluded in most countries. This excludes a substantial portion of those activities on which most of the world’s people depend for their livelihoods.
COMMUNITY-BASED ACCOUNTING
Work on an alternative system of a community-based economic accounting system is well underway in the Philippines. This system takes the household and the community as the primary units of analysis and aggregation. The economic performance of firms would be addressed in subsidiary accounts that reflect their contributions to the community and those who reside in it. This approach represents an important step toward a practice of sustainability derived from the theory of sustainability outlined earlier. 3
In this system the community unit defines both a citizenry and a habitat with definable characteristics of land, water, soil cover, vegetation, marine resources, and mineral resources. The citizens are classified by characteristics such as age, gender, occupation, education, and income levels. Each household is defined in terms of its bundle of economic needs, which the system compares with actual consumption.
The community balance sheet includes its natural resource as assets. Production processes, such as in agriculture, forestry, mining, fisheries, trade, services, create flows between asset or stock accounts, sectors, factors of production, and households or consumers. This provides the basis for a community-based double-entry accounting system.
The accounts may be organized according to a hierarchy of settlements – households comprising hamlets comprising neighborhoods comprising villages clustered around market towns clustered around an urban center. At all levels the community-based accounting system defines an economy that is inseparable from its habitat and defines an essential role for local government in the management of that economy and its underlying natural resource base.
A BASIS FOR LOCAL DECISION MAKING
Since the community-based accounting system accounts for both natural and human capital stocks, the social and environmental costs of economic activity are automatically internalized and highlighted. The clear cutting of a forest is reflected immediately in the reduction of relevant asset accounts.
Both the financial gains from economic activity and the consumption of the goods and services produced are allocated by household, so distributional outcomes are also integral to the system. It is clear who is capturing the returns from productive processes, what household needs are being met and what needs are not. Resource flows into and out of the community are also highlighted, thus providing a very different perspective on investment decisions than do conventional methods.
Many investment projects are highly profitable to a firm or individual, yet very costly for the community. Clear cut logging for export is a graphic example. Logging activities can produce enormous profits for individual firms and register positively in GNP without providing sufficient returns to the community in the form of wages and fees to compensate for losses from increased flooding and drought, soil loss, downstream siltation, and the costs of replanting.
Export processing zones provide another common example. They expropriate land, dominate local government decision making, enjoy tax holidays, demand fully developed infrastructure that must be paid for by local taxpayers, make priority claims on local water supplies and power generation, have few linkages to the local economy other than hiring labor at low wages, and contaminate local land and water supplies with their toxic wastes. The firms may generate handsome profits that go abroad, without compensating the community for its costs.
With a community-based accounting system, the full costs and benefits to the community are revealed so that investment proposals may be assessed accordingly. The community may then negotiate with outside investors and trade interests on the basis of a community balance sheet, exactly as a firm now decides whether to engage in a given market transaction based on the results anticipated for its balance sheet.
Community-based accounting supports application of the principle of subsidiarity – i.e., that each decision should be made at the lowest feasible organizational level – and its corollary that, to the extent feasible, basic needs should be met within smaller, more localized economic units.
This means that smaller units will seek trade with one another and with larger units only as the exchange offers clear advantages to the community over local production. Otherwise, the preference will be for local producers.
The community-based accounting system provides a tool for managing such choices in the community interest. This strengthens the link between the community’s well-being and the health of its local ecosystems. It also reduces external dependence and thereby the potential for exploitative alienation of its resources by external interests.
The effective application of the community-based accounting system demands broadly based community involvement. By establishing the concept of a local economy, the relationships of human interests to place and community take on new meaning. This in turn enhances awareness that the community’s ecological resource base is the foundation of its well-being over time. The community becomes deeply aware of the consequences of giving free reign to footloose capital and external trading interests seeking only to extract local value for export. Social practice based on an economics of cooperation and ecological stewardship is encouraged.
ACTION OF THE SPIRIT
Our dominant institutions are blinded to the deeper realities of the sustainability crisis by their own power imperatives. So long as this remains the case there is no prospect that they will provide the leadership we so badly need. Informed and enlightened citizen action is our only hope.
Replacing the action of financial calculation with action of the spirit goes right to the core of the transformational process. As that awareness builds perhaps our most important task is to encourage one another to trust our inner knowledge and to find the courage to act upon it. s
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Notes
1 Thomas Berry, The Dream of the Earth, Sierra Club Books, 1988.
2 Note that in current practice economic growth, not consumption, is the higher goal. Consumption is only a means.
3 For further inforrnation contact Sixto K. Roxas, President, SKR Managers and Advisors, Inc., No.59 Hillside Loop Blueridge A, Quezon City, Philippines, tel. (63-2) 721-9096; 791-757; fax (63-2) 722-5547.
THE ECONOMICS OF ALIENATION
We believe the source of our collective social and ecological crisis can be traced to the long historical processes by which the human species has become increasingly alienated from community and nature. This alienation has both intellectual and institutional roots.
Intellectually it is rooted in the Western concept of dualism, which sets humanity apart from nature and legitimizes the view that humanity has not only the right, but also the obligation to subdue nature to its own benefit.
The concept of separation was central to Descartes’ thesis that humans have the ability to be objective observers of reality. This simple idea unleashed the intellectual and institutional forces that produced the remarkable scientific and technological advances of Western society.
These advances in turn set in motion a long period of exponential growth in the demands that human economic activity places on earth’s ecosystem. The dynamics of this growth continuously strengthened the basic illusion that through their command of technology, humans have become the masters of the natural world and no longer need to heed its limits. It is curious indeed that a species that prides itself on its intelligence continues to maintain this arrogance in the face of the mounting body of evidence that the underlying belief is based on nothing more than a dangerous self-delusion. Why?
MONEY
The answer may be found in the extent to which money has become the arbiter of values and the motivating force of nearly all human institutions and activities. The quest to endlessly replicate money has become so deeply embedded in human values and institutions that we might easily conclude that it is the organizing principle of public policy.
The profound implications of that quest become clear only when we recognize that the historical process has been one of substituting money, a substanceless artifact, for spirituality, the universal life force, as the primary source of value, meaning, and identity in human society.
Our collective obsession with the replication of money is both cause and consequence of our collective alienation from the reality of the spiritual nature of all life. This alienation is the root cause of the social and ecological crisis that now threatens our collective future.
Money serves two functions in modern society: as a medium of exchange and as a storehouse of value. Its function as a medium of exchange is purely utilitarian, a useful and positive institutional invention.
It is money’s ability to serve as a storehouse of value, wholly divorced from any intrinsic or instrumental values, that has made it a powerful instrument of alienation. As money becomes the activating force of institutions, the holder of a large store of monetary credits is increasingly able to exercise alienating claims over the natural resources, talents, and knowledge of others.
Financial debts are a particularly common instrument of alienation. International debts owed by countries to commercial and multilateral banks have the alienating power of bonding the labor and resources of future generations of one country to the future generations of another.
The persistent processes of alienation have become a daily experience in poor rural communities around the world. As ties to community and place are broken, dispossessed people migrate to cities where they become dependent on the monetary economy. Money becomes a substitute for the affiliational ties of community and place. The accountant replaces the religious teacher as the arbiter of value.
The greater one’s relative economic power and the more seamless the global economy, the greater the freedom enjoyed by the powerful to exercise claims over the non-monetary resources of the poor.
Released from the constraints of place and of obligation to community, those who control accumulated financial credits seek out ecological surpluses. The poorer the existing claimants of those resources, the more easily the holder of financial credits may gain control of them and shift any related social and environmental burdens onto those unable to protest.
Under conditions of equality, however, it is difficult, if not impossible, for one group to alienate another from their physical resource base. The greater the inequality, the greater the freedom enjoyed by the powerful to plunder the environmental resources of others. The greater the plunder, the greater the displacement and further impoverishment of the weak – until the point of social and ecological collapse.
It is neither poverty nor wealth that creates environmental destruction. It is inequality. Equity is an essential precondition for sustainability.
EQUITY AND SUSTAINABILITY
The behaviors of both rich and poor exacerbate the sustainability crisis: the rich by their overconsumption of resources beyond what the ecosystem can sustain; the poor by having large families that increase the number of human claims that future generations will make against whatever resources remain. Each is responding to the alienation process in terms of their own experience and the opportunities available to them.
The wealthy seek to fill their social and spiritual emptiness through consuming the material goods that advertisers relentlessly assure them will provide them with a sense of identity, empowerment, popularity, and meaning.
The poor seek to reduce the overwhelming sense of insecurity created by loss of community and rights to ecological space by having children – the one thing they can call their own and their only prospective source of care in their hour of need.
Bringing both consumption and population levels into balance with what nature can sustain is an essential precondition for sustainability. Both require the elimination of gross political and economic inequality.
– by the ANGOC, IRED Asia, and the PCD Forum
