Local Futures

  • Home
  • Media Room
  • Blog
  • Store
  • Contact

The Economics of Happiness

Donate
Menu
  • About
    • About Local Futures
    • Who We Are
    • Founder, Helena Norberg-Hodge
    • Our History
    • Get Involved & Support Us
    • Close
  • Our Projects
    • Global to Local
      • International Alliance for Localization (IAL)
        • Join the IAL
        • IAL Members
          • IAL Member Organizations
          • IAL Listserv
        • Video Project: Voices from the IAL
      • Webinar Recordings
        • Sacred Activism in a Post-Trump World Webinar
        • Talking Climate Webinar
        • People Power: Democracy and the Economy Webinar
        • Beyond Trump: The Path to Real Change Webinar
        • Bringing the Food Economy Home Webinar
        • A World Without ‘Free’ Trade: What it would look like and how to get there
        • Beyond ‘Free Trade’ – Alternatives to Corporate Rule
        • Education: Promises, Myths & Realities Webinar
        • Debt and Speculation in the Global Economy Webinar
        • A New Activism Webinar
        • Climate Change or System Change Webinar
        • Going Local Webinar
      • Animation: Going Local: the solution-multiplier
      • Insane Trade Short Film and Factsheet
        • Insane Trade! & Factsheet Translated
      • Planet Local
        • Culture
        • Eco Communities
        • Ecology
        • Health
        • Local Business & Finance
        • Local Energy
        • Local Food, Farming & Fisheries
        • Local Policy & Community Rights
        • Place-based Education
        • Sharing & Repairing
        • Planet Local Short Film Series
          • 1 – Introduction: The New Local Food Movement
          • 2 – Diverse Farming Systems
          • 3 – Local Food Webs: Exploring Systems of Distribution
          • 4 – Local Food Processors: AKA Making Delicious Food
          • 5 – Challenges & Solutions
          • 6 – Ecovillages & Networks for New Farmers
          • 7 – And Finally… Here’s a Little More Inspiration
      • Local Bites Podcast
        • Unpacking Global Empire from an Indigenous Perspective with Tyson Yunkaporta & Helena Norberg-Hodge
        • More than Just the Vegetables
        • Food Sovereignty in the Global Economy
        • Transition, Tradition, and Trade
        • Not-for-Profit Businesses
        • Love, Values, and Wellbeing Economies
        • Growing a Farmers Market from the Ground Up
        • Beautiful Places: A Conversation with Wendell Berry
        • Creating the Framework for a New Economy
        • From GDP to GNH
        • Rebuilding Healthy Communities: The Growing Ecovillage Movement
        • Seeds of Resilience, Seeds of Sovereignty
        • Why Local Ownership Matters
        • Local Alternatives to Globalized Development: A View from India
        • How to Feed the World? A Political Agroecological Approach
        • Helena Norberg-Hodge on how corporate ‘free trade’ deals threaten local communities and economies worldwide
    • Our Work in Ladakh
      • Past Work in Ladakh
        • Experiences in Ladakh 2018
        • Experiences in Ladakh 2017
      • Ancient Futures (book & film)
      • Local Futures’ History in Ladakh
        • Women’s Alliance of Ladakh
    • The Economics of Happiness Film
      • Economics of Happiness Conferences
      • The Film
      • DIY Economics of Happiness Workshop
    • Close
  • Events
    • Upcoming Events
      • Full Events Calendar
    • Economics of Happiness Conferences
      • Past International Conferences
      • Other Past Events
    • Calendar
        • « February 2021 » loading...
          M T W T F S S
          1
          2
          3
          4
          5
          6
          7
          8
          9
          10
          11
          12
          13
          14
          15
          16
          17
          18
          19
          20
          21
          22
          23
          24
          25
          26
          27
          28
    • Close
  • Learn & Take Action
    • Learn About Our Work
      • Learn about Globalization
      • Learn about Localization
      • Learn about Big Picture Activism
    • Activist Tools
      • COVID-19 Response: Let’s Localize Like Never Before
      • What You Can Do To Localize Right Now
      • Films for Change
      • Recommended Readings
      • Organizations for Change
      • Independent Media Sources
      • Maps of Alternatives
    • Close
  • Publications
    • Local is Our Future (latest book)
      • Endorsements for Local is Our Future
      • Translations of Local is Our Future
    • Ancient Futures (book & film)
    • The Economics of Happiness (film)
    • Translated Resources
    • Free Reading Materials
    • Films
    • Books & Other Publications
    • Newsletters & Annual Reports
    • Close
You are here: Home / Free Trade and Globalization / The Global Economy’s “Impeccable Logic”

The Global Economy’s “Impeccable Logic”

March 12, 2015 by Steven Gorelick 2 Comments

298982355_c7db73c824_oBy Steven Gorelick

Ever since the Occupy movement coined the terms “the 1%” and “the 99%” to point out disparities of wealth and power, the gap between rich and poor has received a lot of attention. In his highly-regarded 2014 book, Capital in the Twenty-first Century, for example, Thomas Piketty’s central thesis is that wealth inequality is bound to increase in modern capitalist economies. This was underscored by a recent Oxfam report, which tells us that the world’s 85 richest people now have as much wealth as the poorest 3.5 billion; that the richest 1 percent will own more than half the world’s wealth by next year; and that in the US, the wealthiest one percent captured 95 percent of income growth since 2009, leaving the bottom 90 percent even poorer. (1) There’s more, but you get the idea.

Statistics like these have led to widespread questioning of the moral underpinnings of the global economy. But does morality have any place in conventional economic thinking? While the overseers of the global economy are beginning to see problems with the wealth gap, it’s for reasons that are neither moral nor ethical, but purely practical: extreme inequality, they fear, might threaten the continuance of the system itself. Christine Lagarde, Managing Director of the IMF, worries that “excessive inequality is not good for sustainable growth [sic]”(2), while billionaire and self-described plutocrat Nick Hanauer is even more concerned: “if we don’t do something to fix the glaring inequities in our society, the pitchforks will come for us.” (3)

To suggest that conventional economic thinking lacks a moral foundation is not to say that corporate CEOs and IMF economists have no moral or ethical values: most of them probably contribute to charity, feel tender thoughts towards their children and parents, and may even be angered at certain forms of injustice. The question here is whether there’s a moral dimension to the way conventional economics regards wealth inequality.

To help answer that question, let’s revisit a famous memo written by one of the most influential economists of our time, Lawrence Summers. The memo was written in 1991, when Mr. Summers was Chief Economist of The World Bank. In it he argues that heavily polluting “dirty industries” should be located in the less developed countries (LDCs). This is because the ‘cost’ of illness and premature death is based on lost earnings, and so the lives of the poor are less valuable than their wealthier counterparts:

“From this point of view,” Summers wrote, “a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.”

After arguing that “under-populated countries in Africa are vastly UNDER-polluted” and lamenting that high transportation costs “prevent world welfare enhancing trade in air pollution and waste,” Summers concludes his memo with this:

“The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns… etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.” (4)

In other words, any moral qualms about dumping toxic waste in poor people’s backyards must be suppressed, because acknowledging the validity of those concerns would call into question the legitimacy of the entire “liberalization” package ­of deregulation and free trade pushed by The World Bank, IMF, WTO and other institutions. If moral values conflict with the economic model, Summers suggests, then those values must be abandoned.

One would expect that the leaking of this memo in 1992 would have irreparably damaged Summers’ reputation, derailing his career. There was no lack of outrage from certain quarters. Brazil’s Secretary of the Environment, Jose Lutzenburger (an ardent environmentalist and winner of the Right Livelihood Award) wrote back to Summers: “Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in…. If the World Bank keeps you as vice president it will lose all credibility.” (5)

Not only did Summers hold on to his position at The World Bank, his career path continued ever upward. He was soon appointed to a number of high-ranking positions by President Bill Clinton, eventually rising to Secretary of the Treasury (where he presided over the deregulation of the financial industry); from 2001 to 2006 he served as President of Harvard University; after a stint as the managing partner of a major hedge fund, he was chosen by President Barack Obama in 2009 to head up his Council of Economic Advisers. (6)

There were some repercussions, however. Jose Lutzenberger was fired soon after writing his scathing criticism of Summers.

Summers now claims that he signed the memo but didn’t write it, that its contents were taken out of context, and that the whole thing was meant as “sarcasm” anyway. But the years that followed saw precisely the “welfare enhancing” trade in pollution that the memo called for. Dirty industries have, in fact, migrated to the less developed countries – accounting for both environmental improvements in the rich countries (about which Northerners are unduly proud), and horrifically blighted environments in places like China. And waste is now routinely traded to the South, with cargo ships bringing discarded plastic, e-waste, and other effluent of the consumer culture to Third World countries for disposal or “recycling”, at great cost to their environment and the health of their citizens.

The “impeccable economic logic” which Summer embraced is deeply troubling, especially when so much of the global population is, by that logic, expendable: people who are admired in their communities, loved by neighbors, friends, and family; people who are caregivers for children and the elderly, who entertain and educate their communities as singers and storytellers; people who are honest and trustworthy, and crucial role models for the young. Such people may have countless admirable traits, but the only one that matters to mainstream economists is their contribution to global economic output. If in that arena – measured by their monetized earnings – they are deemed deficient, their worth becomes negligible. And as the wealth gap grows, millions more are joining the ranks of the expendable every year.

There will never be enough resources to bring all those billions of people up to the levels of income and consumption common in the west – something that even pie-in-the-sky economists who dream of endless “sustainable growth” must realize. It’s frightening to imagine what their next “welfare-enhancing” proposal will be.

______

Steven Gorelick is Managing Programs Director at Local Futures (International Society for Ecology and Culture). He is the author of Small is Beautiful, Big is Subsidized, co-author of Bringing the Food Economy Home, and co-director of The Economics of Happiness. His writings have been published in The Ecologist and Resurgence magazines. He frequently teaches and speaks on local economics around the US.

________

References

  1. Working for the Few: Political capture and economic inequality, Oxfam briefing paper 178, Jan 20, 2014.
  1. Don Tapscott, Huffington Post, “Extreme Disparity of Wealth Dominates Davos”, 1/28/2014, http://www.huffingtonpost.com/don-tapscott/extreme-disparity-of-wealth-dominates-davos_b_6567138.html
  1. “How Should we Distribute Our Wealth”, NPR, TED Radio Hour, February 6, 2015, http://www.npr.org/templates/transcript/transcript.php?storyId=379181798
  1. http://en.wikipedia.org/wiki/Summers_memo
  1. http://www.whirledbank.org/ourwords/summers.html
  1. http://en.wikipedia.org/wiki/Lawrence_Summers

Photo credit: “It’s The Worrying That Kills You” by Taro Taylor
available at https://www.flickr.com/photos/tjt195/298982355/ under CC BY 2.0

Share this:

  • Email
  • Facebook
  • Twitter
  • LinkedIn

Related

Land Grabbing and the Threat to Local Land Rights
Current Trade Treaties: “a revolution against law”

Filed Under: Free Trade and Globalization Tagged With: development, economics, ethics, famine, globalization, sustainability

Author: Steven Gorelick

Steven Gorelick is Managing Programs Director at Local Futures (International Society for Ecology and Culture). He is the author of Small is Beautiful, Big is Subsidized, co-author of Bringing the Food Economy Home, and co-director of The Economics of Happiness. His writings have been published in The Ecologist and Resurgence magazines. He frequently teaches and speaks on local economics around the US.

Comments

  1. Philip Gaut says

    March 15, 2015 at 1:29 am

    So, is this article a call to take up pitchforks? Surely millions of us are dissatisfied with the current way of doing business but I see no alternative suggested here. Hanauer, cited in this article, calls for a new way of doing capitalism but I don’t think he has any idea what that might look like and I doubt it could work, whatever it might be.

    Despite work over the last half century or so by the brilliant Herman Daly, Jose Lutzenberger and others before and since, who have done their best to articulate possible alternative ways of doing business, we are in practice no nearer to changing our ways, are we?

    Consider this:

    1. Capitalism is a competitive system.

    2. Competition demands winners and losers.

    Therefore, 3, the rich (winners) get richer while the poor (losers) get poorer. It’s inevitable. It’s how capitalism works.

    This I believe: we can tinker around the edges as much as we like but, without truly fundamental change, the result will always be the same. It’s in the rules of the game, and we actually need to change the rules so radically that the game itself becomes a completely different game. And I believe that the vested interests of the rich and powerful will ensure that the game remains the same either until the disadvantaged do indeed take up their pitchforks, Kalashnikovs or biological weapons, or until one of the various looming environmental problems reaches a tipping point beyond which the game will cease to matter.

    Either way, unless we can find the intelligence and the will to start playing a new game, and find it soon, the road ahead leads only to suffering on a monumental scale to which the rich will not be immune. Indeed, there is good reason to imagine that it will in fact be the poor who, accustomed to surviving with nothing, will be the more successful survivors.

    If we really are to get out of this alive and relatively pain-free, where are the leaders?

    Reply
  2. Steve Bean says

    March 20, 2015 at 12:59 am

    It’s not logic, but rationality, which is the frequently conflated money-think approach. There is no logic to money use, only limited, according-to-the-rules-of-the-game thinking (and beyond-the-rules-of-the-game thinking). Rationality is the weighing of supposed relative values, theoretically in order to balance them in a transaction, i.e., a 1 to 1 ratio. It’s all make believe, and we’ve all (with few remaining exceptions around the world) succumbed to the belief.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Subscribe to the Economics of Happiness Blog

Sign up for our email updates

Latest Blogs

  • What did we lose when we lost the stars?

    February 22, 20211 Comment
  • Trade treaties and the climate emergency

    February 15, 2021No Comments
  • Birdsong as a Compass

    February 7, 20212 Comments
  • Cities and Green Orthodoxy

    January 28, 20211 Comment
  • How to fix a food system that’s not designed to feed people

    January 19, 20211 Comment
  • Progress and the modernization of Ladakh

    December 18, 20203 Comments

Blog posts by Category

  • Capitalism (3)
  • Climate Change (41)
  • Community (26)
  • Consumerism (3)
  • Coronavirus (16)
  • Democracy (3)
  • Development (20)
  • Economic Growth and Degrowth (31)
  • Economics of Happiness Conferences (4)
  • Education (7)
  • Environment (31)
  • Food and Farming (54)
  • Free Trade and Globalization (39)
  • Happiness (2)
  • Health (22)
  • Indigenous worldview (13)
  • Inequality (5)
  • Inner transformation (13)
  • Livelihoods and jobs (33)
  • Local energy (7)
  • Local finance (4)
  • Localization (44)
  • Nature (1)
  • New economy (17)
  • Resistance and Renewal (15)
  • Technology (27)
  • The Economics of Happiness (15)
  • Uncategorized (3)
  • About
  • Contact
  • The Economics of Happiness
  • Learn & Take Action

Sign up for our email updates

Donate Now

International Society for Ecology and Culture © Copyright 2021 | site by digiflip
loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.Ok