Fixing the world

‘Small is beautiful’, Ernst Friedrich Schumacher’s seminal collection of essays published in 1973, was subtitled ‘a study of economics as if people mattered’. The author, who was profoundly influenced by Theravada Buddhism, was concerned that the modern world was putting economic growth before human development, greed before compassion.

Schumacher was writing at the peak of the post-war economic boom, for which his guru, the British economist John Maynard Keynes, was partly responsible. At the depth of the Great Depression of the 1930s, reformist leaders such as the great American President Franklin D Roosevelt applied Keynesian policies of public spending on welfare and infrastructure to jump-start economic growth.

Following the Second World War, these policies were used by Roosevelt’s successors, in the Marshall Plan to revitalise the moribund industrial economies of Europe. This resulted in an unprecedented, protracted period of economic growth, which saw consumption rise in the industrialised nations and which sucked into its wake a number of ‘Tigers’ or ‘Newly industrialised Countries’ (NICs), such as Singapore, South Korea and Mexico.

Ernst Friedrich Schumacher

John Maynard Keynes

John Kenneth Galbraith

By the 1960s, Schumacher’s other guru, the Canadian-American economist John Kenneth Galbraith, came to the conclusion that growth had been sufficient to allow a comfortable lifestyle to be spread around; he advocated greater spending on the poor and on third world countries.

World economy

In 1972, the Club of Rome came out with ‘The limits to growth’, a report on the computer simulation of the future trends in the world economy based of five principle variables: population, industrialisation, food production, pollution and resource depletion. The model predicted that, at current growth rates, the world economy and society were due to collapse.

Schumacher created a synthesis of these threads in economic thinking and became the godfather of the ‘Green’ movement, which advocates better regulated, more people-and environment-friendly policies - in other words, ‘sustainable development’.

Unfortunately, Schumacher, the Club of Rome and the Green movement generally were dismissed as ‘prophets of doom’. Notwithstanding, far-seeing leaders such as US President Jimmy Carter tried to implement some of the policies advocated by the Greens.

In 1979, Margaret Thatcher became Prime Minister of Britain and, together with Ronald Reagan (who became US President shortly afterwards), began a counter-revolution (prototyped by the bloody fascist Pinochet regime in Chile) which overthrew post-war welfare consensus and pushed back environmentalist reforms.

Financial institutions

The pace of globalisation picked up as ‘de-regulation’ - the removal of environmental, economic and societal constraints on big business - was implemented dogmatically by the adherents of the revisionist ‘free market’ economists Friedrich August von Hayek and Milton Friedman.

The economic process of giving money to the ‘haves’ was mirrored by the political process of emasculating democratic representative bodies and empowering financial institutions.

This reactionary movement saw the enthroning of naked finance capital over the productive capital of industrial and agricultural entrepreneurs as well as over the people who do the actual work.

Global economics was reduced to the summation of a series of what were effectively gambling operations on the world’s commodity, share and financial markets.

Parallel to this, the environmental regulations of the 1970s were rolled back. The burning of greenhouse-gas producing fossil fuels, which had plateaued at about six billion tonnes of oil equivalent

annually, climbed by half as much again in 20 years.

The end result of the ‘free market’ counter-revolution is observable in two conferences taking place this week: the G-20 summit in Los Cabos, Mexico and the Rio+20 Earth Summit in Rio de Janeiro. The former is trying to grapple with the collapsing world economy and the latter with the disintegrating environment.

The current global economic crisis has its source in excessive de-regulation of financial institutions, combined with unbalanced economies due to the shift of production away from the traditional industrialised economies to NICs. The world’s financial structure became a gigantic Ponzi scheme which eventually collapsed, dragging down billions of livelihoods with it.

The root cause of the problem was illustrated by the fact that US President Barack Obama, German Chancellor Angela Merkel, British Prime Minister David Cameron and several other leaders have snubbed Rio+20.

European Union

The poorer nations, backed by the rapidly growing BRICS (Brazil, Russia, India, China and South Africa) grouping, had been calling for support from the rich, greenhouse gas-emitting economies for third world countries in order to make effective sustainable growth strategies.

This move was being resisted by the countries of the ‘First World’, apparently undeterred by the ongoing degradation in the global environment - A 2008 study by Graham Turner of Australia’s Commonwealth Scientific and Industrial Research Organisation vindicated the Club of Rome’s predictions.

These leaders did, however, attend the G20 meeting, which brings together Argentina, Australia, Brazil, Britain, Canada, China, France,Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the USA and the European Union.

Western leaders have been panicked by the possible effects of the Euro-zone crisis on financial markets.

This panic enabled the BRICS-led nations to indulge in some horse trading. In return for their boosting the International Monetary Fund's lending pool to $ US 456 billion, they managed to force the more obdurate of western leaders to accede to giving support to struggling European Union member states and to giving priority to investment in infrastructure in developing countries as a way to stimulate global growth.

The USA and Canada, however, refused to pledge assistance to a bailout package for Europe. A clear pattern is emerging, of BRICS-led countries trying to patch together solutions to the world’s problems and First World countries following expedient, self-serving paths.

The world is broken and needs to be fixed. The leaders of the First World, who have hitherto styled themselves the ‘international community’, who are mainly responsible for this predicament, should shoulder their fair share of the burden and behave as if we do not all have another planet we can escape to.