Economia by Geoff Davies, New Economic Systems to Empower People and Support the Living World

“This book offers a reconception of how economies work, how they might be managed, and for what purposes.” (Geoff Davies)

“This remarkable book . . . systematically pillories modern economic concepts, from globalism to laissez-faire economics. . . . If you are depressed whenever you hear an economic argument that common sense tells you is rubbish, then this is the book for you. Davies dissects modern economics and intellligently argues that it is possible to create a new economic system that will benefit society.” (Bruce Elder, Sydney Morning Herald)

“Imagine a much more equal and inclusive society than we have now. It has old-fashioned family values, solid local communities, and full employment in an efficient and sustainable market economy with a debt-free money supply and no executive plunder. Impossible? Perhaps. But Geoff Davies’ project is distinguished by such commonsense, hard science, practicality, surprise, fine writing and expert contempt for orthodox economics, it’s a joy to read for visionaries and sceptics alike.” (Hugh Stretton, Social Scientist)

(The following review is a repost from Change Management Monitor)

Overview

The author’s thesis is:

The Earth is bountiful if we treat it well and live sensibly. We do not have to have extremes of wealth and poverty. There is quite enough wealth in the wealthy countries to allow everyone to live comfortably with moderate effort, even as significant income differentials persist. In poor countries there is still enough wealth to eliminate quickly the worst deprivation and starvation. There is a very reasonable prospect that quality of life could be enhanced substantially for everyone, if that were the goal of both the community and the system. The problem is that, regardless of what we say we want, our economic system is not working to improve the lot of the poor, it is working only to make the rich materially richer.

In the first seven parts of the book, he identifies what is wrong with the present global system, presenting a cogent case for each of his criticisms. These failings can be summarized as:

• An economic system that rests on theories which are so far from representing reality that they severely distort policy – and the distortion causes the implicit aims of economic policy to be hostile to the implicit aims of society and of ecological sustainability;
• The distortion is compounded by seriously inappropriate measures of progress and further compounded by a monetary system that aggravates the tendency to bias the system towards the wealthy over the poor and present extraction of wealth over investment for the future, while decoupling the growth of monetary wealth from productive enterprise;
• The dominance of global corporations has allowed them to set trade and other rules that entrench their own power, while greatly reducing the power of society and the community to operate the regulation of the market economy that is needed to ensure that it operates in the interest of social justice and ecological sustainability; and
• At an operating level, current incentives tend to drive toward greater material use, whether or not that works to the benefit of the enduser. (for example an architect is rewarded in relation to the total spend, not the savings for the end client through more efficient energy use).

He also summarizes an alternative view of economics and monetary policy which is developed from the theory of nonlinear dynamics (complexity theory) and a systems view of the place of economics in the ecology and society.

While none of this critique or theory is new, Davies’ development of the various arguments is engaging, wide-ranging and persuasive. Further, his analysis of the impact of monetary policy and particularly his Part 7 on the impact of alternative monetary designs builds the case for radical redesign of our monetary system with a power that I have not seen elsewhere.

Part 8 outlines an alternative economy, based on the critique and principles developed in the first seven Parts. It is based on a market economy, but one in which:

• incentives and disincentives are built in to guide market participants to operate in ways that are supportive of societal goals. ‘Modern market economies suffer from a fundamental confusion of goals … a variety of different and conflicting drives is built into their structures’. They also provide strong incentives to externalize environmental and social costs
• appropriate measures – such as ‘triple bottom line’ measures and the Genuine Progress Indicator (GPI) or Index of Sustainable Economic Welfare (ISEW) – replace the blunt and misleading instrument of Gross Domestic Product (GDP) For an explanation of ISEW, click here
• a variety of community based money supply instruments are available and used to provide support to development at the community level, and also to stabilize international financial markets, which are currently large casinos as to over 95% of their transactions and act to destabilize productive development
• the currently ill-stated and often conflicting goals of the economy are resolved and made explicit. Current goals effectively amount to maximizing material throughput, with the assumption that this will maximize utility – a demonstrably false assumption
• we tax waste, not work. There is the excellent slogan that we should “tax bads and nuisances, not goods and services”

The central message is that a market economy can be a central support for achieving sustainability and quality of life for all. For it to fill this role it needs to be embedded in an understanding of the systemic nature of the environment and society and operate within a design that provides appropriate incentives and disincentives. The actual structural changes that are needed are not all that radical. The radical change needed is in mind set from the currently dominant neo-liberal mythology.

Content

The book is unusually good for the way in which alternatives are developed for each of the failings identified in the current system, together with a demonstration of practical pathways to those alternatives.

The book is in 8 parts, with 37 chapters. Each parts begins with a brief introduction which is part summary, part illustration to help the reader focus on the issue

There is a sort of counterpoint between the parts, with the argument moving between a focused view on elements of the economic system and a panoramic view of complexity theory and society and the ecology as the expression of complex adaptive systems.

Part 1 Pseudo-science – six chapters which summarize the devastating critique of the currently dominant neo-liberal (’neo-conservative’/'economic rationalist’) economic system that has been developed by many writers in recent years.

Part 2 Complexity and the World of Life – 3 chapters summarizing the key features of complex adaptive systems.

Part 3 Global Dysfunction – 5 chapters that identify the perverse effects of reliance on a severely flawed economic system and measures of progress. There is also a detailed critique of the economic and political role and influence of the global mega-corporations. (Davies points out that, despite the myth of the market economy under modern capitalism, an enormous proportion of economic transactions take place within command economies – the internal economy of many global corporations and their satellites.)

Part 4 Learning from Life – 4 chapters outlining the key systemic elements in an ecological world view.

Part 5 Stressed Planet – 2 chapters continuing the critique of current policies, this time from the viewpoint of ecological sustainability.

Part 6 First Steps – 3 chapters which identify the issues to be addressed and the style of thinking required to develop an economic system that harmonizes with sustainable social and ecological systems.

Part 7 Malign Money – 6 chapters that provide a detailed and very valuable analysis of the various uses of money, how it is created, and the impact of alternative monetary systems on the way in which the economy links to the social and natural world. The author demonstrates clearly that the global system that we tend to accept as being ‘natural’ combines the most malign features of the the many alternative systems available.

Part 8 Living in Gaia – 8 chapters which bring together proposals for a healthier system. The author shows that, while very deep changes in ways of thinking about the economy are needed, the actual changes in structures and ways of measuring progress are far from radical and rely heavily on a market economy – but one in which the incentives and sanctions support sustainability rather than undermining it as at present. He also points to examples of current changes in this direction.

Click here to go to the book’s website and read some excerpts from the book.