How can we address poor design in our overall economic system? We can return to the concept of leverage points and look for areas where we can make the least amount of change for the greatest effect. What are fundamental aspects of our current economic system that are fatal flaws? We propose a few below.
True or full cost accounting
This is another tool that can help us focus our economic system on things that will help us survive instead of things that will harm us. Currently, our economic system does not charge companies or consumers for damages created to ecosystems or human health because of pollution. We don’t pay for damage to ecosystems from extraction methods for things like oil or wood or palm oil, or for depleting soils or aquifers. (Again, think true cost.)
For instance, oil companies create costs by destroying forests or other ecosystems when they drill, or when oil spills (which it always does), by polluting air and water supplies, causing health problems in hundreds of thousands of people in the US. This is considered an “externality”, an external cost that somehow magically “no one” pays.
These companies do pay for some, not all damages from oil spills but there are many other costs incurred that they don’t pay. This has created a “skew” in our system where costs are being incurred and no one is paying them, ensuring that our children or grandchildren will need to do so. Or costs are incurred and people who did the least to incur them (like those in high poverty areas, which are usually the most affected by the air pollution) are paying those costs.
There are various projects and individuals that are pushing the concept of implementing true cost accounting and getting polluters to pay their way. This can be done in a variety of ways through fines or credits or other methods. Most people want to do it gradually to give time to companies to clean up their act, and give time to other companies with cleaner services and products, to increase their capacity.
Genuine Wealth Indicators
A number of economists have created new benchmarks for tracking economic well-being, rather than simply using the Gross Domestic Product which only tracks what money is spent. It doesn’t track the quality of what it’s spent on - or what it isn’t spent on. Yet, this is the main economic statistic we use to determine how well we’re doing. Some economists think we can do better.
Gross Domestic Product (GDP) which measures:
Cancer treatment
Gulf oil spill
Subsidies to oil companies
Insurance payouts on accidents
Incarceration in jails
Medical costs
Superfund cleanups
Subsidies for chemical agriculture
War and Military build up
Government bail out
Costs of natural disasters
Bail out money invested in private sector (counted twice)
GDP doesn’t measure:
Raising a child
Volunteer work
The loss of old growth trees
Species extinction
Backyard food forests
Mutual aid societies
Community building
Good health
Walking or biking to work
Volunteer tree planting
Polluting less
Community gardens
Happiness
Mark Anielski, a Canadian economist, created a “Genuine Wealth Indicator” that measures the well being of the natural systems in the region, and the people. He surveys people to find out what they feel is important to their well being.
Then he surveys how each of those points are doing in their region, as well as key indicators of natural system health. He then puts this all into a “flower” graph that indicates how that region is doing.
This is his hometown of Leduc, in Canada. They’re doing pretty well overall.
Santa Monica. Not every category was measured on this graph. One can see at a glance what is doing well, according to the community, and what is not.
Alberta, CA. Pretty interesting window into an area, huh?
What if governments used this to determine what to fund? What if the private industry used this to determine what products or services to produce? What if non-profit organizations used this to determine where to focus their efforts?
You can use this general model to name the various items important to your own well-being, and the well-being of your site. What categories might be on it? How could you measure them in some way?
People’s budgets
Some cities have started to allow citizens to vote on some aspects of the budget or all of it. St Petersburg, FL tried that one year. They approved the basic necessities (including law enforcement) and then turned over the other items to the community to vote on. This has been very successful in a number of areas and encourages civic participation and awareness which can lead to many other positive activities. This allows people to define what their values are more directly than an elected representative might do, and fund those things.
Imagine if the US government allowed people to vote directly on what we wanted them to spend money on, even with just part of the budget. Then maybe we could spend time educating each other on the pros and cons of various expenses rather than what we tend to end up doing in political conversations.
This movement toward a better design of economic systems that will reflect our whole being and our well being is growing. New systems and versions are proposed regularly. One of them, Doughnut Economics, is getting attention from some world leaders. https://doughnuteconomics.org/
There are others we're less familiar with that are capturing interest as well. A number of leaders do appear to realize that there are flaws in this system. Cities are easier to approach with some of these concepts than national governments, usually.
Transitioning to a new system is tricky, politically risky, and will probably produce discomfort to various degrees. Refusing to address the problem areas or improve on the design will also create discomfort. It's a matter of which version we prefer.
Regardless of what the powers-that-be do, there is plenty we can do on our own and within our own networks and communities to transition to more resilient versions of economics.