Friday, November 21, 2008

Introducing: The Special Proposal

As I have said in my earlier posts, there is a body of pragmatic suggestions that has arisen from my creative work on economics over the years. Though these ideas have been essentially complete for quite some time, I have chosen to first present more general theoretical work on an economics of compassion derived from Mahayana Buddhist thought. For reasons I discuss below, I have decided to move ahead quickly at this point with a preliminary presentation of my pragmatic ideas. For some time I have been calling this body of pragmatic thought The Special Proposal.

To be entirely thorough in preparing the ground for this material, it would be good to lay out some more detailed theoretical writings before bringing forth the proposal itself. Topics such as the economics of scope, which is itself a subset of a system theory of economics, would provide a slow and gradual approach to the proposal at hand. But I am presenting this material at this time for two reasons. First, it could be argued that a discussion of the six-fold economics of compassion, which I have presented at some length in my previous post, is really adequate in its own way as a preparation for The Special Proposal. In particular, it arises from the implications of the co-centric wisdom aspect of that presentation. However, it should be noted that I believe there is a route to The Special Proposal through the logical resources of economics as a social science, albeit economics as broadened in scope by the progressive thinking of the likes of E.F. Schumacher, Kenneth Boulding, Hazel Henderson, and Herman Daly. I plan to explore these avenues of thought in future posts and in my upcoming book, The Economics of Compassion.

The second and most compelling reason for presenting this body of thought now is a sense of urgency around the financial and economic crisis that is now unfolding here in the United States, with effects worldwide. In the midst of all this, I really do not see all that much creative thinking going on, so I thought I would throw some really unusual ideas into the mix and see what happens!

If we consider our individual economic activity, there are clearly countless ways that we can bring compassion into that activity through practicing the principles of the six-fold economics of compassion (generosity, ethics, tolerance, diligence, focus, and wisdom) in our own lives. When it comes to applying such principles in a broader organizational or societal context, it is not quite as clear what should -- or can -- be accomplished. Nevertheless, the power of organizations and collective action in general makes it quite compelling to search for ways to do so. In other words, although it is not always clear or easy how to move institutions or society at large toward an economics of compassion, the leverage and potential benefits of such shifts certainly make it worth investigating. And it is probably true that individual action, important as it is, is not going to help humanity turn the corner fast enough, except perhaps as individual action functions in leadership and creativity. Thus, though individual action is indeed crucial, changing or creating institutions and the prevailing mentality around economics on a society-wide level is the key here.

If we are to be pragmatic, we need to go beyond mere development of principle and planning, important as that is, to effective action. To achieve effective action, or even a glimpse plan for such, we need to respect the truth of cause and effect. In essence, this means we need to be honest about the subject of economic power. By contemplating economic power with a simple respect for cause and effect, we may come to a vastly different sort of consideration than the kind of cynicism, resignation, or blame game that leaves many progressives spinning their wheels. It is very easy to get angry when we think about who has power and how they use it. It is easy to wonder how we might take that power from “them,” rather than think about how “we” might obtain and use power.

If we look generally at how to address the great economic issues of our times, namely poverty, the environmental question, and economic justice in general, we need to be careful to channel our thinking in productive directions. Even if we focus specifically on economic power, there are areas that will be more or less helpful. There are many areas of economic power that can be considered, and I do not exclude them from consideration, even if I choose to emphasize other areas. Specifically, the area of political power over economic activity is one that is very much in the public eye right now. When many of us think of fixing the economy, we habitually think of what the government can or should do. I am not so naïve or ideological in orientation to to think that the government, or the political process in general, could or should possibly be disentangled from the economy. But neither am I so naïve as to think the government can fundamentally fix the economy. Government activity, for better or worse, is undeniably an aspect of economic power. However, The Special Proposal is not fundamentally based on governmental power. Instead, it rests on two aspects of economic power that may seem disparate or even unrelated. The first is a virtue of the human spirit, and the second is a principle of economics that is at once abstract and a bit mysterious, and at the same time extremely tangible and potent. I am referring to generosity in the first case, and in the second, to capital.

In essence, The Special Proposal is this: that a new form of capital be created, invested, and maintained, which will be called civil capital, or more elaborately, civil endowment capital. The aggregations of such capital will be called civil endowments. The beneficiary of civil endowment capital will be a specially defined one: the universal beneficiary. The universal beneficiary is defined as follows: all living human beings without exception, and all human beings yet to be born. The fundamental method for the formation or accumulation of civil capital will be generosity. The resources that will make it up will first and foremost be given voluntarily by human beings, for human beings. It should not be assumed that standard processes of charity and philanthropy would provide the sources of civil endowment, yet they could, at least in the beginning. More likely for the long term is that the bulk of input could come from various small and steady streams of contributions derived from routine transactions (similar to microtaxes) and from cash flow of businesses capitalized by the endowment. In the sense that these streams would be voluntary in nature, they would fall into the category of generosity. This slow and steady input to a permanent capital fund, by the way, is the implication of the term “trickle in.”

Of course, civil capital will have its own internal productivity over time, but civil capital will not follow the greed-based investment paradigm which I cheerfully call “reptilian capitalism.” It is not about the cold-blooded replication and multiplication of itself. In other words it will not be invested according to the “normal” speculative, extractive, and exploitive paradigm of conventional capitalism. Instead, it will be invested according to a civil endowment investment paradigm. This paradigm is simply in keeping with the defined beneficiary of civil capital, namely all of humanity, now and for the future. In brief, civil capital will be invested in ways that benefit all of humanity, with no one excluded. If the beneficiary is everyone, it doesn't work to exploit someone, and it doesn't work to poison someone, and it doesn't work to ignore someone.

It may be hard to visualize how this is possible, but a starting point is the simple avoidance of harm. The global economy as it is currently structured is deeply harmful to each and every one of us, especially if we think about the future. It is harmful to each of us most obviously in environmental ways, with the very real and multiple threats of global ecological catastrophes looming over each of us and all humans yet to be born. The tragedies of deep poverty, human conflict, and lack of opportunity affect individuals in more varied ways. Yet if we are able to see ourselves as citizens of the world, the conditions and the suffering of our fellow human beings cannot fail to affect us. The implications of co-centric wisdom, and simple compassion as well, are that the economic interest of the whole of humanity is of direct bearing on each of us on many levels.

This sense of a whole system awareness is at the core of the proposal for civil endowment. The investment of capital is an extremely potent long term causal mechanism in the evolution of the economy. Creating a body of capital that will benefit the whole system, from the core, as it were, can have a tipping effect. The body of theory pertaining to this idea is called civil endowment theory. I look forward to providing a more rigorous discussion of this from the point of view of economic systems theory. Suffice to say for now that capital is a unique sort of causal vector, one that operates in the formative and qualitative dimensions of an economy. I will also say that its power has gotten a bad rap because it has been applied selfishly. The emergence of socially responsible investing (SRI) is a huge step toward a different type of capital altogether. SRI is not civil capital, however, because it lacks several important structural features of civil capital. Though invested ethically, ownership remains with private investors who expect a good return in a fairly short time frame. By contrast, civil capital is fully owned on a beneficial basis by humanity at large and is invested in what can be called maximum horizon time frame, namely the farthest foreseeable future.

Civil capital endowments would be administered by a system of NGO (non-profit) organizations collectively called the civil fiduciary. There is a long history of administration of capital assets by third parties on a beneficial basis, and there is also a long history of non-profit civil society organizations holding and investing assets, usually for the financial support of the organization itself. Thus the establishment of a civil fiduciary would merely be a restructuring or refining of existing organizational missions and professional skills. This last point is by no means meant to minimize the challenge of such a project, but it is definitely not a Utopian dream.

Civil endowment theory is a structural innovation, an enhancement, to the theoretical structure of free market economies. It can be said that the establishment of a civil endowment system completes or perfects a free market economy. Therefore, civil capital can be called “the perfection of capital.” Without being grandiose, it is clear from the implications of civil endowment theory that it solves the system-level issues that have divided economic thinkers of right and left for centuries. I have no illusions that this assertion will be instantly accepted, nor does it matter very much. I am content with a gradual process of, from my own side, explaining the reasoning that led to what I call the leap, (the recognition of the possibility and potential of a civil endowment system) and from a community point of view, with engendering support and development of a civil endowment system in practice.

One objection to this idea, of course, is as follows. “Well, of course if there were truly massive amounts of resources devoted to the wellbeing of all humanity, it could have some real impact, but how will you get people to give that much money, and how long will it take?” In response to that question, it can be shown through reasoning that a civil endowment system would be helpful to humanity at any level of scale. It could do so at three levels: symbolic, catalytic, and structural. The first level is mainly the inspiration of the idea, and its activation as a seed for transformation. At that level (and at all the others) the act of giving to the endowment, however that is done, is a transformative affirmation for the giver; it changes the consciousness of the giver. And the symbolic power of the endowment, even when small, creates inspiration along with whatever tangible benefit it accomplishes. At a catalytic level, the causal vectors inherent in investment decisions become significant enough to influence tipping points in the vast matrix of events that make up the system of the world economy. The civil endowment influences the economy through a process of leverage. Finally, at a structural level, a really stable enhancement of the wellbeing of humanity is possible.

Admittedly, this is a hypothesis, and to enact it would be an experiment. Certain types of obstacles could arise, such as political opposition. Though civil endowment theory is not political in nature, political factors (and not just opposition) could affect its success in general, or its applicability in various parts of the world. The Special Proposal is most immediately applicable in countries that have basic open-society conventions: private property, rule of law, and fundamental institutional freedoms. It should be noted though, that the existence of a vibrant civil endowment system could encourage open society in places (including the United States) where that openness is less than complete or threatened.

It also may be possible that humanity in general is just too stubborn and stuck to absorb ideas like this. However, that's the beauty of leadership. Not everyone has to “get it” at once, or ever. Not everyone has to be inspired to contribute to the well being of all humanity. It will take leadership and inspiration, but that's how things get done. Therefore I'm not one of those people who likes to listen to those who start sentences with “People will never . . “ It's true that some people “will never” but many other people are very open and willing to look at new ideas. Those people are called leaders.

In summary, the rationale for civil endowment system is an outgrowth of the co-centric wisdom principle as explained in the six-fold economics of compassion. It recognizes the global economy as a profoundly interconnected system. The possibility and the need for civil endowment can be seen through a rational analysis of economic power as it operates in today's world, combined with a recognition of potential efficiencies of universal scope, all within the view of a global macro-economy functioning as a whole system. Finally, it rests on a philosophical point of view, which can also be expressed as a kind of faith or confidence, that there is enough compassion present in the human race to turn our global economy around, if we just can create the appropriate methods and institutions for doing so.


JimK said...

The puzzle piece still missing, as far as I can see, is: how should the civil fiduciary manage the invested capital?

One way to explore this would be to look at a variety of possible concrete ways that civil capital might be invested - e.g. agriculture, forestry, medicine, transportation, communication - then look at a variety of issues that might arise in such contexts.

It seems like any of these investments would still be expected to generate a profit, i.e. to trickle some fraction of their cash flow back into the civil capital fund. The main difference, I think, from business as usual would be that the profit should not come at any hidden cost to the community, environment, etc.

I think this is the core problem - the management principles that will be practiced. If you can demonstrate a way to run a business so that it can provide long term sustainable benefit to the community and the environment, along with a small surplus... the money will find its way to you.

JimK said...

There's no need to start from scratch in outlining management principles. Paul Hawken's book _Natural Capitalism_ would be a good jumping off point. Maybe he didn't get it all right, but how not?

Peter Senge's _Fifth Discipline_ is another of my favorite management books, but not so directly addressing your vision, I don't think. Still, there is a lot of value in it.

Maybe to combine Senge and Hawken?

It's nice to have a different goal, i.e. long range universal benefit versus short range personal profit. But without a way to steer the enterprise to keep it headed to the goal, the goal can become just words in a brochure. How can an organization keep itself headed in the right direction, in any more-or-less right direction, keep disoovering and correcting whatever misdirections arise?