Trickle-In Economics

Civil Credit and Civil Money

2012-02-02T11:08:00.000-05:00

(from THE NEW ECONOMICS Column in Country Wisdom News, February 2012 issue)

Right around now is a great time to be interested in alternative economic thinking! The uncertainties and injustices we are all going through have created a lot of motivation for new thinking and new directions of action. A lot of smart people are getting involved and working for change.

One of the key areas of economic activism nowadays is the world-wide trend toward local currencies and mutual credit networks. It’s impossible to say exactly how many of these there are, but it’s in the thousands. True, not all are successful or long lasting. But what is significant about these initiatives is that ordinary people are taking practical steps to create systems that localize their economic lives, build community, and raise awareness. In this column, I’d like to step back and discuss the basic ideas of civil credit, and related to that, civil money. This is by no means merely an intellectual exercise, as I am currently working with an intrepid group of cohorts to create a mutual credit network right here in the Hudson Valley that could be linked to a local currency.

Let’s think about credit. In an exchange economy, we provide goods and services to each other on a reciprocal basis. It is perhaps a feature of civilization that we are in some cases willing to receive compensation at a later time. That is called credit. The basis of this is trust, but the trust is not just personal. We also trust that there is some sort of accountability, whether it is by social convention or by law. This applies to money as well. When someone hands you a dollar, why do you believe it is worth something? We could say that money and credit are “trust-based” social technologies. Even with the basic levels of trust and accountability that people have out of their basic goodness, it has become clear to a lot of folks that the complex financial systems that have evolved are not basically sound. They are unstable, they are rigged, and are unjust in many ways. One type of reform effort these days involves taking the fundamental principles of money and credit, simplifying them, and integrating them with modern communications technology.

If we possess fundamental economic freedoms (something not to be taken for granted) we have the right to exchange goods and services and to enter into contracts. Libertarian writers such as E.C. Riegel have made the point that if we have these rights, we have the right to create money independent of government, or for that matter, the business establishment. Ah, but what is money, and how is it created?

Let’s take a very simple scenario: if I do a job for my friend Jim, and he gives me an IOU for that work, it would be possible for me to trade that IOU with someone else for some other good or service. This would mean that Jim would repay that debt to the other person, not me, since they gave me something in exchange for the credit represented by the IOU. The IOU is actually the simplest form of civil money. The IOU represents a credit for the person who has it, and a debt for the person who issued it. All paper money involves this credit/debt relationship, and please keep in mind that credit and debt are really the same thing—just from different perspectives. Notice that civil money was created by civil credit: I extended credit to Jim by giving him something he needed in exchange for a scrap of paper, a piece of paper that represented, however, his willingness to pay me back. Now, in this simple 3-party exchange, the IOU would be torn up (oops, recycled) at the end, and the “money” would disappear. There are a lot of lessons in such simple scenarios, and as an aside, I often feel that people could progress more in their understanding of economic matters by contemplating things like this than by listening to diatribes on the Federal Reserve or the budget deficit. But I digress.

Now, even without computers and the web, which make things very convenient, it would be possible to create a mutual credit system with a large number of participants and with no “money” at all. It would simply be a matter of keeping track of all the transactions. Systems like LETS and Time Banks do just that using a web-based accounting platform. So called “second-generation” mutual credit networks increase the sophistication of such systems by putting careful controls on accounts to reduce risks of default and to ensure that the network remains valuable to users over time. It is important to see that these systems are examples of civil credit. The participants are extending credit to each other on a community basis.

OK, if you’re with me this far, you’re a geek (that’s a compliment) and let’s take it another step. We’ve been thinking of creating a local currency for our area for some time. But how do you do that? Do you just print up some bills and say, “This is money.” That’s a fail, as they say these days. Money has to have a basis of issue. Some local currencies, like the Berkshare in nearby Massachusetts, are issues in exchange for dollars. You buy them for U.S. dollars, and you can convert them back to dollars if you want. I argue that the actual economic power of such a currency is very limited, despite the community-building aspect of the whole thing. Why not issue a local currency that is really civil money? Here’s how it would work: At any given time in a mutual credit network, some accounts will have a positive balance, some negative. Those with positive balances can redeem that credit by getting goods and services from other members. By why not also let them redeem that credit by being issued ( . . .drumroll . . . ) paper money? Such a local currency would be tradable with anyone who agreed to accept it, not just network members, which extends the convenience of the system for members, and builds community awareness. Why is this type of local currency more powerful? Because it is based on goods and services already delivered. It is truly credit based. The money is actually created by the delivery of goods and services, and becomes a circulating asset in the community.

This is all still a work in progress, and if you’re interested in learning more about such a system, participating in it, or (especially at this point) getting involved with organizing it, please be in touch. By its very nature this is a community project, and it won’t happen any other way.

see also: hudsonvalleycurrent.org

The Road to Economic Democracy

2011-11-28T10:08:00.000-05:00

With all the concern about our economy these days, there is a tremendous amount of discussion on just what’s wrong with the system, and what we could do about it. From the outset, we need to see the difference between merely complaining about things (valid as that may be), and discussion that is joined with a willingness to be part of the change we advocate. Then within that, we need to notice if what we are really about is talking change at a fundamental level, or if it is just about treating the symptoms. Finally, if we do have ideas that could improve matters at a structural level, are they feasible? Do they have a realistic chance of taking root, even on a small scale?

A lot of issues we are seeing today, such as the nefarious activities of big banks, money as debt, the crushing power of corporations, and the political power of the rich, have been around a long time. One “big picture” remedy with enduring appeal is that of economic democracy. The concept has been associated with a very wide range of proposals and programs, including workplace democracy, employee ownership, a national dividend, guaranteed income programs (negative income tax), and many others. H.C. Douglas, who favored a national dividend, published a book entitled Economic Democracy in 1918. Also around that time, some companies began granting stock ownership to workers, in part to lessen the appeal of socialism. Though many proposals made under the banner of economic democracy are outdated or downright utopian, the idea of extending democratic principles into the economic order remains an extremely attractive one.

But just how would that happen? Just as political democracy grants political power to the many rather than to the few, economic democracy would need to find a way to universalize something in the economic sphere. But what? I argue that granting decision-making power, or even direct spending power to everyone equally does not quite hit the nail on the head. This is especially true because of the tough choices needed to transition the economy to sustainability. And worker ownership and workplace democracy, as positive as they are, don’t change the overall conditions of the economy as a whole. When you throw in the competitive environment of global economy today, with many large economies practicing state capitalism, it’s hard to find a way past the “race to the bottom” for wages, employment—and, oh yes, the environment.

Especially when we use a term borrowed from politics like democracy, it is natural to think about a political path to economic democracy. Indeed there are lots of people working for that, whether they use the term or not. If you’re interested in reducing wealth and income disparity, increasing fairness for ordinary people, fostering ecological responsibility of business and so on, these are all pieces of the puzzle of economic democracy.

There are a lot of us who feel that holders of concentrated of wealth (corporations and the rich) need to carry their weight in terms of taxation and environmental responsibility, and especially that they shouldn’t stack the political deck in their own favor. In particular, we need a system in which our collective livelihood does not devastate the natural world on which we and future generations depend. However, the lack of real progress on sustainability generally, and in particular on moving away from fossil energy sources, is symptomatic of the entrenchment of economic power centers that have nothing to do with the public interest.

Though much of the reform spirit active today is directed towards political reforms, such as changes in regulation and legislation, there is a catch-22 at work here. The people we want to make less money from the system as it stands are the very people who have tremendous political power in preventing real change. Although it is honorable to fight for economic and social justice in the political realm on a piecemeal basis, issue by issue, actual change in the system can only come about by more fundamental shifts. These shifts start with changes of outlook at the individual level, such as transcending our relentless materialism and selfishness. But the needed changes are not going come from individual actions or changes of attitude alone. We need to create countervailing systems and institutions. For this reason I have emphasized civil activism as an alternative (and compliment) to the political sort. In short, we could say that there is only going to be a political solution to our economic problems when there is a non-political solution. Though this may seem like double talk, all it means is that unless realistic alternatives are in place (and not just as ideas) the political realm will have no traction, nothing to support, as it were. Reform minded legislation and improved regulation are needed, to be sure, but if we only work in that direction, we will not succeed. I really believe that. And because there are plenty of smart and dedicated people working for political reforms (and against them, I might add), I choose to work in civil domain.

Though it may seem difficult to see how to introduce effective reforms from a civil society direction, a window of opportunity appears if we consider the pattern of influence that capital investment exerts over time on the very character of our interconnected economy. By shifting the management of a portion of society’s capital to civil endowments, there is the possibility of creating capital which is fully devoted to serving the common good. In fact, we could go so far as to say that this aggregation of economic power, which I have called Civil Capital, has the potential to create the conditions for economic democracy.

A civil endowment system would grant everyone an equal beneficial interest in pools of capital fully dedicated to serving the common good. By excluding no one from its benefit, this type of investment by definition could not operate on an extractive, exploitive, or speculative basis. By its very imperative, it would need to find expressions in sustainable and socially just contributions to livelihood. Such capital pools could function at a global, regional, and even individual level, but in every case they would be managed by, and accountable to, civil society. This would emphatically not be a centralized, monolithic system. It could encompass any number of funds and oversight organizations devoted to sustainability, fairness and inclusion, and to building authentic prosperity at the scale of the whole of society. It could be said that the principles of economic democracy are built into the DNA, as it were, of civil capital itself.

It may be helpful to revisit the idea that a Civil Endowment System would be a condition, but not a direct cause of economic democracy. By analogy, a farmer’s field is a condition for the growth of a crop, and the seeds and water and sunlight are various kinds of causes for that growth. In a similar way, a road is a condition that makes travel feasible. It is from that point of view that I make the assertion that a civil endowment system is a road to economic democracy.

Though there may be plenty of valid ideological justifications of economic democracy, it is in some sense a description of an outcome, not a program that provides a causal model for its development. The question of “how to get there from here” is where civil endowment comes in. Even at a small scale, civil endowment capital pools would create capital backing for sustainable enterprises, with job and equity opportunities for workers. The productivity of those investments would be returned fully to the common good in the form of further investment and direct economic benefits to individuals on an egalitarian basis. The beauty of a civil endowment system is that it requires no major political upheavals, does not disrupt basic economic freedoms, and does not require universal buy-in. For example, a symbolic civil endowment fund for the United States, valued at one penny per capita, could be established for just over three million dollars.

Because it means so many things to so many people, economic democracy can’t be regarded as a unified movement. But because it embodies so many positive aspirations and ideals, it is a very interesting “idea sandbox” for learning and discussion on economic reform. Whatever we call it, we need to move toward an economy that provides real fairness and opportunity across the board, and helps the very poor move out of that condition—all while safeguarding the environment. That is a tall order. We need remedies that are equal to the problems at hand. Even if a civil endowment system is the road—or one of many roads—to economic democracy, we still need to build that road, and make the journey. Then again, it could be a very interesting trip.

Civil Endowment Theory and The Special Proposal

2011-10-31T12:01:00.000-04:00

In this post I will try to very succinctly lay out the basic ideas of Civil Endowment Theory, Civil Capital, and The Special Proposal. I realize that many of my previous posts have been too long for people to grapple with in a blog format. I am grateful to Country Wisdom News and Visit Vortex for giving me professional experience in writing on topics of importance and keeping it fairly brief.

Civil Endowment Theory looks at our current-state economy and tries to put real world solutions on the table, solutions that are both feasible and non-utopian. It should be noted that economic dogma of both left and right is largely based on utopian thinking. The market fundamentalists think that the market can fix everything. Socialist/Marxist thinkers believe the government can fix everything. These utopian theories qualify as “zombie economics.” They are dead theories that still have a lot of legs.

Keynesian economics occupies a much different territory. To put it very briefly, Keynes was right. The government can positively influence things like employment, business investment, and inflation through fiscal and tax policy, along with the actions of central banks. Yes, it can. But that implies there is the political will, sanity, and honesty to exercise this influence skillfully. What we’re seeing in our current time period is a total lack of political will, unity, and honesty around using the powers of government in the economy. In particular, we are seeing the flagrant abuse of deficit spending for things like unfunded foreign wars. Keynesian remedies are a bit on the subtle side, perhaps almost like homeopathy in medicine. If you’re drinking 20 cups of coffee a day, don’t expect homeopathy to work! Thus, though Keynes was right, Keynes is also not enough—especially in our current political climate.

For all these reasons, I believe the true way forward is through what I call civil economics. Civil society needs to step up and take on new responsibilities and new powers in the economy. We can keep an open and free economic system, and build in social justice and sustainability. However, it is going to take some changes in how we think and behave. A lot of people want these positive changes, and I guarantee everyone wants a realistic sense of economic opportunity in their lives. We are looking for solutions, and the time has come to put them in place.

Civil Endowment Theory takes a look at the role of capital in a modern economy, and points out two things: first, capital is essential. Since the dawn of the industrial age, we’ve become completely dependent on manufactured goods for economic life. Manufactured goods in turn depend on the investment of money, ideas, and work. A very pure and simple definition of capital is that it is the union of financial power and an investment idea that is put into practice for a productive result. This leads us to the second key point of Civil Endowment Theory: there is nothing inherent in capital that necessitates that it be used for selfish purposes. That is merely the historical pattern we’ve inherited.

Marx’s critique of primitive capital is correct as far as it goes, but his solution is both an historical and a theoretical failure. Civil Endowment Theory takes the following view: capitalism cannot be reformed, but capital can! What is the reformation of capital? It is quite simple: capital for the common good. We can institute a causal force for reform by creating such capital, which I call civil capital. We do not need to outlaw private property or private capital, but we need to create a balancing force, a leading force, of investment power in the economy. How will we endow such civil capital? Again, the answer is simple: through generosity.

If you take these ideas at all seriously, a lot of questions will arise for you. How will this capital be administered? Is there really enough generosity in the human spirit to create enough civil capital to make a difference? How will this play out as a story in the public realm? These are good and indeed crucial questions. I have developed a lot of detailed responses to these questions, but it’s also good that you think about them yourself.

Finally, there is Special Proposal. This proposal is again extremely simple in its essence. The Special Proposal is that we create a Civil Endowment System. We need to test the hypothesis of Civil Endowment Theory. I have no interest in arguing about its feasibility for the rest of my life. Only by engaging in this work will we see if it will perform as designed. Civil Endowment Theory holds that civil capital will operate at three levels: symbolic, catalytic, and structural. The first level, the symbolic, is of significance at literally any level of scale. So the question arises: would you contribute a penny to build a permanent capital investment fund for the economic wellbeing of all humanity, all those living now, and those yet to be born? Even thinking about such an act will influence the way you regard the economy, capital, and your fellow human beings. As for me, I’m in for a penny.

The Perfection of Capital

2010-02-03T10:59:00.003-05:00

There are a lot of things in the economic sphere that are necessary but, in practice, imperfect. For example, competition is necessary, but it is imperfect. Markets are necessary, but they are imperfect. Government oversight of the economy is necessary, but it is imperfect. Keynesian intervention is often necessary and effective, but it too is imperfect.

What is perfect, then? Authentic, unbiased compassion is perfect. But how can we enact compassion in the economic sphere? In most general terms, we can do so through the six economic virtues of generosity, ethics, tolerance, diligence, focus, and wisdom. More specifically, we can do so by creating a Civil Endowment System (CES).

At the core of the CES is civil capital, a base of resources permanently invested for the common good of humanity. It is not asserted here that civil capital could be perfect in execution. What is asserted is that it is perfect in conception. George Soros talks about the radical fallibility of human actions, and there is actually nothing in this assertion that contradicts that principle. What is asserted is that something in the realm of pure idea can be perfect, just as the mathematical formula for, say, a circle is perfect, and even though an absolutely perfect circle could never be drawn.

To understand why this is important, or even worth talking about, we need to go back to Folkert Wilkin's brilliant characterization of capital. He broke it down into two simple parts. The first is geist, a German term that can be translated as spirit or idea. This is the mental component of capital, the part that not only generates a business plan in its practical manifestation, but is also the spirit that governs the behavior of the capital altogether. The second aspect is wealth or financial power. This aspect, usually embodied in money, is the means by which the geist is put into action. There is a common assumption that the only geist of capital is to provide financial return on a selfish basis to the parties that provided the money. This assumption needs to be challenged. The logical outcome of applying universal unbiased compassion to the capital geist is to arrive at a form of capital that benefits the universal beneficiary.

The idea that the income or productivity of a body of capital could be assigned to the universal common good is, from a social and legal point of view, no different than designating a specific beneficiary of a trust fund. The macroeconomic effects of such a system could be truly transformative. Indeed, every major problem that we face globally in the economic sphere could be positively addressed by the formation of a CES. I do not say solved, here, because there remains the question of scale and implementation. This is not a Utopian proposal.

Though the Socially Responsible Investment (SRI) movement is a step in the right direction, it is not a complete transformation of the capital geist, since those who invest the capital are still the recipients of its productivity, albeit profits that are more ethically earned than with “reptilian” capital. As we consider the possibilities of civil capital, we should also keep in mind that the proposal for the CES (also called the Special Proposal) is an open-society initiative. One important implication of that is that nothing in it is meant to prohibit anyone from investing for their own benefit. What is challenged is merely the assumption that selfishness is the only geist available in the operation of capital.

Since geist resides in the sphere of mind, we can talk about the perfection of geist. The leap to a geist of universal benefit brings capital to its perfection. It is perfect in the sense that it is the most beneficial. As well, it completes the very conception of capital, so to speak. I use the term “perfection” here somewhat in the sense of the Tibetan term dzogpa, which also means completion. Thus, the notion of perfection of capital means not only civil capital, but also means recognizing the full extent of the range of qualities of geist behind it, from the least beneficial (pure selfishness) to the most (pure universal compassion).

Granted, it could be argued that it is an unproven assertion to state that authentic, unbiased compassion is the perfection of capital geist. However, the attitude of compassion in general is in accordance with, not just Buddhism but, I would argue, all the major spiritual traditions. Ultimately, one's acceptance or rejection of this idea is a personal matter, but in any case it is the basis for the assertion that civil capital is the perfection of capital.

Compassion from the Edge

2010-02-03T10:57:00.001-05:00

The Special Proposal in an outline of a structural economic innovation called the civil endowment system. Such a system, which could function as a civil-society initiative within an open society economy, carries a great deal of potential for addressing the urgent issues of our times. Because this approach looks at things from a whole-system perspective, there is always a danger that it could be confused with traditional leftist collectivist thinking and policies. In fact, the Special Proposal does not depend on any sort of idealism about the social unity of mankind, nor does it place the responsibility on government to structure the economy or even to address economic problems.

Instead, the basis of the Special Proposal, at the most basic level, depends on just three conditions. First is a recognition of the system character of the economy as a planetary whole. This means seeing the interrelationship and interdependence of the people, the economic processes, and the environmental context of our life on this planet. Second is concern and compassion toward this whole, which really means concern for each and every individual that makes up the human whole, and recognition that the common good, to greater or lesser extent, is a factor in the wellbeing of each of us as individuals. Third, is simply generosity based on this concern. If each one of these condition is genuine, meaning that it arises from correct understanding and wisdom, the next condition will come about naturally. For example, if you really see the interdependence of all things, you will come to compassion. If you don't have compassion, you haven't seen it deeply enough. And if you really have compassion, you will have generosity.

With that said, of course, it is possible for the civil endowment system in practice to foster a greater sense of human brotherhood. Indeed, this would be a most welcome outcome. However, it is very important to distinguish causes and effects. If a pre-existing and universal spirit of human oneness and cooperation is necessary to fix the global economy, transition to a renewable energy economy, end severe poverty, and so on, it would seem that these goals are not going to be achieved. We simply don't have enough spirit of unity right now. On the other hand, it is possible to remain optimistic about a positive future for humanity because that is not what is needed.

The mistake of leftist collectivism for the last two hundred years or so is to believe that true human solidarity can be achieved either on the basis of idealism or imposed by law. It can't.

To explain the difference between conventional leftist collectivism and the civil endowment proposal, I have coined the phrase “compassion from the edge.” What is meant by “the edge” in this phrase requires a bit of explanation. In simplest terms, it means our relationship to a system of which we are a part, an individual perspective on something larger than ourselves. Of course, an egotist's perspective is that we are at the center of the world, or the universe for that matter, but a more realistic perspective is that we are, metaphorically, on the edge of it. (It should be clear here that these terms like “center” and “edge” are metaphorical throughout, in an attempt to talk about systems in plain language.) When we, as individuals, look at a system as vast and complex as the planetary eco-economy, our perspective is that of the edge. Saying we are on the edge does not imply that we are on the outside looking in. We are in the system. An easy way of think about this is to imagine one person standing in a room full of people, looking out over the room. In this example, the individual's perspective is “the edge,” the people in the room (including the observer) represent humanity and whatever humanity is doing, and the room represents the environment.

One implication of this line of thinking is that, despite our immersion in our world, the human mind is capable of looking at situations as a whole. This is not the same, however, as to say that our perspective from the edge constitutes an objective reality. Our interpretations of what we see are not necessarily accurate, even in a relative sense. A paranoid looks at his social universe and thinks, “they're all out to get me.” This is whole system thinking, actually, though most likely inaccurate. But the possibility of inaccurate interpretations does not negate the fact that we are capable of thinking in terms of whole systems.

Now, from that edge perspective, there are several psychological “stances” we could take. We could take a neutral, detached stance, for example. The other types of stance we will talk about here are the selfish one, and finally, a compassionate one.

From the neutral, detached perspective, the big picture of the planetary eco-economy tends to look a lot like a slow-motion train wreck -- completely out of control, a chaotic mix of selfish and incoherent human actions and natural processes. Indeed, if we look at things with any degree of scientific insight and environmental awareness, all the trends look quite bad right now. A neutral perspective does not necessarily have any answers to the challenges we face, but it does have the virtue of dispassionate honesty.

Then there is the stance of selfishness (or, in the language of economics, self interest). The notion of self interest applies not just to individuals, but to organizations and to nations as well. We can even talk about the self interest of humanity in general versus, say, nature. People make this last sort of argument all the time in fact, such as when some tiny endangered species stands in the way of a logging operation. The argument is not made about “this corporation and its workers vs. the tiny bird.” It is always, “which is more important, mankind or this animal?”

There is a great deal of disagreement and confusion on both sides of the ideological divide about the question of self-interest. Advocates of classical/neo-classical economics, the school of thought coming down from Adam Smith (and more lately, for example, the Chicago School) assert that the freedom to pursue self-interest individually (namely, on the edge) is a good thing, and fact it is all that is necessary.

I agree that individual economic freedom is fundamentally a good thing. It is not only good for the individual, but it also creates an essential system efficiency in the wider economy. Much can be said about the good that comes from freedom, and from our ability to exercise self interest. At the same time, much of what we do in the name of freedom and self interest is actually not in our self interest, or anyone else's, because it is based on delusional, egoistic thinking. Thus, although we need it, and need to preserve it, there are unarguably dangers and abuses associated with freedom at the edge. With all that said, my disagreement with the neoclassical economists (one shared by countless thinkers these days) is a more technical one. For all that I endorse economic freedom, it cannot be regarded as a single-factor solution to all economic woes. To regard it as such in today's world is, to put it kindly, stubborn.

I believe that most reasonable people could agree with thinking along these lines: There is, in fact, a justifiable self-interest, and it is actually not just a right, but a universal responsibility. We are responsible for ourselves. And we have a right to take care of ourselves. And furthermore I believe we could agree that where problems arise, they result from the misinterpretation and misuse of self interest, and particularly from gross inequalities of economic power.

Thus my rejection of the market fundamentalism of contemporary neoclassical economic thinkers is not a rejection of self-interest, but of unjustifiable self interest. And it is a rejection of what could be called the sufficiency of self interest, which leads to the spurious economic mysticism of “the invisible hand.”

Finally, it is entirely incorrect to assume that freedom is only exercised in selfish ways. Despite the fact that we all have to operate on the edge of a system of which we are a part, our attitude does not need to be one of simple (and possibly delusional) self-interest. We do not need to operate on the basis of mere self interest. The basic insight that we are in fact part of the system that we observe is a keyhole to the wisdom that goes beyond such a stance.

This leads to the key point of this discussion, which is is this: we can generate an attitude of compassion at the edge. We are free to do so. And interestingly enough, one of the most direct ways to get to some sort of accurate whole-system view about human beings is to develop compassion for them, because we can be quite sure that human beings desire happiness. In developing compassion, we recognize this fact and, in fact, we endorse it.

Compassion from the edge is all that is needed to build the civil endowment system. Not revolution, not new laws, not a utopian breakthrough, not a supernatural transfiguration. Compassion.

Though the compassion we are talking about is, in fact, unbiased and “for everyone,” it does not need to be “by” everyone. Because it is from the edge, not everyone needs to have compassion, and it need not be imposed on anyone. No particular person needs to endorse, accept, understand, or even be aware of it. There just needs to be enough of it.

This is a brief explanation of why the Special Proposal not only lacks the features of socialism, it lacks the features more generally of collectivism altogether.

The Vision of Civil Endowment

2009-11-16T10:31:00.002-05:00

To build an economic system on the basis of human compassion may at first seem idealistic, naïve, or just plain impossible. But if we take a deeper look, it starts to look refreshingly possible. In my work to connect economic theory with the insights of Mahayana Buddhism, I've outlined six economic virtues that correspond to the six transcendent qualities by which a person on the bodhisattva path puts compassion into practice, eventually leading to full spiritual awakening. In other words, I've looked at the kinds of actions or qualities that are traditionally taught to bring about enlightenment, and looked for a related economic pattern. Except for one or two of them, you don't even have to change the names. The economic virtues are: generosity, ethics, non-aggression, diligence, focus, and wisdom.

A dismissive response to this line of thinking might be: “Fine, what's the big deal? If people would just do all that good stuff, society would be in great shape. What else is new?” What's interesting though, is that it turns out that there are very readily identifiable economic efficiencies that arise from each of these virtues, whether they are practiced individually, within institutions, or in society as a whole. This suggests that it should be possible to design economic structures and institutions based on those efficiencies.

My contemplation on how to make use of those efficiencies and build a more compassionate economic system in practice has led me to develop the theory of civil endowment. The key point of this body of thought is that we could create a new kind of capital which would be fully dedicated to the common good. This new kind of capital, called civil capital, would form the civil endowment. The other important point is that this civil endowment would be administered by civil society institutions created specially for that purpose. Structuring this innovation as a civil society initiative largely sidesteps the political process, where fundamental economic reform remains highly unlikely. It also avoids relying on the even more unlikely event that the business sector -- and especially the financial part of that sector -- will reform itself.

The great need for general economic reform, especially in addressing the vast and widening gulf between rich and poor, is justification enough for the establishment of a civil endowment system. But on top of that we have the extreme urgency of the multiple crises that human society faces. All this seen together should make us all the more willing to look beyond our existing toolbox of ideas, not to mention our stale rhetoric and dogma. We need major innovation in economic theory and practice, or the human race may not survive the historical era we are entering now. It's that serious.

Civil endowment theory is such a system innovation. It is also non-utopian, in the sense that it can be instituted in today's world, as it is. It is not an attempt to scrap the existing economic system, but rather to institute a new paradigm incrementally. For it to work, it is true, there must exist at least the basic features of open society, such as the right to form organizations, fundamental economic freedoms, ownership rights, and the rule of law. Though these conditions do not exist worldwide, there are enough places where they do exist to establish the system. And, as it happens, a civil endowment system would do much to preserve and promote open society worldwide. Thus, there is every possibility that it would help move closed (i.e. authoritarian) societies toward openness. Open society and civil endowment are mutually reinforcing, a statement that cannot be made about either capitalism or socialism.

From a theoretical point of view, this system of thought and practice is fundamentally outside of the categories of capitalism or socialism. It is not socialism because it does not rely on government ownership or control of productive enterprise. It is not capitalism because it does not promote extractive or exploitive investment, or productivity that destroys the world we live in. Nor does it, at a more theoretical level, subscribe to the notion that selfish behavior creates the common good. Instead, it works to create beneficial causal factors that work at the scope of the whole system (global human society and the ecosphere), which are implemented on a civil society basis rather than a political one.

It is important to be clear that this proposal is not an attack on business, private property, or on responsible self-interest. Nor is it a repudiation of the needed role of governments in the economy. It does, however, point out the possibility of an increased role for civil society in guiding the economy, one enhanced by the real economic power inherent in the civil endowments. Civil endowments could function as a stabilizing and moderating part of the overall economy, one capable of providing leadership and of addressing the crushing human problems of our times. The investment of civil capital would be used as needed in a given context. In the developing world it could promote basic sufficiency for all and the kind of sustainable infrastructure development that could nurture truly healthy economies. In the more developed economies, it could help reverse the wide and increasing gap between rich and poor, and bring healthy re-development to devastated post-industrial economies such as that of the United States. Importantly, it could play a major role in supporting renewable, non-fossil energy investments. Though there is a lot of private money going in that direction, much, much more is needed.

A quick way into the theoretical world of civil endowment is the little phrase, “capitalism can't be reformed, but capital can.” This is the counter-intuitive essence of the proposal. If we create a substantial system of NGO-administered capital fully committed to the common good of humanity, we will not have abolished private property, economic rights, or even “free enterprise.” We will simply have created an open-society economic system that moves beyond capitalism. To the extent that capital is reformed, the unbounded lust for profit that characterizes primitive capital is no longer the primary value or driving force. Human wellbeing is the primary value. Thus, though it may seem paradoxical, the way to diffuse and transcend the contemporary destructive manifestation of capitalism is not to eliminate capital but to reform it.

What would this reformed capital be like? Here is a summary that introduces the key ideas:

Civil capital is a form of finance capital which is invested as an endowment for the universal beneficiary, under a strict investment paradigm for the benefit of all humanity on an unbounded time horizon. As such, it optimizes both social and natural capital. Although the maximization of profit and productivity is not part of the civil investment paradigm, all retained earnings and productivity are endowed to the beneficial owner of civil capital, the universal beneficiary. Civil capital is managed by civil society organizations which are accountable to society at large.

Let's consider at a few of the phrases used in this definition:

The Universal Beneficiary refers to all human beings now living and yet to be born. This unique designation of people in both the present and future creates the unbounded time horizon of the civil investment paradigm.

The Civil Investment Paradigm refers to capital investment for non-frivolous economic productivity on behalf of the Universal Beneficiary. In practice, this paradigm is informed by the principles of environmental and social sustainability, universal sufficiency, and social justice.

Civil society organizations refers to specially created non-profit organizations that would function as fiduciaries for civil capital and its investment, preservation, and evolution.

Attitudes toward capital within the various camps of economic theory and practice are such that there is a bit of a Catch-22 in operation. On the one hand, those who recognize the tremendous power of capital tend to only see it in terms of selfish motivations and benefits. That is true, actually, for most of those who either think capital is great, and for those who are against the whole idea. Among those who love capital, some theorists or individuals continue to harbor the notion that “everyone acting selfishly yields the best result for society.” This notion, and that of the “invisible hand” of markets, is in wide disrepute, yet it remains a secure refuge of rationalization for the materialist. The wealthy and powerful believe in capital, and they know how to use it. On the other side of the ideological divide, those who yearn for “the common good” have tended to neglect the investment process, and implicitly, capital itself, and think more in terms of governmental regulation or control on the one hand, or individual actions and social movements on the other. And therein lies the catch. Neither side sees the transformative potential of capital once it is liberated from its selfish application. If anything, I hope that my contributions to the conversation will cause people of both persuasions to rethink what capital is and what it could be.

What is meant by investment here is the actual commitment of economic power to a productive purpose. The “crest of the wave” of any modern economy (including ones that are government controlled) is the ongoing process of investment. Although governmental involvement is a major factor in any modern economy, the real driving force as an economy moves forward through time lies within the actual investments that are made. The economic processes that are enabled by each investment as it happens are at the absolute core of the economy, and especially at the core of the way an economy changes and evolves. This is why the reformation of capital could be tremendously effective in reforming the economy itself.

If we look at human needs in the coming decades, the transition to a sustainable, non-catastrophic future for our race requires a vast and skillful transition in how investment is made, by whom, and for whom. Briefly put, those investments need to do what is necessary, on the scale that is necessary, to provide for the sustenance of the human race in a way that is ecologically sustainable. Who will make those investments? Where will the will and the leadership come from, not to mention the actual investment resources, to transition to a post-fossil energy economy? And who will benefit from the immense profit and productivity inherent in such investments? The answer to all these questions is, at least potentially, “all of us.”

But to answer these questions in greater depth, we need to delve into the fundamental theory of capital. This realm has received little attention since the basic ideological divide between socialist and capitalist dogma was laid down in the 19th Century. But if we undertake an analysis with a fresh mind (a journey undertaken brilliantly by Folkert Wilkin in his book The Liberation of Capital), we find a rather subtle realm, a realm in which tremendous creative and indeed compassionate possibilities reside. A key possibility within this basic capital theory is that capital could function without the relentless and amoral quest for profit. In other words, there could be a post-materialist conception of capital. Furthermore, there could be an altruistic conception of capital. Key to both these points is that capital could function without selfishness. Civil capital is the practical conception that arises out of these possibilities.

At this point you may rightly ask, “Well, how is this idea of civil capital different from Socially Responsible investing?”Socially Responsible Investing (SRI) and the more recent notion of “impact investing” are very positive movements, but don't forget that the people who put the money up for such investments want their money back, with profit. They may be willing to earn less and work harder for what they earn, but the basic selfish orientation of their capital is unchanged. They are trying to invest with a sense of ethics, which is a good thing, but it is still their capital. Civil capital, by contrast, is detached from private ownership. Its beneficiary is the universal beneficiary. Therefore, the investment decisions associated with it, along with the dispensation of the returns on those investments, are wholly different from any sort of private capital.

To explain this point about private capital, I use the playfully evocative terms “reptilian capital” and “mammalian capital.” Reptilian capital is cold blooded. It is concerned only with selfish return on investment. It has no ethical compunctions. It abides by laws and regulations only for pragmatic reasons. The reptilian capital paradigm rules much of our business and financial world today. We should never underestimate the extent and power of this mentality in our society. At the same time, there is an investment mentality based on more decent instincts, instincts that are warm blooded. Hence the term “mammalian.” This mindset is concerned with environmental and social outcomes as well as profit. Out of such a mindset comes the world of SRI, impact investing, and socially responsible business. To understand civil capital, we need to see that it goes far beyond even the laudable mentality of mammalian capital. The key difference is in the beneficiary. Instead of the financial returns and other benefits of ownership going to the investors, the returns on civil capital go to the universal beneficiary. The secondary difference, but also a crucial one, is in the administrative structure of civil capital. It is managed by socially accountable NGOs, by people who are not motivated by personal financial return.

Admittedly, it may be a little hard to visualize at first how this “return to the universal beneficiary” would happen in practice. Are we going to send a dividend check to everyone on Earth? In theory, that could happen, though not immediately. It would take a long time for enough civil capital to accumulate for that. It is possible, though, that even in the early phases of such a system, productivity could be channeled to those who need it most in creative ways. In practice, any profits of civil investment would most likely be re-invested as the system develops. As significant as that is, the financial returns or growth of civil endowment is not really the primary benefit of civil endowment investment. What is more significant, and what can take place on any level of scale, is the qualitative stimulus effect that civil capital can have on an economy. Going back to the nice folks who brought us SRI, what they realized, in their wisdom, is that quite apart from financial return, a capital investment has a qualitative real-world impact in terms of the economic actions it promotes. Those actions in turn have effects, not just in the sphere of the overall economy, but also socially and environmentally. It was this “ripple-out” effect that the SRI folks want to cultivate, albeit while taking the profits for themselves. Quite apart from the question of the financial returns of such investments, the paradigm under which civil capital would be put to work would open up a whole new realm of investment thinking, since the time frame under consideration would be unlimited, as would be the social scope of action and benefit. Therefore, it is not just the question of “who gets the profits” that makes civil capital vastly more beneficial than SRI. The unbounded scope of the event horizons in the investment decisions, both socially and temporally, opens up profound possibilities for the best possible kinds of economic development.

Furthermore, the economic power that results from the productivity of civil capital can be used in far more creative ways than simply sending everyone a check. There is actually a route to true economic democracy lurking in this paradigm. Though economic democracy is an imprecise concept, and one that has many proposed expressions, it is also an idea that has a deep resonance for those who favor economic justice. Unfortunately, most of the proposals associated with economic democracy are, at least on their own, more or less impossible to implement. They also show little likelihood of addressing -- let alone solving -- the paramount issues of our time, namely, global warming and global poverty. Civil endowment funds, on the other hand, could be targeted at precisely these most crucial problems and gradually bring about the conditions necessary for greater economic democracy and participation.

Many of those working for economic change today point to another area of concern, namely monetary policy. Again, a robust civil endowment system paves the way for progress in this area. We need to be really clear that as long as the reptilian profit motive of bankers is the main driving force, whether it is within the institutions themselves or in their unconscionable influence on public policy, real progress is not going to happen. Though there is a great deal of public outcry, and indeed perhaps some movement toward re-regulation of the financial industry, I do not believe that the answer to the problem can be -- or even should be -- coming from the government. The alternative route, which is thus one of the most urgent and effective potential uses of civil capital, would be to create financial institutions that are non-predatory, out of which could come any number of benefits, including monetary and credit reforms. One very exciting outcome of this could be the creation of both local and global currencies that are superior to the current national currencies. This could happen if there were simply financial resources available to create them, which in turn is entirely possible if there were institutions committed to economic justice for all.

Another screaming need for a new investment paradigm is in the field of media. Advertising-supported media is not necessary a flawed business model, but at least in large-scale mass media it has become horribly corrupt. This is most evident in the case of the rising power of politically biased and even extremist news organizations we see on TV these days. More generally it is reflected in the insidious materialism that advertising promotes in society. On the other side of the fence, we see various state controlled news outlets engaging in their own extremes of distortion and control. Clearly neither the ruthless lust for profit, nor authoritarian state control is going to going to lead to “fair and balanced” media. The backing of civil capital would open up new realms of possibilities for media that is truly responsible to truth and to the public benefit.

The wide range of benefits that could potentially arise from a civil endowment system has led me to call civil capital the “perfection of capital.” The term, though perhaps grandiose, is appropriate since civil capital is designed to be in optimal accordance with compassion and wisdom in principle and human wellbeing in practice. It is detached from selfish motivations and unskilful applications of economic power. It integrates and perfects the various forms of capital such as finance capital, invested productive capital, as well as social and natural capital. It is perfect because it is designed to be perfect.

Once we see the value of civil capital, we need to ask two pragmatic questions: “Where does civil capital come from?” And, “How is it managed?”

The refreshingly simple answer to the first question is: human generosity. Not only is generosity a fundamental part of the human culture and economy, but as society becomes more globalized we see that people are often willing to give very compassionately to groups of people with whom they have no personal connection. Though people give very liberally in the case of disasters such as hurricanes and tsunamis, the power of generosity has not yet been mobilized to actually reform or heal our economic system. To galvanize human compassion and giving for this specific purpose will take time, but there is no reason to doubt that people would support it once the concept of civil endowment becomes known and its benefits understood. Beyond the sphere of direct individual giving, there are a vast range of possible revenue streams that could be directed to the endowment system. Extremely small percentages of various kinds of transactions, such as currency conversions and international capital transfers could create micro-streams of input to the system. This is similar to the “Tobin Tax” concept that has already been proposed to fund worthy projects on a global scale. A civil endowment system would be a worthy recipient of a tiny percentage of many types of transactions. There are in fact countless ways that revenue could come into the system. Keep in mind that the civil endowment would be a permanent and self-enriching body of resource. Revenue streams from civil endowment backed companies could be built into their business model from the beginning. Although all the inputs to the system would involve generosity, they clearly would not all be direct gifts. It would be more like building generosity into a system. Once established, the small streams deflected from economic processes would trickle into the endowments and not particularly deprive anyone. This notion of structuralized generosity is a key element in the feasibility of such a system.

It is actually very important that civil endowments come into being through acts of generosity, rather than through confiscation by taxation, because through the actual act of giving to the whole human race, the giver is transformed and the interdependent cycle of a compassionate economy is set in motion. To see that human compassion and generosity is sufficient – and necessary -- to start the civil endowment system is an “ah-ha” moment that I call “The Leap.”

Finally, there is the question of the management of civil endowment. I propose that special non-profit fiduciary organizations be set up to do this work. They would be publicly accountable for their actions, and operate under a strict charter. Most likely there would be both paid professionals and volunteer governance boards as part of this structure. Under the civil investment paradigm, the nominal owner of the assets would be non-profit organizations (NGOs) with a transparent administrative structure. These organizations would make the basic decisions about investment of the capital, and monitor the results of the investment. An NGO of this type could be the direct owner of for-profit entities such as holding companies, banks, or venture capital firms, or it could invest indirectly through financial professionals. The key would be to not only enact the civil investment paradigm, but to refine and evolve it over time. Probably it would also be necessary to have a specialized NGO functioning as a standards body for the NGOs that actually hold civil assets. Finally, it might be necessary to separate the functions of fundraising and asset management. With that approach, there would be one or more civil endowment foundations responsible for accumulating the assets that form civil capital, and distributing them to the administrators of the endowments. This three-fold system would create a system of checks and balances, defuse potential conflicts of interest, and generally decentralize the functioning of the civil endowment system.

There are trillions of dollars in assets under management today by trained fiduciary professionals. Unfortunately, they operate under the wrong set of rules. It is also the case that many non-profit organizations have endowment funds under management, some of them huge. However, the purpose of these endowments is to generate cash income for their non-profit work. Some have migrated in varying degrees of a socially responsible investment strategy, but basically they are still about extracting cash on an ongoing basis. Though the civil endowment model is clearly different than this, the basic societal framework of non-profit organizations owning and managing large endowments is clearly established. In the case of a civil endowment system, NGOs have a new role: that of owning and managing large endowments for the wellbeing of the human race. If this is their purpose, it makes no sense whatsoever to make investments that are based on theft, exploitation, or the very destruction of the planet we live on. Thus the whole extractive investment model that has characterized modern capitalism from the beginning can be jettisoned.

What happens to profit, that concept so dear to traditional capitalists, under this model? It is still possible for businesses to make a profit under this model, but it would not be the overriding concern, nor would short-term profit expectations be of anywhere near the same significance that they take on currently. It is important to bear in mind that in reality, profit is just an accounting concept. What is more significant is the concept of productivity, which means actually producing a good or service that people need. As long as you make investments that do that, the system will do what it's meant to do. On a broader scale, the civil endowment system as a whole does not need to make a profit, in part because profit is reckoned on the basis of a specific accounting period. The civil investment paradigm is based on an unbounded event horizon. This doesn't mean that there could be no quantitative evaluation possible for its success or failure. But the actual criteria for success of specific investments would be more of a combination of qualitative and quantitative results. Keep in mind that there would be an ongoing income to the endowment system through structuralized generosity. Broadly speaking, if the system is seen to be valuable to humanity, people will continue to give resources to it to make it function. With that said, it is my hypothesis that civil endowments will be robustly profitable in the long term and will create a tremendous amount of decentralized private wealth along the way. The basis for this hypothesis is a rather esoteric concept known as “the efficiency of universal scope.” The essence of this efficiency is the view that causal factors that operate to enhance the health of a whole system will produce greater productive results than factors that destabilize or drain the system in some way.

It is inevitable, and actually preferable, for a civil endowment system to start out small. At first its presence would be, at least from a global perspective, purely symbolic. As it grows however, it could become a catalytic force, and eventually grow into a structural component of a vibrant and prosperous world economy.

Clearly there is no way to know how important such a system could become, or how soon it could begin to address human problems. I'm sure that as I explain it down the road, there will be plenty of objections that start with. “People will never . . . .” There is no doubt that the concept requires leaps of vision. But the leaps involved are as much of reason as they are of faith. It is actually rational to support a system that enhances the wellbeing of all humanity, because in an interconnected world, each of our prosperity -- and indeed our survival -- depends on the wellbeing of the whole of society. Civil Endowment Theory is not inimical to self interest. It merely points out the practical truth that each of our self interests includes, at least to some degree, the interest of the human whole. There are vast numbers of intelligent people these days who understand this. This is why, on balance, I am persuaded that a civil endowment system has real possibilities for implementation. It is a practical expression of a truth millions have seen.

As for those who don't understand it, it is important to see that this proposal by no means requires universal buy in, or even widespread awareness that it exists. It will not be imposed by any government or promoted with any kind of coercion. It is a voluntary initiative by those who see its value. Furthermore, because of the transformative character of the act of giving to a universal endowment, it can be argued that it is beneficial at absolutely any level of scale. Even a penny, given with the intention to benefit every human being now living and those yet to be born, is an expansive and uplifting act. With such a gift, the doors of possibility open to the practice of economic compassion for humanity as a whole, for the unbounded future. It is simultaneously an act of kindness, of hope, and perhaps most surprisingly, of pragmatism.

Concerning the feasibility of this idea, there are really two questions. The first is systemic: would civil endowments actually have the qualitative benefits that they are designed to have? And second: if such a system did indeed potentially have the salutary effect on the world economy that it is intended to have, would people have enough generosity to make it happen in on a large-enough scale? The answer to both questions is, “Well, let's try it.” This is admittedly a hypothetical proposal. There is no way that I know of to make theoretical models for such a thing or, for that matter, speculative prognostications. But the key thing that makes me want to push ahead is the point mentioned above about scale. If it has at least some benefit at any level of scale, why not move forward? Why not take the steps to create such a system, and take them deliberatively, cautiously, but decisively? In doing so, we can unify the outlook of compassion and practicality, and learn what works and what doesn't. Though I cannot personally predict the future of a system that has yet to come into existence, I am absolutely convinced that we need to take creative and transformative steps in the realm of economics. I am equally convinced that compassion is a worthy governing principle for guiding what we do. The idea of civil endowment is my synthesis of social vision, economic theory, and pragmatic planning at this urgent point in human history. It is my contribution to the conversation that is so important for all of us. You are warmly invited to join in.

(My thanks to Carl Frankel and Arya-Francesca Jenkins for their helpful editorial suggestions on this post.)

Event Info: Envisioning a Compassionate Economy, Sept. 20 2009

2009-09-18T12:04:00.004-04:00

A Conversation in Four Parts with David N. McCarthy

4-6 PM, September 20, 2009
At the Lifebridge Sanctuary
Rosendale, New York

This event is free of charge. Donations to the Lifebridge Sanctuary are warmly invited.

If we want to create a compassionate economy, just how would we go about implementing it? This event presents some practical ideas, the results of over ten years of study and creative work in relation to economic theory and practice. The four sections of the conversation will be:

The Case for an Economics of Compassion
The Case for the Reform of Capital
The Case for a Civil-Guided Economy
The Case for a Civil Endowment System

There will be a short talk on each topic followed by conversation.

David N. McCarthy is a founder and the current Executive Director of Buddhist Television International (Dharma TV). He is the former Chairman of Hudson Valley Sustainable Communities Network (now Sustainable Hudson Valley), and has spent many years studying the classic and alternative theories of economics. This event is the first comprehensive public presentation of his creative work in the field.

This event is offered in the spirit of the United Nations International Day of Peace, as well as the U.N. Millennium Development Goals.

The Lifebridge Sanctuary is at 333 Mountain Road in Rosendale. It's just down the road from Sky-Lake Shambhala Center, if that is helpful. Here are directions to the Sanctuary.

The Sanctuary is a wonderful space and I strongly recommend becoming familiar with it if you aren't already.

The Case for a Civil-Guided Economy

2009-08-03T14:39:00.006-04:00

Making a case for civil-society guidance in the economy is in part a call for recognition of what already exists, since such institutions already play an important role. But it is also a proposal for new modes of influence from civil society. It comes from asking basic questions such as, “What types of institutions guide our economy?” and “Where does economic power reside?” As we explore the various sectors or “domains” of human institutions, we will see just how central they are to the various theories and active systems of economics. Creative thinking about such arrangements can lead to transformative solutions.

Observers of human society generally have grouped the institutions we create into three broad categories, namely the governmental, business, and civil sectors. Governmental institutions have the main characteristic of wielding political power; the business sector has the characteristic of working in the exchange economy and providing livelihood. The civil sector is less simple in definition in the sense that civil institutions most characteristically have some sort of intended purpose or cause behind them, and the range of causes is extremely wide. A civil society group can be anything from a group of hobbyists who love to grow roses, to humanitarian groups trying to end various forms of human suffering, to reactionary groups trying to roll back any number of human advances most of us take for granted. Churches, schools, arts associations . . . the range of civil society groups is as broad as the interests and purposes of human life. Civil society ranges from the pinnacles of spirituality and creativity to the depths of hate and destructiveness. It's a group promoting brotherhood or ecological sustainability, and it's also the Ku Klux Klan.

In my work on economics, I have generally called the three broad grouping of institutions “domains” and reserved the term “sector” for more narrow divisions within the economy, such as the manufacturing sector, the agricultural sector, and so on. Whatever the terminology we use, it is vitally important to think about the structure and interactions of these three kinds of institutions when we think about economics. As well, I believe it is vital to add a fourth domain to the discussion: the domain of the individual.

This fourth domain takes on two important dimensions. First is the significance of the aggregation of individual choices and economic actions. For example, many advocates for sustainability have counseled, no doubt with some degree of validity, that individuals need to make more responsible buying choices to transform the economy. They say that we should buy compact fluorescent light bulbs instead of incandescent ones. There are often long lists presented of such actions that we ought to take. Though I accept that such actions are are extremely significant, I also believe it is inherently insufficient to try to achieve a sustainable economy by promoting such individual actions. In any case, this is merely mentioned here as an illustration of fourth domain behavior. The aspect of fourth domain behavior that is the aggregated result of individual choices is also the driving force behind democracy, for better or worse. The other significant aspect of fourth domain behavior is the whole subject of leadership. Even as we function in institutions and other social units, such as the family, the nationality, and so on, we function individually in that context. Our individual actions and the influence we exert on others is very significant. Leadership can also mean individual deviation from social norms -- again for better or worse.

If we look at these four domains, we will see a framework for looking at the whole of society, one that is general enough to cover pretty much any particular human group we need to consider. Of course, there are many institutions that straddle the borders of the different domains, such as public schools, or non-profit organizations that undertake business activities, and so on. There are also groups that operate fraudulently, such as church groups that are really political fronts, fake non-profits operated by corporations, and so on. The other significant fact is the deep level of interaction and influence that take place between the domains. Indeed, the only way to understand much of what happens in society is by considering this interdependence.

Rudolph Steiner and his intellectual heirs have done very interesting work in this area of thought, and the theory of Social Threefolding, which derives from Steiner's Anthroposophy, suggests that greater independence of the three spheres would lead to positive results for humanity. This is understandable, especially considering the various extreme situations of imbalance that existed in the early 20^th Century. Totalitarianism (the complete dominance of government over all aspects of life), Communism (specifically the domination of economic life by the government), and Theocracy (a form of civil society domination), were the focus of Steiner's notion of a remedy based on more independent functioning of the three spheres. It is hard to argue with the very reasonable notion that the three spheres need basic independence to work properly, and that domination of one sphere over the others is unhealthy. However, my own work focuses more on how the various domains can function interdependently in a healthy way.

Concerning the domination of one sphere or domain over the others, I think it can be argued that, at least in the so-called “developed” nations, the domination has shifted to the business sphere, as the rise of materialism and globalism have given business and money interests unprecedented influence over government and society generally. By holding the keys of wealth, the business sector also holds broad power advantages over civil society organizations – such as being able to outspend environmental defense groups on an issue even where there is broad agreement on that issue in society generally. The control by ownership of media and information flow by profit-oriented corporate power centers is another significant aspect of the profound influence of the business domain.

It could also be argued that negative fourth domain behavior, specifically the relentless consumerism and self-absorbed mentality of individuals in the current era is a profound influence on the world direction at this time.

On the more positive side, there are tremendous movements for change and transformation emerging from both the civil (third) domain and the individual (fourth) domain. The recent epochal events in Iran, for example, though currently inconclusive and possibly unsuccessful, are of a broadly third and fourth domain character. Though nominally a third domain theocracy, Iran has proved itself to be a solidly totalitarian (first domain dominated) state, but one that is seething with individual and organizational “change vectors.” Though the government apparently has won the recent struggle, no one who has observed the situation closely believes that Iran will ever be the same.

Writer Paul Hawken has written a wonderful and ultimately very optimistic book called Blessed Unrest, which documents the spontaneous flowering of civil-society movements for positive change worldwide. In it, he points out the vast and surprisingly effective network of people and organizations working for environmental, social, and economic reform, despite powerful opposition and limited resources.

Turning now to a contemplation of economics in light of the four domains, we can see to what a great extent the various major historical movements and theories actually turn on exactly how these four domains interact, and specifically how economic power operates in a particular society. For example in Socialism, the state (first domain) has the upper hand in controlling the economy. The degree of control varies from more or less absolute (North Korea comes to mind as an example), to something far less so, such as Scandanavian-style “social democracy.” Though Marx postulated that the end result of socialism would be that the state would “wither away,” the outcome of the historical Marxist and Socialist experiments has proved the opposite. It is more that Socialism itself has withered away, leaving the state in places like Russia and China very much intact. Probably Marx's prediction that Capitalism will destroy the world carries far more potency and possibility than his predictions concerning a dictatorship of the proletariat and the emergence of a stateless communist utopia.

On the other side of the ideological divide, so called “free-market capitalism” hinges on the fourth domain notion of individual economic freedom. Don't forget that Adam Smith's Wealth of Nations was published in 1776, a year of some significance historically in relation to the subject of freedom. Individual liberty was a radical and liberating concept at that time, one that was percolating in the social science innovations of the “Scottish Enlightenment” just as it was politically in America. Though the ideal of personal freedom has taken root worldwide, in much of the world today it remains, sadly, no more than a dream. While actual individual liberties are often taken for granted in the West, the mythology of freedom has been significantly co-opted by entities that are by no means human, namely corporations. There is even the astonishingly corrupt notion – a notion that stands as accepted law in the United States – that corporations are, in the eyes of the law, persons. This goes far beyond the reasonable notion that business entities should be provided with due process of law.

The mythology of individualism and the worthlessness of government has been extended and sustained (with plenty of corporate funding) with promotion of the idea that Capitalism is the best of all possible economic structures . . . which is baseless fantasy at this point. Witness the stark realities of huge profit-oriented corporate entities manipulating governments, shaping public perception of reality through media, and more or less enslaving humanity for the profit of the rich, while thoroughly neglecting the actualities of human need and destroying our very planet in the process. Does anyone of integrity still believe that raw selfish interest results in the “most efficient allocation of resources,” after seeing the disgraceful pattern of greed, speculation, and corruption that led to the recent global meltdown? And to whom does the business community turn when their speculative house of cards collapses? Government, of course.

What is the upshot of all this from the point of view of the four domains? It is simply that the present power arrangement in which business entities exercise control over governments which they then use to prop themselves up in the aftermath of their own dysfunctional behavior has little likelihood of ever working out well for America or any country. The relationship between business and politics is incestuous. It lacks honesty. Bad guys often win. And as if that is not enough, the whole human race is imperiled by this arrangement.

Clearly, the recent economic meltdown has led the United States toward an economy that is more “state guided” than in the past. Indeed it was the Bush administration's near complete abandonment of regulation (specifically in financial markets) that deserves much of the blame for the events that followed. But is a state-guided economy really a solution? Though I do support the pragmatic efforts of the current administration to undue the horrible effects of the previous one, I do not believe that a state-guided economy is a long term solution or an optimal structure for a healthy economy. The state is best suited for the more clumsy (but essential) work of providing a legal system, national defense, international relations, and the maintenance of such institutions and responsibilities as it can effective undertake. It is not so well-suited to the creative and nuanced work of guiding the economy, except in the matters of legal oversight and regulation, as needed.

Neither can it be said that the business community, despite many positive efforts, can guide the economy, which its built in conflict of interest. The fox is just not going to be good at guarding the chickens. The “invisible hand” is a concept that has valid bearing in very constrained contexts, but it is certainly not sufficient for a real turnaround at the scale of the whole of humanity. Business is good at inventing a better battery for electric cars. But it is equally adept at buying the patents for that same car battery and sitting on them indefinitely because, well, “our main business is oil and gas.” (For the long version of this true story see http://ev1.org/nimhsup.htm).

Therefore what we've seen historically is either varying degrees of a state-guided economy, or of a business-controlled state system. If you throw in the occasional theocracy, that's about it, at least recently. Instead of these structurally flawed arrangements, I propose a third possibility, a civil-guided economy. One of the key arguments for this is that since authentic civil society organizations are not fundamentally motivated by either political power or “money power,” they stand in the best position to exert guidance that is actually guidance as opposed to outright control. They are in the best position to think beyond the immediate future, indeed to even go beyond the concerns of those of us living today. Civil society groups are, in principle, uniquely suited to provide leadership that is truly for the best of society. At present, civil society organizations of all kinds provide ideas, commentary, criticism, and forums for communication on economic matters. Foundations provide all manner of charity, some of it massive in scale. Then why don't we have a civil-guided economy? At present, we have a system where in the first case, civil society organizations do a lot of talking, a lot of arm-twisting, perhaps a lot of soul searching, and they often provide truly creative and positive ideas. But when they do provide tangible economic aid, they do so without fundamentally challenging the existing economic order. From that point of view, they don't exercise much by way of transformative economic power. Much of their economic activity is actually dedicated to funding themselves for their no-doubt important work. (I'm speaking here of the endowment and fundraising activities of non-profits, about which I'll write more later.)

It is a delicate matter, perhaps, to somehow give non-profits economic power without tipping them into the realm of business. The key point in this regard is to recognize that economic power can be exercised for the common good. It is only a matter of habit and perhaps cynicism that we think otherwise, although we do not necessarily have models that fully reflect that potential in today's world. Certainly we have non-profit organizations, such as the Red Cross, which exercise large scale economic activities in charitable ways. We have giant universities and global churches. We have foundations, such as the Gates Foundation, which are having unprecedented impact.

Yet there has been no fundamental shift in the “spirit,” shall we say, of the world economy. Fifty thousand people a day are still dying of starvation. A billion or more of us don't have adequate food and water. The entire human race stands at great risk from climate change. And every one of us, rich and poor, faces real economic insecurity in our present financial system with its rampant speculation and financial manipulation. Whatever is being done to address these human problems, it simply isn't enough, either quantitatively or especially, qualitatively. Despite the unprecedented development and reach of civil society organizations, they are not yet participating in the economy in ways that will truly bring about a transformation.

The gist of The Special Proposal (discussed earlier in this blog) is for economic power to be exercised by civil society organizations in a new way, namely through the development of a civil endowment system. This system would endow significant, expanding, and dynamically managed pools of resource for the common good of humanity. Such resource would be invested as capital, called civil capital, in ways that truly benefit the whole of humanity. Economic power would be exercised through direct ownership of productive assets. Unlike Socially Responsible Investing (SRI), the ownership of the productivity of the assets would reside with “the people” rather than the original sources of the capital. Thus, although the notion of civil endowment is inspired by SRI, it is wholly different in nature. The influence of this economic power, in concert with the structure and conventions of civil society, would function in cooperation with business and government interests to create a grand triangulation of power between business, government, and civil society. In this interdependent relationship, the guidance of civil society over the economy would indeed be that. It would not be outright control. Civil capital would not supplant private capital, basic private ownership, or the role of governments. Openness and transparency, and accountability to individuals (the fourth domain) would be the balancing factors enabling true structural economic reform.

We can summarize the case for a civil-guided economy under the following points:

Guidance for a healthy economy needs to come, at least in part, from parties that are not primarily concerned with political power or economic gain for some individual or group. Civil society, by its very structure, has the best chance of exercising such guidance at a fundamental level.
Civil society by nature of its diversity, has built in checks and balances, transparency, and accountability, qualities that government and business interests often lack. Though not all civil society organizations have these features, institutions can be designed and maintained that do.
The true power of a civil-guided economy can be realized by instituting a system of capital ownership for the common good, with a diverse system of investment funds dedicated to the “universal beneficiary.” Through the leverage and influence of such capital pools, civil society can guide the economy through the power of ownership, without restricting fundamental individual economic freedoms, abolishing private property, or contesting the legitimate roles of government.
This decentralized “triangulation of influence” represents a genuine creative innovation for a post-materialist, interdependent global economy.
Such an arrangement embodies the potential for significant transformation of the world economy.

An Introduction to the Economics of Compassion

2009-03-17T21:26:00.006-04:00

This essay serves as an introduction to the notion of an economics of compassion, and also to the more extensive discussion of this topic which has been accumulating in my blog for the last nine months or so. At the end of this post I outline the main topics of this body of thought, and the various posts that discuss each topic.

For any theory or body of knowledge to be valid, it needs to be concordant with the way things truly are. In effect, this means that such a theory must be concordant with wisdom, if we take wisdom to mean most generally “a correct knowledge or awareness of how things are.” It would perhaps be unnecessary to make such a statement, if it were not a direct way into our topic, which the economics of compassion. The connection is simply this: according to Buddhist philosophy, compassion and wisdom are inseparable. They are two sides of the same coin, as it were. This point needs to be made, at least in passing, because it would be very easy -- and not only for the more cynical among us -- to have the immediate reaction that an economics of compassion is merely a “feel good” concept, or one based on hopelessly idealistic musings.

On the other hand, if you did agree -- or come to agree through reasoning or personal experience -- that compassion and wisdom are inseparable, it would make a great deal of sense to take the idea of an economics of compassion seriously. I am not going to make a lengthy argument here as to how and why wisdom and compassion are inseparable. The reason for that is that perhaps you already agree with me! Or if you have reservations, it may be that the point will be clarified for you as we work through the reasoning involved. One thing that is obvious even with a little reflection is that if you want to actually practice compassion, you have to have wisdom. You have to know how to help someone. Conversely, compassion can be said to arise from the wisdom that we all possess inherently.

If we were to contemplate an economics of compassion, where would it begin? Compassion is understood, both in general usage and in Buddhist thought, to be the wish for someone to be free from suffering. This is the starting point, because economic suffering is, needless to say, a known quantity. Poverty, starvation, and disease are the most obvious forms of economic suffering. And looking a little deeper, we see that people at all levels of wealth suffer. The very rich suffer from the craving and stress coming from the feeling that what they have is never enough. Those of us in the middle suffer from anxiety about our economic security, our ability to realize our dreams or just to have a reasonably comfortable old age. All the economic rungs of society suffer from the stress of endless work and uncertainty about the conditions of our human realm. Wars, disease, and environmental disasters affect us all, rich and poor. Add to this the instability of our economic system as it currently exists, an instability that threatens absolutely everyone with uncertainty and potential ruin. Finally there is the incalculable potential suffering of the future, of a planet devastated by climate change, wracked by wars and social disruption. How does that make us feel in the present? How will our descendants – if there even are any – feel about us looking back from the future?

If we wish to head off or at least reduce economic suffering, we are actually giving rise to compassion, because that is what compassion means. But compassion for whom? Intelligent people are coming to see that the system needs some sort of fixing, that it's not enough to simply plod along and take care of oneself and one's family. It is interesting that there is general agreement these days that the economy is deeply interdependent and that for prosperity to return, things have to happen at the system level. Of course, opinions differ as to the details of what should be done, but this recognition of interdependence is a glimmer of wisdom. And it ties in directly with how the Buddhists see compassion, which is the notion that if you don't have compassion in an unbiased and universal way, it is really not a complete compassion. Wanting to fix our economic system as a whole is actually an orientation towards some degree of compassion for everyone in that system. By the way, this is emphatically not contradictory to the notion of individual responsibility. It is true that we each experience the world individually and differently, and that our individual well-being is deeply dependent on our own actions. But it is equally true that no one individual has the power to address the systemic issues that face humanity today. We need to work together, because we are together, and unavoidably so.

Despite our individual responsibility at all levels (and generating compassion is a prime example of that), there persists a notion in society and economic thought that is extremely toxic and pernicious to any sort of economics of wisdom or compassion. I'm referring to the idea, based on distorted interpretations of Adam Smith's Wealth of Nations, that by behaving selfishly we automatically, through some magic or “invisible hand” are doing the best we can for others. This is such sheer nonsense that it deserves a rigorous refutation, and has in fact been refuted by many great economic thinkers. Nevertheless, it is such a seductive idea, one that relieves us both of moral responsibility for our actions and even the burden of thinking clearly, that it continues to hold sway, particularly among those who are indoctrinated with conservative economic theory. And just to be “fair and balanced,” we also need to sweep out the rubbish of the main notions of Marxist thought, particularly the idea that the only route to justice is for the government to administer the economy under a centralized command system.

If we sweep away the garbage -- and garbage it is -- of the extreme economic views of left and right, we may end up feeling a bit groundless. What reference point can we cling to? What truisms will lead us home? According to Buddhism, this groundlessness is not a problem at all. It is actually a symptom, not of intellectual poverty, but of seeing things directly, of openness, freshness, and new possibilities. So let's stay with the groundlessness, just for a moment.

As we rest in that groundlessness, the reference point that emerges that is truly compatible with seeing things directly is compassion itself. That is the starting point, because it is without limitations. It applies to all members of society, and actually to all living things. And it addresses what is really important, namely the relief of suffering, and by implication, providing universal access to our highest human potential. Therefore compassion is the ground of how to be successful in the world, successful in the truest sense. Many people, of course, will tell you how to be successful, and perhaps their advice is helpful. But I repeat: the foundation of authentic success is unbiased and universal compassion. In technical economic terms, you could say it is an aspiration for the health of the whole system. Think about it. If you want “the economy” to be better, what does that mean? It means wellbeing for all the people in that system. If you think about it more deeply, it means the health of our natural world too, without which we would all soon die off. Therefore, if you want the economy to get better, you have compassion. Congratulations!

Now, how do we practice that? Mahayana Buddhism presents an incredibly rich pallet of time-tested methods for practicing compassion. In particular, there are what are known as the Six Perfections: generosity, ethics, patience, diligence, meditation, and wisdom. I have adapted these six principles of practice to the sphere of economics in my essay The Six-Fold Economics of Compassion. The last of these, wisdom, is divided into two main categories: Post-Materialism, and Co-Centricity. These two principles are each discussed in a separate blog entry. Finally, wisdom could also be broadly divided into “theory,” which is the more general discussion, and “pragmatics,” meaning the practical steps we could institute at a systemic level to put economic compassion into action. The main pragmatic recommendations arising out of my years of contemplating economics issues are put forth in the essay, Civil Endowment Theory. For a shorter discussion of civil endowment, see the post entitled The Special Proposal. (You can see the titles of the various posts by clicking on the little triangles next to the dates in the column on the right side of the page.)

Climate Disaster and Economic Justice

2009-01-07T12:50:00.007-05:00

A note: I have just read an important piece by Bill McKibben which is an update on the global warming picture. The news: it's happening faster than expected, and many of our standard ideas about the subject are limited. If you do nothing but read that piece, called Think Again, Climate Change, I will be pleased. My blog entry below is in direct response to it. Also note that I'm trying to write shorter entries now. This one is around 900 words. No more seven thousand words. That was an exception. But I do hope you get through the previous post on Civil Endowment Theory at some point, because it's a distillation of the last 10 or more years of my work.

This post just makes one simple point, which is this: Humanity is not going to get motivated enough, inspired enough, and unified enough to stave off climate disaster – which in simplest terms means phasing out fossil fuels – unless we do it in a way that brings economic justice and opportunity for all.

Typically when we think about the struggle against global warming, we think about governmental action, international treaties, and the like. It is true that governments have a huge role to play, of course, but they show no signs of moving away from policies that perpetuate the grotesque inequalities of wealth that exist in our world. Their leadership is inherently suspect, not to mention the fact that many governments are actually fossil fuel producers (Russia, the Arab states, Venezuela, Mexico). Their solutions will fall short because they are fundamentally beholden to conventional thinking of the same sort that got us in this mess. The recent U.S. financial sector bailout is a case in point. Outrageously, much of the money that was given to banks (about $350 billion so far) went to executive bonuses, dividends, and buying weaker banks. Reptilian capitalism at its best.

Nor do the very rich have a handle on this. T. Boone Pickens, the oil tycoon of Swift Boat fame, who recently got renewable energy religion and blanketed the airwaves with ads about wind power, has fallen silent. I heard he lost $300 million in the recent market meltdown, and financing for his wind projects is in question. That's a snapshot of course, and the rich have a huge potential role to play. They need leadership, though (something they don't want to hear) and they are fundamentally disinclined, despite genuine altruism and generosity, to do anything to change the system as it exists, which is indeed the system that made them rich.

Let's see, what else might do it? Oh, yes, “market forces.” But, as we have seen in recent months, when the price of oil collapsed much of the momentum for renewable projects was lost. Sales of SUVs rebounded. Oil prices are again inching up, and certainly smart folks know that the long term trend is going to be up. But putting our hopes on a price-based transition is too little, too late. Prices fluctuate, as we've seen recently, but CO2 emissions don't depend on the price of fossil fuels. And there's a huge amount of them left in the ground. There's no indication they won't be extracted and burned at whatever price. And then there are those lovely subsidies that governments pay for fossil fuels, subsidies that distort the market. It seems that the real market is about how much it costs to buy favorable legislation and lax regulation, and the marketing costs of manipulating public opinion, such as in the recent “Clean Coal” propaganda campaign.

Let me say this again: We need a solution for energy transition that simultaneously brings economic justice for all. There are two reasons for this. First of all, economic justice is justified! We as a human race deserve – and we will all benefit greatly from – a civilization in which everyone has basic sufficiency, basic economic security, and basic opportunity. That is what economic justice means to me. It does not mean forced egalitarianism, forced collectivization, forced conformity, government control, or any of that. It means universal freedom, the actual freedom that economic well being brings, and the civil freedoms that empowered individuals demand.

The second reason is the simple pragmatic fact mentioned at the beginning. The epochal economic transformations needed in the coming decades can only take place in the spirit of a unified humanity – unified against the threats of planetary eco-disaster, but equally unified in the inspiration of a new planetary economic paradigm. The vast masses of ordinary human beings are simply not going to make the sacrifices, the wrenching changes, and go the extra mile – in short, we are not going to do the work – simply to make the fat cats richer. We are not going to do it to perpetuate the injustice that now exists. There simply isn't enough motivation in the human spirit to do something that stupid. Neither will nationalistic competitiveness do the trick (“Let's stop global warming to show the Chinese just how superior we are . . .”). Global climate change is a problem for all humanity. We need a solution for all humanity.

The civil endowment system as expressed in The Special Proposal has the potential to make such a solution possible. What is needed is the mobilization of generosity on a planetary scale. That generosity comes from human beings, not a theory, a system, or a proposal. Nevertheless, by providing a vehicle for the expression of planetary generosity and its utilization, the implementation of civil endowment theory can become the definitive new economic paradigm of the future, a paradigm that we have always deserved, and one that is desperately needed as we move closer to irreversible climate catastrophe.

Civil Endowment Theory

2008-12-20T00:26:00.005-05:00

This post is an effort to set forth in summary form the essential points of a Civil Endowment System that forms the heart of the Special Proposal as described in my previous post.

Although some of this is theoretical in nature, it is extremely timely, because although it does not offer a quick fix for the current economic mess, it does offer a slow fix. By analogy, a Civil Endowment System is like good diet and regular exercise as a way to attain health. In some sense our current collective economic behavior is like someone who smokes, lives on junk food, sugar, and caffeine, never exercises, and then wonders why radical surgery or even chemotherapy has become necessary.

The analogy, of course, is not exact, but our world is indeed approaching critical condition. It is clear that the current economic pattern is unsustainable. This means that it will inevitably change, but how? Will it change through collapse, destruction, and catastrophe? Or will we succeed in designing a system upgrade with new insights, new functionality, and new paradigms?

Adding a Civil Endowment System to our current financial and economic structure is a proposal for just such a system upgrade. In many ways, what is proposed is as different from classic capitalist and socialist models as they are from each other. At the same time, it can take root and grow organically within our global society as it is, and it can do so without violence, appropriation, or even substantial political change.

It is interesting that a proposal for a Civil Endowment System could be the subject for an article entitled “Fixing the Free Enterprise System.” That would probably appeal to a business audience. But another completely apt title would be “Economic Justice for All Humanity.” That would probably appeal to a different crowd – more my personal crowd, I would say, although I also own a business and can relate to that sort of thinking. It could also appeal to an environmental constituency under the title: “Sustainable Development: Where's the Money REALLY Going to Come From?” What is significant is not these slightly grandiose titles, but that a Civil Endowment System is the programmatic proposal in each case.

Concerning the “free enterprise system,” many of us dispute whether it really exists at all. (The term “market economy” is more widely used in professional circles.) Whatever you call it, many people think that it is necessary to scrap the whole idea of capitalism and start over. Unfortunately that is the sort of Utopian thinking that got economics in the sort of mess that it is in today. Capitalism isn't just going to go way, and the historically proposed alternatives are even worse. In reality, both socialistic and capitalistic economic theories are highly Utopian. This will be the subject of a future post, and it's not my idea, by the way. But the bottom line is this: business is not going to go away. Self interest isn't going to go away. And hopefully personal freedom isn't going away. And although government in general is deeply involved in even so-called free or market economies, government isn't structurally capable of fixing such an economy. I will further state here that government is structurally incapable, or at least inadequate, at actually running or controlling an economy (socialism/communism). Moreover, it has been tried. The socialist experiments are history, and they are overall a history of failure. At the same time, it can safely be said that capitalism in its present form is a dismal failure too, one that has the dubious honor of potentially destroying the world.

I am personally quite sensitive about the question of what is Utopian, since when some people ingest the details of the Special Proposal they will undoubtedly suggest that it is a Utopian dream. It is not, but until you understand that the basic ideas of classic socialism and capitalism ARE Utopian, you'll probably not see that. Stay tuned for that discussion.

In the U.S., there is little mainstream support for out-and-out socialism, although it is quite interesting that the Bush administration has been buying banks lately! What there is though, is quite a bit of emphasis on the assumption that the current economic mess is the government's to fix. Though I generally support short term measures such as are being taken (with all the reservations and distaste that many people have about who the bailout does and doesn't bail out), we have to come to grips with the limitations of government in establishing a decent economic order. Of course the government has a role to play, and it should do that well. When you have an administration as disastrously corrupt and incompetent as the current one, and with the structures and conventions we have currently in place, combined with the general malaise of a society adrift and in denial about the realities of history, we definitely will get the sorts of boom and bust cycles we are now seeing. To summarize, let's just say this: although government intervention is necessary in the current crisis, and although significant government involvement and regulation of the economy is a given in today's world, we shouldn't assume that the government is going to fix the structural problems that exist in our economy. If we do assume that, we will miss the chance to really fix or even begin to remedy such problems. Government can't do it.

If we are to be pragmatic, we will try to find a way to get from the current situation to something better, and not only think about the short term. That is the emphasis of the Special Proposal.

Civil endowment theory begins by pointing out the power of capital. Capital, in the sense of being the direct investment of resources to launch productive processes, is powerful because it is the initiator and driver of the these processes. It is an essential ingredient. As such it also carries with it complex qualitative outcomes. We could say that the investment of capital is both a tipping-point type causal factor, and a long-term or persistent type causal factor. It is a tipping point factor, because it initiates a particular type of economic activity. It is persistent because it locks into place that mode of activity for a certain period of time.

When we talk about the power of capital, do not assume I am discounting other forms of economic power. It is possible to talk about the economic power of government, of individual choices, of consumer fads, of fear, of jealousy, even the power of, say, celebrities. But capital is more primary than these kinds of power, more creative, and carries with it certain kinds of potential or real freedom, though this freedom is often hidden from view or understanding. What is interesting about the power of capital is that there is some transformative flexibility in its application. You can build a green factory, or a wind power farm as opposed to digging a coal mine. You could even start a bank that treats customers fairly rather than ripping them off. You could launch enterprises that plan to transfer ownership to the workers over time. These are just a few (and by this point in time, well known) improvements of capital behavior.

The basic idea of “capital behavior,” refers to the way the intentions behind investment are put into practice. From this point, students of economics will note that I'm using a modern, more general definition of capital than the original 19th century one, which more or less referred to factory equipment. Nowadays, the definition of capital has expanded to mean any investment intended to create economic productivity, including money used for that purpose. As noted in a previous post, this modern definition creates the immensely slippery problem of confusing true investment with speculation. Even assuming we are able to understand the difference, from the time of Marx, it has been more or less assumed that capital is extractive, exploitive, exclusive, and materialistic, and that it has no conscience, no kindness, and indeed no ethics whatsoever. Certainly that is the behavior of much capital in today's world, perhaps the majority. Thus there is an assumption that capital only exists to feed and multiply itself, like some sort of invasive parasitic or viral infection. This sort of capital I humorously (but accurately) call “reptilian capital.” It is cold blooded and carnivorous. It eats it own young when it feels like it. It answers to no one.

Of course, that is a one-sided and incomplete view of capital, but we must be realistic as to the degree that such a model truly applies. Greed- and fear-based investment is huge, and don't forget it. At the same time, there have always been business people who are decent and well intentioned, and thus there has always been some degree of responsible capital behavior. Most recently there are significant trends such as socially responsible investing (SRI), socially responsible business, and green business. All these are wonderful ideas, and the fact is that the capital behind such ventures is changing its character. Probably many of the people involved with such ventures don't see it as a change in the nature of capital itself, but rather just in the intentions behind doing business. However, there is a lot to be gained by seeing it as a change in the quality of capital. To express this, I have coined the phrase, “Capitalism can't be reformed, but capital can.”

To put it briefly, a very precise and refined definition of “reformed capital” is the economic power base of the Special Proposal. It is called civil capital, or civil endowment capital. The “leap” that led to the formulation of this special notion of “civil capital” involves the recognition that not only would it be beneficial, but it would actually be economical, for there to be a perfected form of capital that would serve the whole of human society.

This postulated economical quality of civil capital, by the way, is a technical way of talking about the economics of compassion. At the most basic level, of course, by compassion we are talking about a quality of heart and mind, and it is that quality that provides the most fundamental basis of my work. But the other meaning of the phase is that, if undertaken skilfully, compassion IS economical. It has a positive economic benefit. It is worth it in all senses of the word.

What is civil capital? A simple definition is this: “capital whose beneficiary is the social whole.” I use the term “social whole” rather than “human whole” here, because, as we will see, civil capital endowments can be designed to serve populations that are subsets of the human whole.

Every form of investment has a beneficiary, which is usually -- but not necessarily -- its owner. In the case that the beneficiary is not its formal owner or administrator, the fund is often called a trust. One common form of trust is the endowment for non-profit organizations such as universities or charitable organizations. Trusts and endowments are not civil capital, because they have a limited beneficiary, and more importantly because the investments usually are managed according to the standard exploitive/extractive model of reptilian capital. Usually they just exist to provide cash income over time. However, the legal structures and social conventions associated with trusts and endowments are highly significant in enabling the establishment of civil capital.

Civil Endowment Capital takes a radical step beyond SRI and other endowment models in that it is fully dedicated, on a beneficial basis, to the social whole. In other words, the direct financial benefits of ownership, along with the positive effects rippling out into the economy, are all granted to the whole of humanity. Those benefits are endowed to civil society, which leads us to the term “civil endowment.” We could say that all humanity effectively owns the civil endowment, in a very real sense of the word. Although there are not existing conventions or institutions by which this universal ownership can take place, such ownership can be established through the beneficial ownership of a fiduciary agency. It is possible, without any changes of law or even custom, for a non-profit organization or NGO to hold assets in trust for the entire human race. Civil Endowment Theory defines the beneficiary of civil endowment, the universal beneficiary, as follows: all human beings now living, and all human beings yet to be born. This is clearly different than SRI, since in the case of SRI the assets are owned by the individuals or groups investors and, though intended to be ethically invested, the assets (and the direct economic benefits thereof) will always remain under that ownership. The second key point of this definition is that it includes all humans yet to be born. Although there is no assumption made here that we have full and complete foreknowledge of what the best investments will be for the longest possible term, the responsibility implicit in this definition is that we must do our best for the longest possible term. The phrase “seventh generation” comes to mind. Did the Native Americans who coined that phrase mean seventh as opposed to sixth or eighth generation? I can't say, but I doubt it. Probably it is more of a beautiful metaphor for how we should think, and that is the sort of unbounded time horizon specified in the phrase “all humans yet to be born.”

If capital were to be invested for this universal beneficiary, what sort of capital behavior would be needed? In many ways, the very definition of the beneficiary leads us directly to the answer. And as it turns out, it is not hard to see that the behavior of civil capital must be exactly what decent and progressive people have been clamoring for for years: the elimination of severe poverty, economic opportunity for all (including closing the obscene gaps between rich and poor), protection of the environment (sustainability), and the general achievement of economic justice. That is a very rough sketch of what I call the civil investment paradigm. In its full expression, though, this paradigm involves a great deal of complexity and would require the development of a completely new investment decision-making model.

In particular, civil investment would not prioritize financial extraction, but rather it would emphasize optimizing the qualitative macroeconomic outcomes resulting from the economic activity inherent in the investment. This follows logically from the nature of the beneficiary. If the beneficiary is everyone, on the longest possible time horizon, we simply can not undertake business activity that is exploitive, extractive, unjust, or unsustainable. This might be such a shocking idea to people in the investment and business world that they may simply be unable to understand it, or certainly to question whether any “money can be made” under such a paradigm. This is so because in today's mindset, just as it is hard for many to differentiate investment from speculation, it is hard to differentiate profit from productivity. In fact, there is a huge difference. In the world of extractive capital, success is measured in terms of profit, whereas in the world of civil capital success is recognized by productivity in relationship to the human consequences of production and natural liabilities such as resource depletion and environmental degradation. It is entirely possible to work for optimal productivity for the satisfaction of human needs under such a protocol. In addition to its productivity in directly satisfying human needs, capital functioning in this way would be a qualitative macroeconomic stimulus. This second quality is of extreme importance. There are two reasons for this. First of all, civil capital will accumulate gradually, and is not intended to supplant or replace private wealth. Even as a very small percentage of the total economy, however, civil capital could exert a positive qualitative stimulus. Going along with this point, it should be made very clear from the beginning that it is absolutely NOT the intention of Civil Endowment Theory to take over all the world's capital or in some way dominate or control the functioning of the broader economy. Instead, civil capital should find its own level, probably as a modest percentage of total invested assets. It should also be noted that part of the strategy of civil capital would be to establish and secure private assets for individuals as an integral part of its functioning, through such vehicles as employee ownership, loans for housing, and the like. The Civil Endowment System is meant to be a multi-functional qualitative tonic for the economy, not a takeover.

The establishment of a Civil Endowment System is doable without revolution or political transformation. It is essentially a civil sector/private sector initiative. There is tremendous will in today's world to move out of the current fossil-fueled industrial economy with its grotesque business cycles and injustices, and toward a more progressive and humane future. That will is constantly stymied, not simply by lack of capital, but by lack of capital that understands and supports and indeed expects such goals. By this reasoning, civil capital as defined above should be created, because it needs to exist.

The presence of this reformed capital, operating under the civil investment paradigm, is an essential structural enhancement to the free market system. Indeed it can be said that a robust system of civil capital completes or fixes the system design of a market economy. Civil capital can thus be called “the perfection of capital.”

Where will civil capital come from? My answer to this is perhaps the most radical and potentially controversial aspect of civil endowment theory. In simplest terms the answer is this: generosity. I have tried to discuss in my earlier posts just how immense a role human generosity plays in the economy of our world. Much of it is usually overlooked: the generosity of parents to children and children to parents; the generosity that supports all of the world religions; the generosity that builds schools, hospitals, and funds the arts; and the outpouring of giving to total strangers in times of natural disasters. The human race has plenty of generosity.

I believe we could build a worldwide civil endowment of about $1000 per capita in about a generation, say 25 years. I know: that's around 7 trillion dollars. By comparison, please note that worldwide estimated military spending for one recent year, 2004, was 1.1 trillion dollars. Just under half of that was by the U.S. That is for one year. Don't forget that civil capital endowments will be permanent, productive aggregations of resource that will trickle in as available from many sources. Note that the socially responsible investing (SRI) segment of overall financial investments is said to be about 2.71 trillion dollars. Thus a $1000 per capita civil endowment would be a pool of resources that is equivalent to about 7 years of total global military expenditures and 3 times the current aggregate SRI amount. I am just using this $1000 per capita figure as a reference point to think quantitatively about a level that could be considered structural in the sense of making a definite and stable difference in the quality and character of the world economy. But civil endowment is a good idea even at much smaller levels. I am setting a target of one penny per capita (today that would be about 67 million dollars) for a symbolic level of operation, and a hundred times that ($6.7 billion) for a catalytic level of influence. These three levels: symbolic, catalytic, and structural are the three qualitative levels of influence possible for civil endowment. Of course, it is possible that experience may show that these figures are significantly wrong. If we make a goal of achieving a structural level of aggregation, clearly new methods of fundraising are going to be needed. I have done considerable thinking about this, and perhaps the most realistic idea is to structuralize inputs through various methods, basically making small but steady flows of resource to the endowment a built-in part of doing business. This could include micro fees on certain kinds of transactions, such currency transactions, which would also create a modest curb on speculative behavior.

Related to this is the possibility of building civil endowment inputs into the structural design of a world currency, an idea that has been widely advocated by economic thinkers. It is entirely reasonable that any conversions to and from that currency should carry a tiny load that would end up in the civil endowment. There are many other types of micro fees that could be applied. Another area is revenue sharing by firms started with civil venture capital. It is quite possible that if the idea of civil endowment gained public attention and legitimacy, members of the tiny percentage of humanity with great wealth would contribute significant chunks of wealth (say a penny per capita) to the effort to give it credibility. It is possible too that a significant number of people could join in the goal of $1000 per capita by endowing one person in the time frame of their own lifetime, as a sort of personal legacy gift to the human race. Poorer people could give less. It is quite important that civil endowments NOT be funded by government and taxation in general, because once money is taken from people by coercion, resentment builds up, and there is a whole cultural habit pattern around what gets done with government money that encourages waste, fraud, corruption and incompetence. With that said, I believe there are important variations of civil capital endowments that could possibly be instituted to serve semi-public functions like Social Security and public education, which therefore may be funded by payroll deductions and taxes. But that brings in a whole other level of complexity from a political point of view, and is very much a “second phase” idea in this proposal. Civil capital in its pure form would be given freely, with understanding of its purpose. The best government support I can envision is that such contributions would be made tax deductible. Although there is a rock solid justification for such a deduction, since the money would go to direct investment in the “real” economy, it is by no means assured, at least in the U.S., that tax-exempt donations would be easily allowed by the IRS, mainly because it is such a radical concept.

To answer questions and doubts about the realistic possibility of mobilizing human generosity on this scale for this purpose is somewhat beyond the scope of this article. Clearly it is a question that needs to be examined soberly and thoroughly. But those who dismiss such a notion out of hand are probably stuck in a sort of one track of economic thinking, one that compartmentalizes various kinds of human motivations. The great economist Kenneth Boulding categorized types of motivations as transactional, fear based, and integrative. This last category refers to acts of kindness and generosity, things that are meant to bring people together. It is very easy to assume that economic actions are primarily transactional, and to take for granted fear-based motivations. Many economists have pointed out, however, what Hazel Henderson calls “the love economy.” Her analysis focuses on countless hours of unpaid labor, mostly by women, mostly in the care of family members. But really the love economy includes what Boulding calls “the grants economy.” In any case, as I have tried to sketch above, it is really a huge part of human life. What remains to be seen is whether the case can be made, and accepted, in broad enough scope, for the formation of civil capital.

The Civil Fiduciary

Once there is a significant body of civil capital, we need to ask ourselves how that will be managed. Indeed this question was the one most pointedly asked in response to my last post by my friend Jim Kukula, who among the countless (sic) readers of Trickle-In, has been perhaps following my thoughts with the most attentiveness (or at least the most feedback.)

The legal institutions and social customs associated with managing investments for individuals and groups are well established worldwide. A dictionary definition of fiduciary is “a person to whom property or power is entrusted for the benefit of another.” The word can be used as an adjective as in “upholding your fiduciary responsibilities.” Fiduciary institutions are organizational entities that do this kind of work. Broadly speaking, this includes banks (in the sense that they maintain deposit accounts or even safe deposit boxes), but most directly refers to investment management firms, pension fund managers, and so on. Certain government and non-profit organizations engage in fiduciary work as well. It is clear that civil endowments will need to be managed by fiduciary organizations of some kind. The structure, governance, and accountability of such organizations must be carefully established such that they will function as intended.

As has been amply demonstrated in the recent financial meltdowns, there are tremendous pitfalls in having one's investments managed improperly. The for-profit fiduciary world brings tremendous actual and potential conflicts of interest to the table. In the worst cases, it is like gambling at a casino run by the most addicted of gamblers. The for-profit fiduciaries are not just working for fees (which themselves are often excessive). They are players in the same game. They are big players and risk takers, with your money, for their gain.

This is not to say that all for-profit fiduciaries are crooks, which is is equivalent to saying that a whole industry is corrupt. It is really enough to say that the inherent conflicts of interest in such arrangements are inappropriate for civil endowment. This leads us to the notion of a non-profit fiduciary. It turns out there are quite a few such organizations in existence. (I am not talking about non-profit organizations that have endowments. These are usually managed by for-profit fiduciaries, which often take astounding fees.) Non-profit fiduciaries include state agencies, state or municipal pension funds, and the like. I do not know of any non-profit fiduciaries that manage, for example, the endowments of other non-profits. In any case the people who fun non-profit fiduciaries are paid professionals. Thus the basic outline of what I would like to call the Civil Fiduciary exists in today's world. Needless to say, just being organized as a non-profit does not automatically make an organization suitable to invest in the civil endowment paradigm, but it does remove a major structural flaw, namely the conflicts of interest and business culture problems mentioned above.

A Civil Fiduciary Organization (CFO) will be a non-profit organization charged with investing and managing civil capital. I believe such organizations would need to be newly chartered and created. There are some possible benefits of re-purposing or adding the civil fiduciary function to existing organizations, but the discussion of that is a bit too involved for this post. In any case, the people who will do the work will be paid professionals. They will be accountable most directly to the standards of the civil investment paradigm, and formally to their own organizational boards and to legal authorities. At more of a civil society level, they would be accountable to donors and to the international public. I envision that there would be any number of CFOs, operating throughout the world. CFOs will make direct investments according to the goals of civil endowment. It may be the case that they would create wholly owned for-profit companies to undertake activities such as venture capital investment, ownership of banks, and the like.

In addition to the accountability mentioned above, there is a need for a standards body, a separate (also non-profit) organization that would monitor and certify CFOs. This organization would also need to have the power to de-certify CFOs that fail to maintain proper standards. They would bring to light irregularities and mistakes as well as successes. There would need to be strict control of certain terminology, such as “civil capital,” “civil endowment,” and so forth, such that the CFOs stay on mission. This organization could be called the Civil Endowment Institute. It would perform research and creative work in addition to certification of CFOs.

It is clear that the art and science of civil endowment investing would be a continuous work in progress. Thus each CFO would need to do research and creative thinking, along with analysis of investment results over time. A great deal of communication and collaboration would be constantly needed. The whole system of civil fiduciary organizations would have to be one large, decentralized learning system. By allowing multiple CFOs to function more or less independently, albeit with centralized certification, the issue of over centralization can be minimized.

The other question that must be addressed concerns the institutional control of fundraising. The way that funds are brought into the civil endowment system, and the public perception that process creates, is as close to a make-or-break issue as I can imagine for this idea. It will probably be best for CFOs to have no role in fundraising, but merely be the custodians of civil capital. This would remove the perception (or reality) of Ponzi-style fundraising and investment, and create another layer of accountability. Thus there would be a need for one or more of a third type of institution, a Civil Endowment Foundation. These foundations would raise and receive funds and distribute them to qualified CFOs. The Civil Endowment Institute would, in its role, set and monitor basic fundraising standards.

Though complex, this system of three institution types would create a matrix of accountability, a system of checks and balances similar to those in modern political constitutions.

The Civil Endowment Model: Variations and Extensions

Before we launch into some very interesting extensions of the civil endowment idea, let's be clear what the most pure form of civil capital would be. Pure civil capital would be owned on a beneficial basis by the universal beneficiary, namely all living humans and all humans yet to be born. It would be invested to bring benefit to humanity as a whole, in the longest foreseeable time frame. The source of this pure civil capital would be freely given resources: “from human beings, to humanity.” That is a sketch of what I have called the perfection of capital. But a civil endowment system could and probably should be more extensive than this, and be used to address more specific and localized economic challenges.

The Individual Civil Endowment

At the far end of the spectrum from a universal endowment, civil capital principles could be applied to individuals. Whereas pure civil capital applies to humanity as a whole, it is possible to endow a particular human being with civil capital, and invest it in ways that would benefit that individual in his or her lifetime, all without violating the basic principles of civil capital. This can be done by viewing the individual as a responsible, aware, world citizen, and investing accordingly. Thus the only main difference in this type of endowment is that the type as well as the productivity of the investments would be tailored to the life of a particular human being. The individual endowment would not be personal private property but, like a trust fund, it would carry various kinds of benefits and rights depending on the age and circumstances of the individual. In the best-case scenario, an individual would receive an individual endowment at birth. The productivity of the endowment would be applied towards food and health care in the earliest phase of life, toward education in childhood and teen years, and then would provide backing for productive work in adulthood. In old age it would provide basic retirement support. At the time of death, it would not be an inheritable asset, but would instead revert to the general pool of assets for individual endowments. Over time, the aggregate of individual endowments could become quite significant. In coordination with other forms of civil capital, the macroeconomic effect could be almost as beneficial as universal civil capital. It could also be a popular and engaging way to build the civil endowment system because people could create endowments for themselves or loved ones, investments that would help them in their lifetimes and then help all humanity after death. I would hope also that people in wealthier nations would develop the custom of endowing strangers in poorer places, just as people nowadays send monthly payments to poor children internationally.

Endowments for Public Pension Systems

In the U.S., debate has raged in recent years about the possible privatization of the Social Security system. You will notice, no doubt, that in the current financial situation of market meltdown, recession, and even possible depression, no one seems to be talking about that! The private investment markets are a mess. Clearly there has been a wholesale betrayal of the principles of true investment, with speculation replacing investment across the board. The hardest hit are those with 401k type plans, managed in mutual fund accounts on a passive basis by for-profit investment managers. In up-market conditions, such funds do well; in bad times people lose their retirement savings. The very rich lose more money in dollar terms, but they're still rich. The ordinary worker loses far more.

In such an environment, it may seem ludicrous to talk about investment of Social Security revenues, instead of the current pay-through system, where the payroll deductions of currently active workers fund the retirement checks of those who are receiving benefits today. Though there is much talk of the “account balance” of the Social Security system, that is merely an accounting device. There is no money in the bank. Today's workers are funding today's retirees. In some sense this is a neutral and safe mode of operation for Social Security. Certainly it is superior to throwing billions into the speculative casino-like markets as they are currently structured, under the dubious stewardship of the wolves of Wall Street.

With that said, it must also be said that the nice folks who want to privatize Social Security have a point. Their point is that if your retirement savings are accumulated throughout your working life, that means much of it will be taken out of your pay decades before you retire. Even at modest rates of return, you should do better by investing it than just giving it to the government, which immediately gives it to someone who is now retired. But even more significant than the potentially superior returns to the individual, is the potential benefit to society -- the macroeconomic effect if all that investment resource were to move into the economy at large. Pumping vast sums of money into true investments, not speculation, would create vast numbers of jobs, vast amounts of economic wellbeing, solve environmental problems, solve social problems, and increase tax revenue. The overall effect, of course, depends on the crucial issue of using the correct investment paradigm. I am convinced that an appropriate civil investment protocol could be designed for retirement funds in general, and Social Security in particular, that would have immense benefit. This will probably not happen any time soon, and not just because of current market conditions. The concept of Civil Endowment Investing needs to be tested and proven, at least initially, in its purer form, before there is any real chance of its acceptance in the highly sensitive (and rightly so) institution of Social Security. It is possible though, that a route to such a system coming into being could be found through an altruistic variant of SRI that would move private retirement investment further than SRI toward a civil endowment model. At that level, such a retirement investment would be little different than an individual endowment, except that the retirement account would optionally self liquidate as needed in the payout phase. In other words, it would not necessarily be passed on to the next generation, as would the individual endowment mentioned above. This type of account would not be civil capital, but would be an example of a further extended auxiliary to civil endowment that I call “parallel funds.” The goal for a Social Security endowment would, however, be to create a permanent fund that would increase over the generations and which would guarantee the elderly not just the necessities of life, but genuine dignity in old age. And for society at large, the Social Security endowment would be a treasure of investment capital for a vibrant and prosperous economy.

Civil Endowments for Public Education

It is interesting to note that when public school systems were first instituted in the United States, it was standard practice to give them rather large chunks of land. I need to do more research on this, but I believe the idea was that this land was to be rented out to farmers and the rent would pay for the schools. If that was the model, then the founding fathers were trying to create a permanent endowment system for their public schools! Back then, land wasn't considered to be capital, but clearly in a more current definition, and based on the intended usage, it was capital, and it was meant to be quasi-permanent. However, history shows that the land was almost always gradually sold off by the school systems to bring in more substantial short term revenues. Whatever the wisdom of that, I believe it is time for school systems to find new ways of endowing themselves. No one needs to be told that public schools need help. At the same time, local economies are often starved for investments that provide jobs, housing, health care, and so on. I believe it would be helpful to create a system of public school endowments that would raise money locally, and create permanent pools of capital to be invested and reinvested in that same community. (There are a few local public school endowments existing in the United States, but from my research they do not carry with them the notion of local re-investment or anything like the civil investment paradigm. They are small, extractive endowments designed to provide small-scale support to local school budgets for things like art programs.)

The local investment of endowments, important as it is, creates significant risks if those investments are also chosen and managed locally. Therefore, it is probably better to spread the risk by creating state level or national level non-profit education endowment fiduciaries that would pool the endowments from participating school systems, but commit to invest and manage locally amounts of capital commensurate with the size of the local endowment. In other words, if the Elk Horn, North Dakota school system has a 10 million dollar endowment, the North Dakota CFO (certified for education endowments by the Institute for Civil Endowment), would be committed to invest that amount locally, but direct returns on the endowment would be based on a state or national average proportional to the size of the endowment. This would spread out risk of failed investments, and deliver an average productive return to school budgets, while leaving the positive ripple-out effects locally where they belong. Thus the benefits are twofold: investment in the community, which inevitably increases the tax base along with the wellbeing of the community, and a direct financial return to the school budget. Overall the school endowment system could reduce reliance on property taxes over time, and stabilize school budgets as state and federal support fluctuates.

There is also the issue of fairness in property tax based funding. New York State has a system where older home owners get a reduction on their property taxes. This has an aspect of kindness and fairness, both because older homeowners often have more limited or fixed incomes and because they've perhaps paid their share. That is all well and good, but it would make more sense economically if some property tax money went into the Public School endowment, because their history of payment would translate to the maturing of investments over time. Then the longer a person had been paying into the system, the more real economic justification there would be for their being excused from further burden. It is quite possible that older homeowners could stop paying school tax altogether, either by paying into the endowment for a given number of years, or by making extra payments to the endowment during high income years to reach a certain threshold.

I believe there would also be strong community support for charitable fundraising locally for such endowments, from grassroots effort on a small scale, all the way up to large donations and bequests by wealthy individuals. One interesting and very educational tradition that might spring up is for the students themselves to do some sort of fundraising activity on a yearly basis that would make a permanent contribution, however modest, to their future education and that of all students yet to enter the system. Needless to say, this would help the kids understand and appreciate the nature of civil endowment, its altruistic intent, and help them make a connection with the actual work of building the system. Probably the kids would have an easier time understanding it than their parents!

An example of how these types of endowments might synergize is as follows: say a school system with a civil endowment also had a certain number of students with individual endowments. During those student's school years, the individual endowment income could be paid either directly into the school budget, or more interestingly, into the endowment for that school. The parents of those children could get credit against future tax payments by channeling endowment income from their kids into the school endowment. This could encourage higher-income parents to create individual endowments for their kids. It gets very interesting.

There are several other possible variants of civil endowments, such as organizational endowments and local economy endowments, as well as perhaps endowments based on demographic factors. This last possibility, such as an endowment for Native Americans, international refugees, and so on, has a certain appeal, but also has obvious shortcomings since it is discriminatory, even if in a generally positive direction. I will leave the discussion of all these variations for future posts. However, one type of demographic endowment that recently came to mind, and which I find quite appealing, is an endowment for the poorest of humanity, say, the poorest billion on the planet. I recently saw a United Nations statistic that 963 million people worldwide last year didn't have enough to eat. Then there's that lovely statistic that about 50 thousand people a day, mostly children, die of hunger and malnutrition. That stuff starts to haunt you if you think about it a lot. There have been a lot of interesting proposals for business to help address the problem of extreme poverty. Where's the capital for that going to come from? Think: civil endowment for the poorest.

Conclusion

To give a really thorough exposition of civil endowment theory would require much more theoretical explanation, including a romp through systems theory as applied to economics. Stay tuned for that. But to summarize a systems view, we could say that capital reform is an “opportunity point,” a point of possibility -- or to use a fancy term, motility. In longer term thinking, it is a qualitative macroeconomic stimulus. At the inner or psychological level of society, the activity of building a civil endowment system would be a potent force for human unity. Exactly how contributing to civil endowment can be transformative for the giver is one topic that deserves much greater discussion than I can give it here. But suffice to say that beneficial effect of giving to the civil endowment is one reason that this idea is beneficial at any level of scale.

Most broad proposals for economic reform focus on abrupt system-wide changes that are highly improbable, such as abolishing the Federal Reserve System, canceling NAFTA, and other political steps. By contrast, civil endowment is non-political and incremental.

Although we don't ordinarily recognize it, we can change the behavior of capital. This change has begun to happen through the movements toward socially responsible investing, socially responsible business, and green business. This influence and power is already changing the way many companies do business. The inspiration of Civil Endowment Theory is that this trend or movement can be vastly refined and expanded. From a moral and compassionate point of view, capital can be perfected.

In future (and hopefully shorter) posts, I will talk about “the leap,” by which I mean the process and the internal tipping point by which I came to see the possibility of a civil endowment system. The leap was not concerned primarily with the practical description of the institutional structures outlined here (although the fact that it is institutionally possible is part of the leap). More fundamentally, it was more a perception of possibility, the possibility that we can radically change our assumptions about capital, who capital benefits, and how it could be accumulated, invested, and managed. In seeing that, we can see how civil endowment can be an effective leverage for system-wide economic reform. As such, Civil Endowment Theory is a logical, non-Utopian outcome of contemplation on the economics of compassion.

Introducing: The Special Proposal

2008-11-21T11:10:00.000-05:00

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.

Dear Friends, It's the Speculation

2008-10-26T10:49:00.006-04:00

I must confess that the original title of this post was, “It's the Speculation, Stupid.” But I thought better of it. To say it that way is a little too cute. The problem is not just that we're all stupid a lot of the time. It's that we're stupid even when we're smart. And that's the flavor of speculation, actually. What may be smart, at least temporarily, for one person becomes stupid if everyone does it. So if we're all stupid, I guess it makes more sense to be friends, friends in our stupidity, but friends the same.

This is my first post where I take the issues of our immediate economic life to hand, rather than stepping back and presenting my ideas on a more general economics of compassion. No doubt I'll say some things that are, well, stupid, but it's a risk I need to take. As deeply as we need a new body of foundational economic theory, we need that theory translated into common sense in the present.

Alan Greenspan testified before a Congressional hearing the other day about the current financial meltdown. As much as I disagree with him fundamentally in so many areas of economic thought, I respect the man. He speaks well, and we can learn from him, especially from the nuanced language he uses. And I respected the fact that he admitted -- now that he's out of power of course -- that he made some mistakes. But the one word he didn't mention (at least in his prepared remarks, which are all I heard) was speculation.

People in the financial world don't like to mention that word to often, but it's the elephant in the living room, isn't it? Part of the problem is that it is often hard to distinguish between what could be called legitimate or even principled investment on the one hand, and speculation on the other. Another problem is that speculation certainly is not the exclusive province of the very rich. If you count homeowners and anyone who has stock investments, or even (indirectly) insurance of any kind, there are a lot of us in the game.

Speculation is something that falls under the general umbrella of what I call the “veil of money.” Money is an absolutely lovely invention, but it has serious flaws because people are, well, human. At the most fundamental level, money is a veil because it puts a linear demarcation of value on things that are inherently qualitative. How much is it really worth not to be hungry? Or to be cured of an illness? For that matter, how much is a clove of garlic really worth? Economists often avoid this issue by saying that something is worth what people are willing and able to pay. But there's still the fundamental problem of quantifying things that are really qualitative. Because of that, and because price really depends on perceived value, which (to put it mildly) can vary, economists have long known that price is not the same thing as actual value. Perhaps this is a gross simplification, but it certainly speaks to the problem of speculation.

In any modern economy, investment is necessary, so what is the difference between a constructive and principled investment and speculation? Simply put, if an asset is purchased merely on the expectation that it will inflate in price, and especially if it is subsequently sold to reap financial profits, it is speculation. In other words, if the whole purpose of an investment is to extract profits based on price inflation of the asset itself, we have a speculative investment. Notice that I'm not equating price and value here. Some investments, say a business that grows over time, do increase in actual value. That sort of increase in value is what stock investors and investment advisors often look for, or at least claim to look for. If the price goes up wildly due to extraneous factors such as “irrational exuberance” or just a bull market, most investors think that is just fine of course. Perhaps we could say, to be fair, that average investors, if there is such a thing, are often taking a strategy in which speculation plays a part, but not the whole part. It is hard, however, to categorize things like currency and commodity trading, and the recent hedge fund craze, as anything but speculation. And the sort of speculation that brought down the house of cards this fall was beyond even ordinary speculation. It was an orgy of extractive market behavior at its worst. It was layer upon layer of questionable debt and esoteric financial instruments (so-called derivatives and the like) being bought, repackaged, sold and resold.

Extractive investment, by the way, is a much broader concept than this sort of financial speculation. The very conduct of a business can be extractive in nature, and often is. Exploitation of natural resources, of labor, and degradation of the environment are all features of extractive business models. Setting those major issues to the side for a time, the practice of rampant speculation in financial investments is the type of extractive behavior that has brought us to the crisis we now face.

It is intuitively obvious that everyone can't make a killing in a speculative economy, but why is that so? In answering that question, we come to a truly fundamental principle, namely the economics of scope.

Most people are familiar with the notion of economics of scale, which means that certain kinds of efficiencies do or don't occur depending on how much of an activity, say manufacturing an item, you do. This is a well defined and well understood principle of economics. What has not been elucidated so clearly is the economics of scope, which I define to mean the behavior of economic action in relation to the whole system in question. Although this may seem to be leading toward rather mystical territory, there is actually a very good example of the economics of scope in classic economics, namely, the monopoly. In the case of monopoly, it does not so much depend on the size of the market in question, but whether one firm effectively controls the entire market. If that is the case, it is called a monopoly and certain very serious problems come up.

Economics of scope as a general principle has huge implications for the sorts of economic problems we face in the present day world. It is, in fact, a useful umbrella concept for the crucial issues of our times: the environment, social justice, even economic war vs. peace. What we find with economics of scope is that inevitably our activity takes place in some kind of larger context, some kind of system. As we push to the edge of system scope (i.e. as our actions come to affect the whole system) , certain non-linear effects come about. Economics of scope is itself a subset of the more general principle of co-centricity outlined in my earlier posts. The notion of pushing the boundaries of system scope is a little difficult to explain. The closest analogy I can make is in comparison to relativity theory, where it is said that as a physical object approaches the speed of light, its mass starts to increase wildly. In our everyday world, we would expect changes of speed of an object to have no effect at all on its mass. And that is more or less what we observe. But approaching the speed of light is some sort of fundamental system boundary of the physical universe. Different stuff happens on the edges of systems. And so it is with economic, ecological, and social systems, in so many ways.

Classic macroeconomics actually addresses the issue of economics of scope, though I don't know that the term has ever been used before in this way. In Keynesian macroeconomics, the central government attempts to use its powers of spending and taxation to impact trends in the overall economy of a nation. The problem in today's world of course it that we have a global economy. (I'm not implying that the lack of global government is a problem; I'm just saying that Keynesian macroeconomics can't be practiced on a global scale, though Keynes himself of course was instrumental in building some of the international economic institutions that try to operate at the global level.) All this is not to mention the fact that Keynesian macroeconomics never worked all that well anyway, even when it is not, as it has been in recent times, grossly distorted by political incompetence and hypocrisy.

But I digress. The point to made from the perspective of economics of scope is this: if an insignificant proportion of economic actors in an economy engage in speculative behavior, it is more or less insignificant. They may incur some sort of moral failings on an individual basis, but the overall economy will not be effected. But when everybody or close to everybody is involved with, or exposed to, speculative risk, it simply does not work out. When your whole banking system is sucked into wild speculative investments on “securitized” (a very ironic term) mortgages for real estate that was itself involved in a wild and unsustainable spiral of price inflation, mortgages for which “we did not correctly price the risk,” (to paraphrase Greenspan's quaintly understated admission of failure) you have a whole economy falling into a vortex of illusion. It's the pervasiveness of the speculation that collapsed the house of cards, and that's a good example of economics of scope. It is a system-scope level of failure.

I don't believe I've said anything truly original about the crisis here, but at least it's an opportunity to introduce the key concept of economics of scope. And by looking at what is truly a toxic and corrosive style of investment, we may be able to move toward a glimpse of the characteristics of a healthy investment paradigm.

For more on the roots of the current crisis, see this very informative (and not too long) article about the current crisis by Herman Daly.

(If you don't know who Herman Daly is, he's worth studying, to say the least.)

And for an article on the recent Greenspan testimony that's a lot harder on him than I was above, but with which I fundamentally agree, see this David Corn piece from Mother Jones.

The Six-Fold Economics of Compassion

2008-10-07T00:40:00.007-04:00

Is it possible to build an economic theory based on compassion? From a Buddhist point of view, the answer would be yes, especially because compassion is considered to be inseparable from wisdom. If we were to ask the same question about wisdom, i.e., “Is it possible to build an economic theory based on wisdom?” the answer would be, “Of course.” In fact, if we didn't build it on wisdom, it would simply be invalid. Well then, if wisdom and compassion are inseparable, it looks like compassion is a valid basis for our theory. This is obviously not meant to be an exhaustive justification of an economics of compassion. Sometimes raising questions is enough. What does it really mean that compassion is inseparable from wisdom? If that is true, what implications does it have for our ordinary understanding of compassion? And what does it really mean to develop an economics of compassion?

The classic definition of compassion is the wish to relieve a being or beings of their suffering. It is the thought that, “May they be free from suffering.” In many ways, this simple definition is enough for all that will follow, but I would like to use a slightly more elaborate definition, one that is a summation of what is known in Mahayana Buddhism as The Four Immeasurables. The first of these is the aspiration that all beings without exception may have happiness. And interestingly enough, the Tibetan prayer that makes these aspirations adds "and the causes of happiness." The second is that beings may have freedom from suffering and its causes. The third is that beings have the higher forms of joy associated with the spiritual path, and finally may they have the profound equanimity associated with wisdom. This is a very simplified explanation of the Four Immeasurables, but it adds depth to the simpler notion of compassion as aspiring that others have mere freedom from suffering. These four facets of aspiration are called immeasurable, by the way, because they apply to all beings, and because they are immeasurable in depth and profundity even for one being. Thus you could say they are “immeasurable to the immeasurable power.” I use this more elaborate definition of compassion because it support the full range of human aspiration. It works well with a post-materialist viewpoint of human culture, one of going beyond mere material sufficiency to areas such as learning, the arts, creativity, and spirituality.

Generating compassion in an unbiased way, which means having an impartial outlook towards all beings, can be seen as an essential expression of the co-centric wisdom, the wisdom that includes all, and excludes nothing. Much more can and should be said about unbiased compassion in an economic context. Often, of course, in our economic behavior human beings display great kindness for people we are close too, especially family members or members of a larger social unit or country. But often the reverse is true for people we regard as “other.” We often treat such people with at best indifference, or quite often with varying degrees of exploitation and downright cruelty.

The ability to be fully inclusive, to think in terms of humanity as a whole, as well as to regard each individual impartially, is part of the wisdom potential we all possess. This is not to say that everyone holds such an attitude, of course. Nevertheless, it is entirely possible for any one of us to do so.

An important point I'd like to raise here is that this body of writing (my blog and my upcoming book) is not an attempt to talk people into having compassion. Of course, I do advocate compassion. I hope people will develop it, maintain it, and increase it. It's just that I feel I would be talking down to people if I felt I had to push it on them. The reality is that compassion is inherent to our human minds. It is not a religious attitude, and it is not imposed by law or even custom, though of course social influence is important. But the bottom line is that this body of theory is most fundamentally about how to apply the compassion we already have to economics. I am still working on my own compassion, and I'm not a spiritual teacher. There are plenty of sources available to learn about compassion, far better ones than myself.

And of course there have been many attempts to apply compassion to economics in history. The original ideas behind socialism and the free enterprise system both contained elements of social compassion, though from different angles. The older idea of the “benevolent despot” is another form of compassion in economics, and the more recent concept of the welfare state derives from such a outlook. Even Keynsian macroeconomics, which boils down to rather abstract government actions around fiscal and monetary policies, carries this intention, since in theory it tries to make the economy better for everyone.

I will have much more to say about all of the above in the future, but the task at hand is to put forth a very general economics of compassion. In fact, the “General Economics of Compassion” was the original title for this part of my theory. But as I developed an explanation which uses the six paramitas of mahayana Buddhism as a framework, “The Six-Fold Economics of Compassion” seemed to be a much nicer title, so I'm going with that. However, note that what follows is a general description, one that doesn't make practical recommendations of a specific nature for the present day world. The special proposals that are at the heart of my pragmatic economic ideas will come somewhat later.

Let's say we have a general attitude of compassion, one that is intended to be unbiased. In some ways it may be easier to think in terms of “humanity as a whole” rather than caring for each individual, but really it is the same thing. And we are ourselves each part of humanity's whole, of course. In fact, as we explore the co-centric wisdom further, we will increasingly see that our individual fate, and hence our individual interest, is utterly tied up with “humanity as a whole.” We could say with real certainty at this point in history that a very significant part of each of our individual economic interests is the interest of the human whole. And conversely of course, the interest of the human whole affects every individual. This fact is extremely important in the considerations behind my special proposal, but for now we can view it as merely a reminder that compassion isn't entirely altruism, in the sense that it isn't entirely negligent of one's own interest. Still, generating unbiased compassion is a stretch, and it is something that should be contemplated rigorously. That's as far as I'll go in terms of advocating compassion. Let's contemplate it. If it works, let's put it into practice. And by the way, my practical theories to come don't depend on everyone having compassion, nor do they necessitate imposing compassionate behavior on people. That will not be necessary, and indeed it is not possible.

For the sake of discussion, let's assume there are some people who do want to practice an economics of compassion. Let's say there's at least one. Or maybe two: you and me. How do we go about it?

Mahayana Buddhism provides us with a set of six perfections (paramitas) which are the means of completing the much larger task of bringing all beings to spiritual enlightenment. They can be directly applied to positive economic behavior in the following ways: Generosity, Ethical Discipline, Tolerance, Diligence, Focusing, and Wisdom. These six economic virtues are named almost identically to the translations of the names of the paramitas from Sanskrit and Tibetan, with something of an exception on the fifth, so I will discuss that briefly first, then cover them in order.

Among the mahayana paramitas, the fifth is called dhyana (Sanskrit), samten (Tibetan) and meditation or concentration in English. Samten in Tibetan is literally “stable thought” which has the meaning of “stable mind.” It applies to the practice of training one's mind at a basic level. It involves focusing the mind (concentration) but also taming the mind to reduce the influence of negative psychological patterns (kleshas). All meditation practice in Buddhism is said to fall into the categories of shamata and vipasyana, and this fifth paramita pertains to the shamata aspect of meditation. Strictly speaking, it is not entirely accurate to say samten refers to meditation, because meditation also includes vipasyana, which pertains to the sixth perfection of wisdom or prajna. (Some accounts of Buddhist meditation, however, catagorize both shamata and vipashyana in the sense of their being practices, under the 5th paramita, and use the sixth paramita to refer purely to wisdom itself.) In any case, the economic virtue of focusing carries many of the same implications that the focusing aspect of basic meditation practice does in the Buddhist path, but applied to economic behavior.

Focusing as an economic virtue could also be called “focal application” or “appropriate focus.” In most general terms it means having the mental presence and direction that enables us to do anything properly. It is the natural focus of work, of study and learning, of planning and reflection, and all the work of the mind that pertains to economic thought. Without focus our minds are ruled by confusion and we will never see things clearly or get anything done.

Generosity

With generosity, we find a starting point that is quite easy to understand, and it seems to pertain directly to economics. The only problem is that economists have generally not found a comfortable way to incorporate generosity into their theories at all. There is evidence that some of the early theorists of economics were frankly baffled by the concept, or specifically by the tendency of people to simply give things away. They could not reconcile the notion of an exchange economy with basic kindness. It didn't add up. Later thinkers of the socialist ilk, including those of the “weeping” variety, have tended to see economic inclusion as a political right, not as something that is particularly to be achieved by generosity.

And then there is the whole messy question of non-monetized transactions. Hazel Henderson has famously pointed out the “love economy” as practiced most notably by wives and mothers throughout history, and the importance thereof. The fact that such a vast amount of economic benefit is simply given away by unpaid or underpaid workers makes it very hard for economists. They like nice neat things that have numbers attached to them so they can put them into equations. Suffice to say that the significance of generosity at the family level has been underreported.

In any case, if we start with individual economic behavior, not broader theory, it is clear that generosity is a clear and valid way to practice the economics of compassion. In fact, without the generosity of parents to children in particular, and people to their close relations in general, human society as we know it would simply not exist. Although such generosity does carry with it the attachment (and obligation) that goes with such relationships, the fact is that is most typically also an expression of love and commitment. It's part of the “love that makes the world go 'round.” The fact that generosity of this sort is so pervasive, so ubiquitous, and so natural demands that we acknowledge it in our economic thinking. It also points to deeper possibilities of generosity as we (at least some of us) come to acknowledge the inclusive unity of the global human family.

Another aspect of material generosity is that of charity and philanthropy. Again, these areas of economic activity play a huge role in human society -- and increasingly so. People give so much, in so many ways, to people they don't know at all, and for so little (or no) return or recognition, that it is simply amazing. Although there are many shortcomings to charity and philanthropy, including the general criticism that it merely tends to perpetuate the existing system of haves and have nots, we still need to recognize that, in some measure, this type of economics of compassion has existed for a very long time. Whether human generosity can be further mobilized to decisively address critical global problems is one of the great questions of our time. The question is not just whether it can be mobilized, or how, but most pointedly, how can the natural generosity of humanity be utilized to transform the economic landscape?

Another dimension of material generosity is one not normally associated with generosity at all, namely conservation. If you think about it, what is the implication of not wasting resources? First of all, you save money. But beyond that, that resource is available for someone else. Simple as that. So, we could view conservation as an expression of generosity.

Conservation in its environmental implications also relates to another major category mentioned in traditional Buddhist accounts of generosity, namely the “generosity of protection.” Clearly if you protect someone from harm in some way, you have given them a great gift, perhaps the gift of life itself. The relevance of this to our contemporary economic activity is this: environmentally positive behavior is a form of generosity. Although this may seem to be just another way of talking about it, I think it is of significance. Any environmentalist knows of the great challenge of shifting human behavior (whether as individuals or in organizations) toward more positive environmental actions. Often there is a lot of guilt and blame attached to the old wasteful and destructive ways of doing things, and a lot of authoritarian righteousness associated with it all. Often the level of compliance and the willingness to change is rather shallow. We need new ways of encouraging each other to behave more in harmony with the planet and with a future that isn't going to be a total disaster. Framing the protection of humanity from environmental harm as a form of generosity is a positive way of approaching this, and it brings out the natural human heroism that we're all capable of.

The third category of generosity can be called the “generosity of truth.” It is actually generous to study, to contemplate, to look for answers, and to communicate those answers. It is generous to courageously proclaim the sorts of “inconvenient truths” we all need to hear. Again, this is another way of framing actions that we who are progressive minded already accept and honor. But again, if we see this in a new way, we may find new strength to practice this form of generosity. Often there is a strong flavor of criticism and anger in our proclamation of truth. Certainly there is blame enough to go around, but seeing the communication of truth as a form of generosity makes it more likely that we will temper it with understanding and kindness -- and maybe we will actually be heard. Maybe something will get done.

Ethical Discipline

Ethics and morality are of course deeply intertwined with economic behavior throughout history. If you study the subject economic history, you will see fascinating shifts in what has been considered ethical or moral. For example, in the Europe's Middle Ages, making a profit “for it's own sake” was deemed immoral and in fact illegal by the Catholic Church. Some cultures to this day regard usury (lending money at interest) as immoral. Then there are certain basic principles that can be regarded as universal, across cultures and history, such as the injunction against stealing.

In any case, what this discussion may contribute to this vast body of thought may just be a few significant points of emphasis. The first is simply a consideration of why we might want to practice ethical conduct. To practice ethical conduct out of compassion is a refreshing shift of emphasis from the heavy shroud of legalistic moralism surrounding the subject. Typically there is an emphasis on morality/immorality in terms of its consequences, whether they be legal or other-worldly repercussions, or spiritual outcomes, from whatever point of view you have. The eastern traditions emphasize the inevitable law of karma, which follows us independent of human retribution or even divine judgment. To avoid negative ethical or moral actions out of concern for their impact on one's own future is entirely justified. But even more powerful and profound is to do so out of compassion for others. And in some sense it is more natural too. You don't steal because you don't want to deprive someone of something that is theirs, not because you may get caught or suffer from bad karma in future lives. It is direct and simple. Although ethics can be quite complicated, compassion will usually steer us in the right direction.

Buddhism talks about morality in terms of avoiding negative actions and adopting positive ones. In economic terms, it is clear that some things to avoid would be stealing, deception, fraud, manipulation, cruelty, and exploitation. On the positive side we can enact ethical discipline by practicing fairness, honesty, and kindness in economic dealings.

Another dimension of ethics could be called the “morality of post-materialism.” Al Gore has made the well-known point that global warming is not a political issue, but rather a moral one. The kinds of actions that will enable us to stop global warming are indeed moral in their scope. To paraphrase another famous quote, we can't cure global warming “with the same mentality that is creating it.” There needs to be some sort of fundamental critique of materialism and realignment of values. The possibility of relaxing our obsessive drive for material consumption and convenience is a prerequisite for changing our economic way of life and gradually putting human values and human wellbeing first. That is the morality of post-materialism.
This leads directly to a last point, which can be called “the special morality of planetary-scope compassion.” We are at a point in history where some of us, at least, can see the possibility of human citizenship at a planetary level. There are many actions we can take in expression of that, some of them very simple. Just about any action that reduces environmental harm is actually an act of planetary citizenship, or planetary compassion. And there are many many other specific actions we can take at this level of ethical conduct. It is mentioned as a separate point because the co-centric approach emphasizes whole systems. Human society in the global ecosystem is one such whole system. To contemplate how to take compassionate action in relation to this whole system is a very high level of ethical engagement.

Tolerance

The third paramita is often translated as patience, but its essential meaning is actually closer to tolerance. Just as ethics are presented as a remedy for negative actions in general, tolerance is presented as the remedy for anger. It is probably not necessary to go to great length in discussing the tremendous dangers and suffering that anger and hatred bring to humanity. The world stage and the “news cycle” give us plenty of examples every day. The play of anger and aversion in economics may be a bit more subtle, but it is extraordinarily corrosive in effect. And tolerance in economic life can be correspondingly incredibly healing and transformative. In particular, tolerance can temper the negative effects of competition. There is a vast difference between pure economic competition in a free economy and the sort of competition that takes place in war--or even sports. Competition at a psychological level carries with it a great deal of anger and jealousy. It is destructive. It should be a no-brainer that cooperation is better than competition, or that economic competition should be fair and respectful. The reason cooperation and fair competition are so hard to achieve is that human beings carry a great deal of negativity towards those we perceive as “other.” We are fine with getting something at someone else's expense, especially when it pertains to our livelihood. On the other hand, there is a growing realization amongst at least some human beings, that there ultimately is no “other.” We're all in this together. Despite this growing awareness, non-aggression is a tough one. Those of us who seek justice and environmental sanity often develop a great deal of anger towards those who don't. And if we don't get angry, how are we going to motivate ourselves to change things?

These are hard questions, and I'm not going to patronize my readers with simple answers. However, it is possible to envision and create economic systems that don't emphasize harmful competition, and do emphasize cooperation. Generally speaking, it is rather radical to mention the notion of non-aggression in an economic context in today's world. It seems like a foreign concept. Probably it brings up the thought that if “we” behave with non-aggression, “they” will take advantage of us. There is a tremendous amount of thought and discussion that can and should go into this question of economic non-aggression. If appropriate ways of enacting non-aggression can be implemented, they could represent a potentially key turning point in economic history.

Diligence

When we talk about diligence or exertion as an economic virtue, it does not mean simply working hard. It means applying hard work and perseverance in the context of truly positive and skillful ways of working, ways that benefit others and avoid harm. In fact, it can take a lot of work just to find modes of livelihood that are not harmful. A great deal of research is going on these days, for example, into how to do all manner of industrial processes in ways that don't harm the environment. That is a good example of proper exertion. Improper diligence, of course, happens all the time. People work tremendously hard to strip the world of its resources, to exploit the work of others, even to steal. In the movie “Heat,” Robert DeNiro plays a master criminal who works with great skill and meticulous planning and discipline. That's a fine example of the opposite of what is meant here by diligence. Unfortunately all such examples are not fictional. And it is interesting that so often the people who have good intentions for the world, gentleness, and ethics, somehow don't work as hard as the crooks. For better or worse, quite literally, it takes diligence to get something done.

Focus

We have looked at focus a bit earlier, and now we will look at in more detail in the economic context. The first point to be made here is that focus is the practice of disciplining the mind to promote stability of mind and attention as a basis for economic integrity in work, consumer behavior, and business behavior.

Integrity of work is perhaps the simplest to understand: to get something done, we have to focus on it. That is an ongoing requirement. Normally we don't think of “doing the job right” to be an act of compassion, but in reality it usually is. Think about the people who drive buses and trains, or fly planes. Think about medical people, teachers, financial professionals. In fact, all kinds of work affect others. Doing a good job in many cases can be a matter of life and death. Proper focus and attention are required to do the job right.

In consumer behavior, it is interesting to note that having a focused and trained mind will help avoid being swayed and influenced by advertising and marketing messages of all kinds, including peer pressure. It presents the possibility of being centered in one's buying behavior. The old fashioned term for this is being “sensible.” Being sensible in today's world doesn't always mean buying the cheaper product. It may mean not buying something at all, or buying a more expensive product that's better for humanity. Having the judgment and character to make such decisions requires a stable mind. A stable mind comes from focusing.

In business behavior, the main point to be noted is that focus brings about the penetration necessary to make correct decisions. By correct decisions I mean responsible decisions. And in the context of the economics of compassion, a responsible decision is one that is responsible to all humanity. That's a tall order, of course, but without the appropriate mental focus, we wouldn't have a chance to make such decisions. We wouldn't even have the ability to make correct decisions, say for our own business in the short term.

An even broader application of focus is in the general mind training needed for stabilizing compassion altogether. I use the term mind training intentionally here, because there is a mahayana system that has been passed down through the Tibetan tradition called lojong, which quite literally means “mind training.” Its emphasis is on making the attitude of compassion for all beings one of stable focus and commitment. This tradition is present in all the major lineages of Tibetan Buddhism, and has been championed by the great teachers of that tradition in present times. The importance given to turning compassion into a genuine discipline points out the importance of really establishing such an attitude in an unshakable way. Usually we have compassion that is limited in several ways. As mentioned above, we usually have compassion for people we like. According to Buddhism this may not be compassion at all -- or if it is, it is compassion mixed with attachment. The defect of this is that we are biased, and our minds easily switch over to total cruelty towards those we dislike. The other problem is that our compassion is sporadic. Sometimes we think very kind thoughts and try to do nice things, but just as often we behave with more or less total self absorption. Having a stable outlook of compassion does not mean living a life of martyrdom or ascetic sainthood, but it does mean finding some consistency in attitude and behavior. It means remembering compassion when things get complicated. All this comes from making compassion an object of focus, and training on that. By doing so, it eventually becomes thoroughly familiar. It becomes part of our very character.

Finally, we can discuss mental focus in terms of its being a condition for generating insight and wisdom concerning economics. The fact is that economics is a complex subject and presents a vast array of conceptual information, much of it confusing and much of it contradictory. Certainly the main schools of economics that have come down to us in the European tradition are seriously contradictory and indeed in serious conflict. We may be in an era of history in which the “free market” system seems to have won the conflict with socialism/communism, but that appearance may itself mask a deeper fragmentation of actual theory and practice. And the evident defects and potentially catastrophic flaws of a market system are glaringly obvious at this point in history, despite the ascendancy of the system itself. And in practice, the complexities of a globalized economy in crisis require a clarity that doesn't just come from more information or from following the opinions of so-called experts. Those who will provide real leadership in economics are not only going to be the professors (learned as they are) or the think tank pundits of C-span (often with very real ideological conflicts of interest), or the hired hand economists of investment banks and brokerage firms. Much has been said of the failure of economics as a profession. In many ways it is unfair to blame economists for the state of the world economy today, but at the same time it is reasonable to ask that those who study and profess to knowledge about the subject evolve in their insight and capacity to help humanity. Ordinary people are going to need to understand economics too, perhaps just to survive. Bringing a strong focused mind endowed with compassion to the subject of economics is a great service to humanity. Through such a focus, we will come to develop economic wisdom, which in my earlier posts I have described as post-materialism and co-centricity. Recently it has occurred to me that perhaps a better term for the second aspect of wisdom is “co-abiding.” I will explore this in future posts, but for the purpose of a brief explanation of the six-fold economics of compassion, these earlier posts will cover the topic of the sixth virtue, wisdom.

Post-Materialism (Part One)

2008-07-15T00:17:00.002-04:00

It would seem that a baby is the most self-absorbed of creatures. He knows what he wants and lets you know about it. When he's hungry, he screams. But a baby typically has a degree of sanity that is not usually expressed in our individual or collective economic behavior. When he's had enough, he stops. He pushes the breast away or throws the bottle on the floor. He's done. That doesn't mean he won't start yelling about something else in a few seconds, but from the point of view of consuming, he has an instinctive sense of “enough is enough.”

What does this have to do with economics? Everything.

In my last post I brought up the notion of co-centrism, which is a way of pointing out the way things are in reality, as opposed to appearances. Things are related; they co-exist. They inter-are, to use Thich Nhat Hanh's terminology. They interpenetrate. Things exist in systems, but the system itself is hard to pin down aside from being a collection of its parts. Co-centricity points to the coexistence of parts and wholes, of systems and the things that make up those systems.

There is another dimension of economic wisdom, and that is post-materialism. Now, to be rigorous, we would want to fully explore what is meant by materialism, then explain why that view is not adequate, and then point out why the correct view is somehow “after” materialism. Perhaps at some point I (or hopefully someone smarter than me) will do just that in depth. In fact, philosophers have been working on this question rather intently for a very long time. One of the ways of dividing philosophical systems is—broadly speaking—into the substantialist camp and the idealist camp. The substantialists think there's something out there, and it's real. The idealists think that whatever is “out there” has a heck of lot to do with your mind, and it may not even be out there. That is of course a tremendous simplification, but it is a great relief (speaking as someone who takes philosophy seriously) to take a perhaps imprecise but broadly accurate look at a question. Materialism is a branch of—but not identical with—the broader category of substantialism. Then there's the more recent school of the Positivists and the related scientific materialists who posit the “mind is an epiphenomena of matter.” All this involves very sophisticated reasoning, and it's true that if we were to examine materialism thoroughly, perhaps the first way to do so would be philosophically. But it is by no means the only way, and the fact remains that materialism of the economic sort is getting along quite nicely, thank you, without benefit of philosophy, so to speak.

Therefore in talking about economics, perhaps the notion of materialism would bring to mind a more common sense idea, one that would be closer to the notions of consumerism, greed, acquisitiveness, and possessiveness. All that stuff. And smart people throughout history have said, “well, that is not good.” Exactly, but why? If you examine why materialism in this sense is a problem you will eventually see that it's a psychological issue, one of attachment or fixation. In fact, we could nail it down right here and now and say that materialism is psychological. It's a mental outlook, or even more fundamentally, a mental pattern or set of patterns. Let's call it psychological materialism. The term psychological materialism is a brilliant one, first used (I believe) by Chogyam Trungpa Rinpoche. Trungpa Rinpoche was more famous, of course, for the term “spiritual materialism,” and to my knowledge did not develop the concept of psychological materialism very extensively. I use the term psychological materialism in a specific way that is idiosyncratic to my own body of thought, and I don't claim or attempt to use it exactly the same way that Trungpa Rinpoche did. My notion of psychological materialism is derived from Buddhist psychological teachings in general and owes a lot to Trungpa Rinpoche's concept of spiritual materialism. In particular, my understanding of psychological materialism includes both the solidification of external objects, and our solidification of, and attachment to, internal experiences, states of mind, emotions, and concepts. It refers to everything internal and external that we solidify with the mind through confusion.

The interesting thing about this way of looking at materialism from a psychological point of view is that it addresses the philosophical question as well as the more ordinary economic way of viewing it. The solidification of seemingly external objects of mind into things that are supposedly real and truly existent is actually a projection of mind. It is a matter of imputation, of reification. Now there are a lot of pitfalls that can come about if one understands this superficially, but certainly it is good as a start to at least question our assumptions about the world of our experiences. If we do not question the assumptions we make, we fall into the realm of naive realism, which means we are firmly in the grip of psychological materialism. In fact we've been there a very long time, according to Buddhism. We could go one step further and say that psychological materialism is just another way of characterizing what the Buddhists call samsara, because it (i.e. samsara) is a mind-created solidification of what is not inherently solid in reality.

The implications of the psychological nature of materialism are quite interesting. For one thing, if materialism is simply a mental attitude, and a confused one at that, why can't we just drop it right here and now? Well, if we were really decisive, we could drop it as a conceptual view, if we had really repudiated it internally. We could toss it aside as decisively as the baby tosses aside his bottle when he's done. But unfortunately the mind is not as simple as that, and even if the conceptual abandonment of materialism is a good idea, we still have all the habits of mind, the instincts at play, the fundamental entrenchment in samsara to contend with. If psychological materialism is synonymous with samsara, then from a Buddhist point of view, transcending it would be no small endeavor.

However, developing a post-materialist orientation is not as rigorous as all that. If we were to talk about going beyond psychological materialism in general, it would mean simply the intention or commitment to not letting ourselves be ruled by the negative patterns of mind (kleshas in Sanskrit) that keep us in a state of ignorance and suffering in samsara. In more economic terms, it would mean not letting materialism of the economic sort rule our minds and behaviors. At the policy level, it would mean not letting wealth and simple greed for “more, more, more,” rule the day. At the theoretical level of economics, it would involve not getting caught up in the “materialism of symbolic representation,” which basically means diverging into abstract representations of economic matters to the detriment of addressing what really matters in human terms.

Going back to the baby, what he feels at the moment he's full is sufficiency. Enough. One of the practical outcomes of post-materialism is not so much the rejection of material things or even prosperity, but instead just this recognition of sufficiency.

In general, post-materialism is presented as one aspect of economic wisdom with the understanding that we will gradually approach it through practice and experience. Post-materialism helps untangle the confusion around the way things appear to be at various levels, and co-centrism is more focused on pointing out the way things actually are. Ultimately, post-materialism and co-centricity are themselves co-centric. They contain each other and co-exist harmoniously without losing their specific attributes. Together they comprise the wisdom (prajna) aspect of the six-fold economics of compassion.

The Co-Centric Principle

2008-07-05T12:59:00.013-04:00

Inasmuch as I propose to call the type of economic theory into which my own ideas fall "Co-Centric Economics," I suppose it would be circumspect to begin by discuss, as best I can, the way I am using the term "co-centric." This use of "co-centric" in relation to economics is a genuinely new usage, as best I know. The term is used in geometry to mean something more or less like "concentric," and it pops up occasionally in articles and blogs (sometimes, it would seem, as an erroneous spelling of concentric, sometimes not). So it's not a new term, though I actually coined it myself quite a few years ago. I was looking for a term that means "sharing a mutual center" but in a looser way than my understanding of "concentric."

I have come to use it relation to economics in a very broad way, actually, and thus it somehow gravitated to its present use as a label for the whole body of work.

As will "trickle in" in coming posts, I have organized my general ideas on economics in accordance with the so-called six perfections (paramitas) of mahayana Buddhism. The last and perhaps most important of these is the paramita of prajna , which for the sake of this work will be translated simply as "wisdom." (Other valid translations for prajna are in use, including "knowledge," "superior knowledge," and "discernment.") Although the English term wisdom does not fully express what is meant by prajna in the Buddhist tradition, it probably comes closest in a general sense.

The six perfections in their spiritual context are meant to be guide for someone who has developed the enlightened attitude known as bodhicitta. Bodhicitta is a very special form of compassion. Indeed it could be considered the supreme form of compassion that we can develop as ordinary beings, since it means aspiring to achieve perfect enlightenment such that one can help all beings reach that same enlightenment.

The compassion that one tries to develop in mahayana Buddhism is concerned both with the ultimate enlightenment of beings, and with their wellbeing in worldly life. Therefore the idea of Buddhist economics is entirely relevant, and a mahayana Buddhist economics would be an economics of compassion. That indeed is the title of my upcoming book: The Economics of Compassion.

In the presentation of the six paramitas, wisdom is last, and it's said that for all of the other five to really be paramitas, they need to be imbued with this last paramita, prajna. The implication of this is that if we are to find an economics of compassion that goes beyond mere good intentions or even sentimentality, it helps to have wisdom. A simple way to describe wisdom is that it is correctly seeing "the way things are." And clearly wisdom is necessary for compassion to be truly effective.

The term co-centric is an interesting way to describe "the way things are" in economic terms. It points to a whole array of meanings, from the tangible to the highly abstract. For example, as human beings, we are co-centric with our natural world. Individuals are co-centric with social systems. Social systems themselves display a high degree of co-centricity. The symbolic economy of money and price is co-centric with the tangible economy of "stuff." The term is related in meaning to "interdependent," integral," and "inclusive." It relates to the simultaneous co-existence of parts and wholes, and of systems and their components. In more abstract terms, co-centrism can point to the yin/yang principle of Chinese philosophy, or to the notion that the linguistic meaning we give to things exists within the context of a language system, and with our own cultural experience. It can point to the unity of opposites, or more specifically to the notion that opposites exist in a larger system context.

In terms of the discipline of economics, it has long been pointed out by the pioneers of "alternative economics" (i.e. E. F. Schumacher, Hazel Hendersen, and Herman Daly) that economics as a profession has tended to isolate itself from other disciplines, and even from human values altogether. Hence Schumacher's famous subtitle ". . . economics as if people mattered." Therefore co-centric economics means economics that exists in proper context with other disciplines, and with the needs of humanity.

One way to talk about this inclusiveness that somehow eluded economics as it got more and more specialized and abstract is to think of it in terms of "co-centricity of scope." Though it is more difficult to create abstract theories (especially neat mathematical ones) if you include everything and exclude nothing, the unfortunate fact is that you really DO have to include everything. And the fact that mainstream economics has tended to exclude tiny little factors like social justice, the environment, or other messy qualitative factors makes it at best a crippled discipline capable only of the most incomplete of answers.

This is by no means just a matter of academic interest. We have come to a time in history when economic matters are coming to the forefront and affect the very survival of our species. It is critically important that the discipline of economics rise to the challenge and the urgency of our times. Therefore economics needs a comprehensive or universal scope of attention: it needs to be co-centric. And this is the only way to create a truly successful economics, one that will address the human condition and indeed offer the most helpful answers and solutions. From that point of view, using the term "alternative economics" to describe an economics that is concerned with the environment and human justice is a bit stupid and insulting.

It should be noted here that co-centric economics is not a term I'm using exclusively for my own ideas, but rather for any economics that fits the characteristics of co-centricity. In practical terms, any economics that is sincerely concerned with social justice, environmental balance, and truly useful theory could be considered co-centric. As such it would include most of the "alternative" economic theoretical work done in the last 50 or so years. From that point of view, co-centric economics is the body of work into which I would wish my own to fall, without particularly trying to co-opt anyone else's work, or for that matter branding them with my own label.

It seems that I am working my way backwards through the six perfections, and to conclude this brief introduction to the section on wisdom, I will mention that co-centricity is actually one of two parts included under "economic wisdom." The other part is post-materialism. In some sense, post-materialism is a refutation of the way things seem to be, or what seems to be important, whereas co-centricity is a description of how things actually are, and what IS really important.

I probably should have started with post-materialism, but I'll discuss that in the next post.

Welcome to Trickle-In!

2008-06-30T15:50:00.004-04:00

For over ten years I've been doing ongoing independent study in the field of economics and along the way developed an original body of thought that I've aspired to present to the world at some point. I've made several starts at writing a book and most recently have realized that what I need is a more flexible and interactive way to write.

You may be interested in this blog if:

The idea of a truly fresh approach to economic theory intrigues you . . .
You've know me personally and have some previous contact with my ideas . . .
You are worried (isn't everybody?) about the current state of our world, and the huge role that economic behavior plays in the future prospects for humanity . . .
You are interested in alternative economic systems such as those proposed by E. F. Schumacher, Hazel Henderson, Herman Daly, and so many others . . .
You are interested in "Buddhist Economics" either through the environmental and social justice movement, or through involvement with Buddhism . . .

What I propose to do in this blog is to present short, coherent pieces of writing that more or less stand on their own, but that also add up to a "trickle in" of a more or less complete system of economic thought that I've developed over the years. That's the first implication of the name of the blog. The second meaning of "trickle in" lies deep in a subject matter called Civil Endowment Theory, which in turn is a cornerstone of the body of thought that I've developed.

When introducing these cornerstones I'll identify them as such, and will develop a hypertext glossary for reference. In keeping with the freeform style of the blog medium, I'll feel free to comment on the economic issues of the day . . . but will find a way to distinguish these sorts of observations from a core presentation of the work I've done all these years.

Why Now? Let's just call it "the urgency." The urgency of our times is a most compelling reason and force behind putting my ideas out there for the world at this time. I can't wait around any longer in good conscience. If we really look at the seriousness of the human condition and the human prospect worldwide, none of us should wait. In contemplating the vast poverty, the imbalance of economic power, the looming environmental catastrophes, not to mention more immediate but deeply ominous developments like the current global price spikes for energy and food, it's hard to avoid a deep sense of anxiety and even grief. We could, perhaps, go down the road of hopelessness, avoidance, or selfish cynicism. Or, more positively, we could say "well, at least I recycle and buy organic food. Fine, but the reality is that we as a species have got to do some major things differently in the global macro-economy and we have to find ways to make these changes soon. Many of the needed changes have become clear, and much of the work has been started, but isn't it abundantly clear that the fundamental structure of the global economy is not equal to the task we face? And at the deeper level, isn't it obvious that the working theories behind of our world economy, the "consensus reality" is deficient?

I don't have certainty as to whether my contribution to the discussion will help humanity or not, but I'm ready to do my part. I strongly invite you, the reader, to respond as you see fit.

Sarva Mangalam
May it be auspicious