21st Century Economics
Physicians today do not rely on the medical wisdom of the early 19th century, nor do architects defer to the design principles of that period. But much of the influential economic ”wisdom” that dominates contemporary policy debates—what we call market fundamentalism-- was developed by theorists who wrote during the Industrial Revolution when farming was still the most common occupation. If we refuse to revise our economic thinking to meet the challenges of the 21st century, the consequences will be disastrous.
We plan to offer a systematic critique of these obsolete ideas and to accelerate the development of a new economic paradigm that is rooted in current realities. Elements of this new paradigm already exist, but much work still needs to be done to integrate the ideas into a systematic alternative that can exert influence in political debates.
For market fundamentalists, government is always the problem, not the solution. But over the centuries, there are many examples of governments that have led the process of economic development in their societies. These include:
- Systematic policies by England’s government from the 16th to the 18th century to build up the textile industry worked to make England the first industrial nation.
- Canal and railroad building by state and Federal government in the U.S. in the 19th century established a foundation for a continental economy.
- A mix of government policies led to rapid economic growth in Japan, Taiwan, and South Korea from the 1950’s to the 1980’s.
- The current Chinese government’s massive investments in education, science, and technology have driven that nation’s rapid growth.
Most importantly, our research has uncovered a surprising fact—that the United States now has a sophisticated developmental state. Through highly decentralized initiatives spread across many government agencies, the U.S. government actively supports the development and commercialization of hundreds of new technologies every year. Scientists and engineers in Federally-funded laboratories all across the country are now the driving force of innovation in the U.S. economy. But to be fully effective, these developmental efforts need to be more visible and more politically accountable.These efforts are summarized in a forthcoming paper in Politics & Society by UC Davis Sociology Professor Fred Block.
A second key element of the new paradigm is green economics —the recognition that the conservation of resources and the reduction of waste have become economic necessities. The old idea that there are tradeoffs between economic growth and environmental protection is outmoded; today economic growth requires that we transition away from fossil fuels and squeeze waste out of our production processes.
A third key element of the new paradigm is pursuing the “high road” in the organization of work places. Productivity in the 21st century is enhanced by empowering employees and providing them with good pay and decent benefits. The familiar “low road” strategies of squeezing workers, increasing employment insecurity, and cutting benefits are no longer a sound basis for building a prosperous society. [see http://www.longviewinstitute.org/projects/moral/Fred%20Block.pdf/view]
Other elements of the new paradigm include a focus on the problem of providing high quality care—health services, child care, education, and services for the elderly. These have become central economic activities and they cannot be produced on an assembly line. [see http://www.alternet.org/story/17146/]
We also need to rethink the role of finance in the economy—shifting from the current focus on speculation to smart finance that pursues productive investments. Over the coming months, we hope to expand on these other elements of a 21st century economic paradigm.
Books that develop some of the key ideas of 21st century economics include:
Fred Block, Postindustrial Possibilities. Berkeley: University of California Press, 1990.
Ha-Joon Chang, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. New York; Bloomsbury Press, 2007.
William Greider, The Soul of Capitalism: Opening Paths to a Moral Economy. New York: Simon and Schuster, 2003.
Paul Hawken, Amory Lovins, and L. Hunter Lovins, Natural Capitalism. Boston: Little Brown, 2000.
William McDonough and Michael Braumgart, Cradle to Cradle: Remaking the Way we Make Things. New York: North Point Press, 2002.