Enlightened Economics

Economics for an Enlightened Age

• Cultural Creatives to Dominate in the Age of Enlightened Economics

Posted by Ron Robins on May 22, 2008

For many years I have envisioned the possible psychological archetype of individuals in the coming ‘Enlightened Economics’ era. After much thought and research, I believe it is likely to resemble that of what sociologist Paul Ray calls the “Cultural Creative.” He coined the term back in the 1990s after performing two extensive surveys on Americans’ psychological values for the U.S. Environmental Protection Agency (EPA) to help understand and categorize Americans’ values to assist in the development of their environmental policies.

Who are the Cultural Creatives (CCs)?
In 2000, Dr. Ray co-authored with Sherry Ruth Anderson the book, Cultural Creatives (CCs), where they describe CCs as caring “…. deeply about ecology and saving the planet, about relationships, peace, and social justice, about self-actualization, spirituality, and self-expression.” They suggested that in the year 2000 there were more than 50 million CCs in America (about 25 per cent of the U.S. adult population) and a further 80-90 million in Europe. In a private conversation I had with Dr. Ray in 2002, he indicated that CCs could dominate western populations as early as 2020. I believe a case could now be made that this will occur much earlier than that.

Spiritual and personal development were at the centre of the values of the founding ‘core’ CCs. Referring to the early development of CCs, Dr. Ray and Ms. Anderson state, “As the ranks of beginners kept growing [in the 1960s], hundreds of thousands stayed with the process and went deeper. By the 1980s, the ‘movements’ numbers had swelled to a million or so, and by the 1990s, tens of millions were involved… But the consciousness movement-full of contradictions, shallow and deep, bubbling with new developments-is still in the phase of accelerating growth.”

CCs imbibe the values of Enlightened Economics
As explained in my various posts (The Missing Ingredient in Economics — Consciousness; Retiring the GDP (Gross Domestic Product, etc.) the fundamental shift I envisage in individual consciousness is towards that of global ecology, spirituality and social justice. This fits very well with the definition of CCs.

Though Dr. Ray has not completed further surveys in recent years as to the growth of CCs in western or global populations, it is clear from the enormous escalation of interest in green products and services, the environment, ethical investing, corporate social responsibility, spirituality, etc., that the numbers in the CC camp are growing significantly.

The ranks of the CCs are being filled from a group Dr. Ray refers to as ‘Moderns.’ The Moderns are the governing group in western societies. Their primary values concern money and status.

As the Moderns decline, the CCs gain
In the U.S., Moderns number close to half of the population. Dr. Ray and Ms. Anderson in their book explain the role of Moderns as “… the normative culture found in the office towers and factories of big business; in banks and the stock market; in university science labs and high tech firms; in hospitals and most doctors offices; in mainline churches and synagogues; in the ‘best’ schools and colleges …and most ‘mainstream’ and newspaper articles. The standard we take for granted, the rules we live by, are made by and for Moderns.”

However, the Moderns are declining in number as their values, focusing on financial materialism, status and lack of altruism, are under attack from both within and outside of their group. Increasingly, such values alone are seen as insufficient to meet the challenges of our world. The shenanigans on Wall Street – with the sub-prime mortgage and derivative fiascos and the gross irresponsibility of corporate elites – are some of the many reasons encouraging countless Moderns to re-align their values. Thus, unknowingly, they convert to the ranks of the CCs.

The expected era of Enlightened Economics necessitates a psychological archetype that reflects the demands of a new global epoch. This new epoch requires values depicting openness to the unfamiliar; a sense and inner experience of the unity of all things; and a deep caring for nature, the environment and humanity. And it also includes a realization that a new vision of global economics is critically needed. Cultural Creatives (CCs) heading to be the majority in numerous countries, imbibe these qualities. As such, their psychological archetype is the one I believe will dominate in the forthcoming age of Enlightened Economics.

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© Ron Robins, 2008.

Posted in Consciousness/Psychology | Tagged: , , , , , , , , | 3 Comments »

• Retiring the GDP (Gross Domestic Product)

Posted by Ron Robins on May 8, 2008

The GDP statistic has to be retired. It is like an old shoe that no longer fits. GDP is fatally flawed as a measure of economic and societal well-being and economists know it. Yet it is universally used to compare living standards and economic growth like one compares sports scores. Furthermore, as each nation compiles it a little differently, especially regarding the inflation ‘deflator’ component, such comparisons are nonsensical. What is exciting is that there are some old and new indices getting attention that could replace the GDP. This is most welcome.

Alternatives to the GDP
Technically, GDP is the total market value of all final goods and services sold in an economy in any particular time period. As we progress in an era of Enlightened Economics, it is destined to be superseded by new indices geared to more accurately measure affluence, sustainability and quality of life, generally. Such indices include the Index of Sustainable Economic Welfare (ISEW), the Genuine Progress Indicator (GPI), and variants of them. Other intriguing indices include the Calvert-Henderson Quality of Life Indicators, the UN’s Human Development Index, and the Invincibility Index. The common thread in these indices is that as well as including economic activity, they also account for societal and environmental factors related to real human development – which the GDP does not.

The GDP statistic should be retired because…

  • According to economist Clifford Cobb and colleagues, “Much of what we now call the growth of GDP is really just one of three things in disguise: (1) fixing blunders and social decay from the past [paying for pollution, costs of crime, etc.]; (2) borrowing resources from the future [GDP excludes the costs related to farmland depletion, water, other resources]; or (3) shifting functions from the traditional realm of household and community to the realm of the monetised economy [i.e. eating out, rather than at home].” (Text in parenthesis has been added for additional clarity.) For a fuller explanation, see “What’s wrong with the GDP.”
  • Losses associated with natural and man-made disasters are not deducted from the GDP. For instance, Hurricane Katrina brought mass devastation. Yet the enormous economic losses were not deducted from GDP. But the clean-up costs were added though!
  • GDP does not account for the value of non-monetary, economic, transactions. Such activities would include elder care by family members, and volounteer activities. In 2002, the International Monetary Fund (IMF) found that such activities represented the following shares of economic output: up to 44% of GDP in developing nations, 30% in transition economies, and 16% in Organization for Economic Cooperation and Development (OECD) economies (Schneider and Enste, 2002). See The Genuine Progress Indicator 2006.
  • There is even evidence that a focus on GDP at the expense of other quality of life indicators can lead a society to a false sense of worth and even create unhappiness. In The Loss of Happiness in Market Democracies published in 2000, Emeritus Professor Robert Lane of Yale University compiled exhaustive research data showing the relationship of GDP to increasing unhappiness. He states, “Amidst the satisfaction people feel with their material progress, there is a spirit of unhappiness and depression haunting advanced market democracies throughout the world…” From his perspective, the rigors of modern market economies increasingly create family and relationship break-ups with subsequent loss of companionship and happiness.
  • GDP is short-sighted accounting. Things that bump-up GDP in the short-term often have harmful long-term human and financial consequences and costs.
  • From the foregoing it is clear that the GDP statistic has little relevance as a measure of our present day material and social well-being.

GDP provides a false sense of progress
Comparing the GDP to GPI (Genuine Progress Indicator) numbers illustrates how false is the sense of gain with the GDP in regard to our human condition. Look at this chart comparing the real (inflation adjusted) US per capita GDP and GPI growth between 1950 and 2004. Note how the GPI figure significantly lags GDP. It suggests that when items such as resource depletion, crime costs, and volounteer sector costs,’ etc., are accounted for, the per capita net benefit of a rising GDP is fully negated.

Source: (c) 2007 Redefining Progress

Retire the GDP now
Some of the ways social and non-market costs are included in the ISEW, GPI, etc., are definitely controversial. Perhaps for these reasons such indices have not as yet achieved common usage. But the GDP, created for the very reason of measuring WW11 wartime production, has been badly and wrongly used as a measure of our quality of life. Enlightened Economics demands the GDP be retired and replaced with more enlightened indices!

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© Ron Robins, 2008.

Posted in Economic Measurement | Tagged: , , , , , , , , , , , , | Leave a Comment »

• Pre-Conditions for a Sustained US Economic Revival

Posted by Ron Robins on April 21, 2008

The US has achieved many periods of sustained and rapid economic growth. And it can do so again. However, as history demonstrates, a big bust results if the growth is spurred by excessive monetary and credit expansion. For the past 25 years or so the US economic expansion has followed the woefully excessive monetary and credit expansion script. The US will not be able to pull itself out of the present economic malaise without dealing with its inordinate levels of debt and ‘exponential’ credit growth.

It is rather sad when most economists and investment industry professionals do not talk about the enormity of the debt and credit expansion problem. Unfortunately, it seems these ‘experts’ are either told to shut-up, prefer to overlook the obvious, or to simply lie about it being a problem! After all, what bank economist wants to tell his bank that its customers should reduce their borrowings, and thereby reduce the bank’s lending and subsequent earnings! More than likely the bank’s stock price would plummet. There is simply no incentive for most establishment economists to be truthful and every reason for them to lie.

For the US to experience a true long-term economic revival, I believe four things need to happen.

1. US debt growth will have to about match, dollar for dollar, GDP and income growth.
Presently it takes around $6 of new debt to create $1 increase in GDP and $4.75 of new debt for every $1 increase in national income. This is bubble territory. Look at this historical chart showing the explosive growth of America’s debt in relation to its national income.

Source: Michael Hodges America’s Total Debt Report/financialsense.com

If income grows slowly while borrowing grows rapidly, eventually there is a solvency problem. That is where the US is today. If the borrowing were primarily to increase overall productive capacity – the increase in production would have created greater income to help offset massively increased borrowing. But this has not happened. Much of this bloated US debt load is concentrated in the financial, mortgage and government sectors, and for the financing of its trade deficits. The debt contraction will be particularly acute in areas related to the financial and mortgage industries and generate extraordinary difficulties for the economy at large.

2. Debt to GDP ratio has to come down by around one-third
Debt at around 350% of GDP and growing 50-100% faster than the rate of GDP growth for more than 25 years – is utterly unsustainable. Following on from point 1 above, the US is basically beginning to experience an insolvency problem. Credit availability is declining while default rates soar. As a result, it has to reduce its overall debt burden. Nations frequently resort to inflating their money supply to deal with their debt burden, as Germany did in the early 1920s and Zimbabwe is doing today. So with the significantly increased amount of money swashing around, debts not being indexed to the growth of the money supply, are more easily paid off. Present moves by the US Federal Reserve now indicate that this is the path they have chosen. According to shadowstats.com, the broadest measure of US money supply is growing at an annual rate of around 17%!

3. Personal savings rates have to move beyond 10% per annum– from around zero at present.
High growth economies have high savings rates. It is that simple. The savings go towards spurring productive capacity – rather than to consumption – and produce fast income growth. In most years between 1952 to the late 1980s, the US enjoyed a personal savings rate above 10% of income. (See this graph by the Bureau of Economic Analysis.)

4. The above 3 conditions have to persist.
It is no secret as to what are good, or bad, macro-economic conditions. The above are key conditions that have to be met to ensure true, long-term, high growth macro-economic performance.

Summary
The message is that the US must significantly reduce its overall debt levels, avoid building-up new debt in excess of GDP or income growth, and for individuals to start saving again. I have no-doubt that these conditions will be met. But before they are met the US is likely to experience an extended period of rolling recessions over many years. And a depression cannot be ruled out either. During this process I expect to see among Americans a transformation to higher consciousness and a growing understanding of economics and its relationship to natural law and the environment. Americans, and people everywhere, will come through this much wiser. A new global Enlightened Economics framework will be created and form the basis for improving living standards and quality of life for all in our world in the years to come.

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© Ron Robins, 2008.

Posted in Economics | Tagged: , , , , , , , , , , | 3 Comments »

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