Need for New Theory

Efforts to reform current economic policy and institutions are invariably opposed by both an intellectual orthodoxy and vested economic interests. They draw on the conventional wisdom of prevailing economic theory to support prevailing policies. They argue that given the laws of economy and current circumstances, we are living in the best possible world. This simply is not true. The multidimensional challenges confronting humanity today are human-made and can be changed by a change in thought and action. Theoretical limitations and misconceptions are a primary root cause of persistent poverty, rapid and rising levels of unemployment, inequality, and calamitous environmental threats. Contemporary economic thought is built on a mind-frame that originated prior to the Industrial Revolution when scarcity of goods was the primary concern, economic growth was considered synonymous with human welfare, and impact of humanity on the environment was completely ignored.

Conditions have radically changed since then. The world has the capacity to produce sufficient goods and services to meet the needs of all human beings, but the prevailing economic system is dismally failing to abolish all forms of poverty. Economic growth is associated with rising levels of unemployment, widening of inequality and rapid deterioration of the eco-system and resource depletion. Financial markets are misdirecting trillions of dollars into a global casino of speculative investments that drain resources from the real economy and job creation and destabilize the global economic system. Human and social capital are increasingly recognized as the key drivers of ecologically sustainable economic and social progress. The continued pursuit of business as usual is threatening the security, welfare and well-being of humanity and the planet now and in the distant future.

Without challenging obvious flaws in existing theory, it will be not be possible to significantly alter current policies and practices. A new conceptual framework is urgently needed to expose the fallacies in prevailing theory and project an alternative conception attuned to the realities of the 21st century and the welfare of all humanity. Alternative views on economic theory and practice have been surfacing for decades, but until recently they have been shut out, rejected or dismissed by mainstream orthodox economists of different schools, because they challenge the fundamental assumptions on which all mainstream economic thought and prevailing economic policy are based. Today the situation is different. Authoritative alternative views of economy based on hard facts and compelling arguments are now gaining serious attention, but they still remain largely off-campus, off-camera, and off the radar of public policy and decision-makers.

Much of the resistance to changes in economic theory is founded on the mistaken view that current economic theory is based on fundamental laws of nature like the laws of motion and gravity. But Economics is a social science and not a natural science. It is not built on natural immutable, mechanistic laws. The laws of Economics are framed by human beings based on the perceptions, values and vision of society. Human beings created the current economic system. Human beings can modify and improve it. The real issue that defines the nature of economy is what kind of future we want to create. Are we satisfied with a set of rules that benefits a small majority and disenfranchises so many? Are we content with a system that undermines earth’s carrying capacity and jeopardizes the future of our children? It is our choice that determines whether we have a world with opportunities for all or a world with increasing inequality and tension. Economy can provide all the jobs we need when job creation and development of human capacities are given priority over speculative unregulated financial markets and rising levels of wealth inequality.

The problem of economy has to be viewed in a wider context of economic impact on the security of people, the stability of democratic societies and the sustainability of the environment. Effective solutions do exist to address all our current problems within the framework of a market economy. Earth can be home to 9 billion people living a decent life. Our natural resources can be managed to provide the basic material for many generations to come. Climate change can be prevented. Extreme poverty can be eliminated. It is all a question of an economy that is built on the right values and objectives. The limits we confront are perceptual and intellectual. A human-centred theoretical framework reveals ample scope for policy changes that can achieve full employment, equitable and sustainable development for all. Moving the debate to the underlying driving values and away from the illusion of immutable economic laws will allow everybody to participate in the debate about the future of economy and our planet.

New economic thinking – new theory -- has the power to effect a rapid and radical change to a new economy that

  • Maximizes human security, welfare and well-being instead of limitless consumption and unregulated economic growth for their own sake;
  • Perceives people as the most precious resource and development of all forms of human and social capacities as the most important form of productive capital;
  • Ensures employment opportunities and meaningful occupation for all, including both youth and the increasingly health and active elderly populations;
  • Regulates the global casino of financial speculation that currently destabilizes economies and impoverishes people;
  • Manages the world’s resources in a sustainable manner for both present and future generations;
  • Promotes a more equitable distribution of income within the constraints imposed by the planet’s resources;
  • Resolves the apparent contradiction between human welfare and ecological sustainability by shifting the focus from unlimited, wasteful, material consumption based on energy and material intensive technologies to maximum security, welfare, well-being and developmental opportunities for people.