At the end of our first Festival of Economics in Dundee in March, I was approached by a clearly overwhelmed attendee.
He asked me if I could recommend one article, paper or book that would sum up everything we had talked about throughout the three-day event.
Initially, this seemed like an impossible task. Just one thing?
During the festival, we discussed two main concepts: the finite nature of natural resources and the importance of monetary sovereignty.
In answering his question, it felt natural to first consider the core texts that support ecological economics and modern monetary theory (MMT).
Was I to recommend Silent Spring, by Rachel Carlson, the first environmental science book published way back in 1962? Or maybe Kenneth Boulding’s seminal article The Economics of the Coming Spaceship Earth, written in 1966?
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But those pieces of work, as amazing as they are, say nothing about MMT.
So maybe I should suggest Stephanie Kelton’s The Deficit Myth, credited with helping MMT to cross over into the mainstream. But that only makes a passing reference to our ecological boundaries.
Just one piece, are you sure?
I asked for confirmation, hoping I could extend the list to at least half a dozen. Their steely gaze meant one text was enough: in terms of ideas and content, our attendee’s cup was clearly overflowing.
I then thought of influential economic texts that try to expose the current economic paradigm. The Shock Doctrine by Naomi Klien sprang to mind, as did The Open Viens of South America by Eduardo Galeano, written in 1971. Or maybe The Great Transformation by Karl Polanyi, published even further back in 1944.
The more I thought, the longer the list grew and the more impossible the task became. And then, I realised that at the heart of what we are trying to do is to change the economic system. Eureka.
The answer was obvious all along.
“OK, if you have to read just one thing, it must be a short 20-page article by Donella Meadows (one of the lead authors of the Limits to Growth report for the Club of Rome) called Leverage Points Places to Intervene in a System”.
I am sure most people can count the truly transformative texts they have read on one hand.
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For Scotonomics, Donella’s system’s dynamic approach is now at the heart of how we understand our economy. It also provides a framework for understanding and influencing everything that takes place in our economy.
If you have not picked up on the most obvious hint, please download the free PDF and read the article.
A wellbeing economy via the “Leverage Points Places to Intervene in a System”
Imagine my delight when I came across a reference to Donella’s work in the most recent Common Weal paper: Wellwashing: Why a Superficial Approach to Wellbeing Economics Will Fail (sorry, you now have two things that you really need to read over a cup of tea or coffee this week).
Professor Iain Black uses Donella’s framework to argue that a wellbeing economy can not be delivered under the current economic paradigm.
He suggests that we need a new economic paradigm, or at least new goals for the current system, if we are to achieve a wellbeing economy. It is a powerful message.
“The world’s leaders are correctly fixated on economic growth as the answer to virtually all problems, but they’re pushing with all their might in the wrong direction”, is how she opens the 1997 article. In other words, the answer might be negative growth!
At the heart of Donella’s framework is this list:
Places to Intervene in a System (in increasing order of effectiveness)
12. Constants, parameters, numbers (such as subsidies, taxes, standards)
11. The sizes of buffers and other stabilising stocks relative to their flows.
10. The structure of material stocks and flows (such as transport networks, population age structures)
9. The lengths of delays relative to the rate of system change
8. The strength of negative feedback loops relative to the impacts they are trying to correct against
7. The gain around driving positive feedback loops
6. The structure of information flows (who does and does not have access to what kinds of information)
5. The rules of the system (such as incentives, punishments, and constraints)
4. The power to add, change, evolve, or self-organize system structure
3. The goals of the system
2. The mindset or paradigm out of which the system—its goals, structure, rules, delays, parameters—arises
1. The power to transcend paradigms
Where to intervene in our economy?
Hopefully, the relation to our economy is clear. If any government wants to intervene in an economy to make a difference, it must make adjustments as far down the list as possible.
Unfortunately, the most common interventions tend to be covered by numbers 12, 11 and 10. The UK government does this out of choice.
The Scottish government, as it lacks the real powers that come with being a currency issuer, tend to do it out of necessity. The economic narrative, therefore, rarely looks further down Donella’s list.
If Scotland, as part of the UK, is to undergo any kind of economic transformation, the government in Westminster must intervene or allow the Scottish government to act at points in the system that will lead to real change. Unfortunately, all the evidence suggests that whatever government occupies the position of power in Westminister, they will fail to even understand the system.
If we are to have any chance of creating a wellbeing economy, the UK government must at least create new goals for the system or grant the Scottish government the power to do so.
However, to believe that the UK government will fully understand and appreciate the structure and parameters of the current paradigm is less a work of transformational critical thinking and more a work of fiction.
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