I’m old enough to remember the presidential campaign of 1992, when James Carville’s mantra for the Clinton campaign was “It’s the economy, stupid!” By “the economy,” Carville meant how businesses and people are doing right now. Are sales up? Is unemployment down? Are you better or worse off than you were four years ago?
Carville’s mantra was useful in winning that election, but it’s no help in curing the deep problems we face today. For those purposes the mantra we need is, “It’s the economic system, stupid!”
By that, I mean not how fast the engine is running, but what the engine is designed to do. Is it designed to do the things we want it to do? Is it designed to make us secure and happy? If not, are there ways we can fix it, without shutting it down or throwing too much sand in the gears? That’s what we need to fixate on now.
An economic system, like any system, has lots of moving parts. And it has an operating system, like the one inside a computer, that tells the various parts how to interact. Our current economic operating system – we call it capitalism – is written in legal and economic code. It does many things well and a few things quite badly.
For example, it’s very good at allocating finite resources among competing demands, but very bad at protecting nature, sharing wealth fairly, and strengthening communities. Up to a point these shortcomings can be tolerated, but we passed that point some time ago. To be blunt, we’ve got to fix our economic operating system before it destroys the planet, re-creates feudal inequalities, and makes us miserable in the process.
One of the fundamental flaws in our current operating system is, it doesn’t know how to stop. It’s driven by legal fictions called corporations who are profit-maximizing automatons. On good days they do this by innovating and serving their customers well. On bad days they do it by externalizing as many costs as possible.
For example, pollution has real costs, but polluting corporations don’t pay them. They shift the costs to people downwind, future generations, and other species. If polluters paid up front, there’d be a lot less pollution, but that’s not how the system works. Nor does the system have any way of telling businesses when the planet is running out of pollution absorption capacity. Hence, ceaseless growth in carbon emissions; hence climate change.
What we need to add to our economic operating system are boundaries and balance. Boundaries between what corporations can appropriate for short-term gain, and what we as a society must preserve for everyone. Balance between present and future generations, and between humans and other species.
This notion isn’t new. Writing in the 17th century, when commons were being enclosed left and right, John Locke made the case for private property, but with a big proviso – “that there be enough, and as good, left in common for others.”
Our 21st-century economic system must build that proviso into its code. The way to do that, I argue in my forthcoming book Capitalism 3.0, is to define the boundaries of modern commons and put trustworthy guardians in charge. When corporations trespass, make them pay. And use the revenue for the common good.