What is new economics?

New economics broadly refers to multiple streams of thought and action that point out fundamental conceptual flaws in traditional economic frameworks of both capitalist and communist variety.

‘New Economics’ is more a process of intermingling challenges to conventional economics than an ideology. It draws on the legacy of those who have aimed to forge an ‘economics as if people mattered’. Today this is a challenge of bringing the material arrrangements of life and society more in line with systems that are both equitable and ecologically sound.

The various streams of ‘new economics’, ‘humanist economics’, ‘ecological economics’ are essentially part of a much wider process to embed the economic processes in social and ethical frameworks. Fundamentally, this means challenging the notion of Homo Economicus as the insatiable being. It is this model that has made ‘efficiency’ a veritable mantra of the industrial era. But as Hazel Henderson, the futurist and counter-economist, has pointed out, ‘Efficiency for whom? Efficiency in what time frame? Efficiency at what level in the social system?’

James Robertson, one of the leading thinkers in New Economics, insists that “economics can never be an objective science that is value-free. […] It must recognize that, because human beings are moral beings, the basic questions about economic life are moral questions”. There is a wide range of efforts now challenging conventional economics, many of which diverge in their prescriptions for a more meaningful economics. But the starting point of virtually all these challenges is ‘economics as if people mattered’ – the sub-title of Schumacher’s Small is Beautiful.

New economics is fundamentally a response to the fact that conventional economics:

• defines economic progress in ways that are destroying the very ecosystem that is its base;

• fosters progress of a kind that systematically transfers wealth from the poor to the rich;

• fails to see that the era of the ‘wealth of nations’ is over and the time has come for what James Robertson has called “a one-world human community”;

• virtually excludes ethical and spiritual values from the center of economic life;

• is rooted in the mechanistic and reductionist approach of the Western scientific paradigm.

We need a radically new economic rationality in which the development process is defined by sustainability, equity and participation.

New Economics focuses on the following aspirations:

1. To foster social and economic systems that encourage self-reliance and enhance the self-development capacity of individuals and communities. This does not mean self-sufficiency or isolation. The emphasis is on the capacity to co-operate freely with others or, as Robertson puts it, the capacity for cooperative self-reliance.

2. There is a need to conserve natural resources and restore the balance of global ecosystems. This is partly sought through economic systems organized through bio-regions. The best way to integrate economic and ecological goals is to decentralize the management of resources upon which local communities depend and give them effective say over the use of these resources.

3. The 21st century economy is visualized as a multi-level one-world economic system, with autonomous but interdependent component parts at all levels: persons and households, local economies, national economies, supranational groupings and transnational corporations. New Economics works for a system in which each larger unit is geared to enabling the smaller units within it to be more self-reliant and conserving.

4. At its core, New Economics is a striving to redefine ‘wealth’. One of the first steps towards TAMA (‘There Are Many Alternatives’) is the act of differentiating between money and wealth. In the process the New Economics stream engages in a thorough re-examination and redefinition of basic economic concepts like efficiency and productivity; dependence, interdependence and self-reliance; needs, wants and scarcity.

New Measures of Prosperity

At present, economic success and growth are measured almost entirely through concepts like Gross Domestic Product (GDP) – which accounts merely for the total material exchange in society and is blind to the dimension of actual social welfare and ecological sustainability.

This shortcoming has been addressed through the evolution of various devices like a sustainability index and other measures of social welfare, which include health, education, gender, justice and income equity.

Capitalism, Communism and the Turning Point

Even today, the claim ‘Another World is possible’ is dismissed as wooly by those who favor the old-style capitalist free market system, and as not sufficiently radical by the Left.

But, from the perspective of New Economics, both capitalism and communism have, in different ways, diminished the capabilities of multitudes of people and led planet earth to the edge of environmental collapse.

It is now more widely recognized that the world has reached a watershed in economic thought. The task of drafting this new map of the real world is fundamentally a normative endeavor which calls on us to consider just what is meant by ‘civilization’. Is civilization the sum total of technological and material achievements? Or does it have more to do with the ceaseless striving for higher levels of being? The search for answers to these questions is a perpetual work-in-progress. New ideas and visionary ideals don’t pop out of a box complete with detailed assembly instructions. We inevitably grope our way towards them, recognizing and working on the flaws as we go along. For all its advances over the last two decades humanist or new economics is still in this groping stage. At the core of this endeavor is the quest for a radical reformulation of what it means to be human, which is no small task.

It involves a greater valuing of the distinctly human quality of self-awareness as a gateway to a higher, spiritual domain. Thus, Schumacher’s insistence on the need for humanity to regain a faith in meaningful existence, a purpose of life beyond self-preservation and gratification.

Some activist-philosophers insist that all these efforts signal a profound turning point in human history one that could mark the expansion of higher human capabilities like love, compassion, cooperation and non-violence.

New Economics Substreams

- Challenging How Money Works

Efforts for fundamental monetary reform are a major sub-stream of New Economics. Such efforts, concentrated mostly in the countries of the North, question the very nature of money, how it evolved and how different forms of money might now be possible. This includes efforts to find ways of introducing interest free money and exploring the benefits of community currencies. Over the last twenty years there has been a proliferation of alternative and complementary currencies which aim to rebuild community and create a protective buffer against the vagaries of the global economy dominated by the fickle flow of conventional money.

At yet another level, there are efforts that accept the intrinsic nature of money as it is, but attempt to contain the damage done by the ‘Global Casino’ of international currency trading. There is a sustained international campaign demanding that all nations insitute a Currency Transaction Tax which aims to reduce speculation on the global money markets and also raise funds for social and development purposes.

- Ethical Investing

Then there is the rise of Ethical Investments or Socially Responsible Investing (SRI) in Western Countries. SRI is about both individual and institutional investors seeking to put their money in companies that satisfy various ethical standards – based on concerns about environment and human rights.

Such investments are defined as any area of the financial sector where investors make decisions based not merely on the search for profits, but on values relating to social, environmental and other ethical concerns.

- Balancing cooperation and competition

There is a growing interest in understanding the functioning of a “Gift Economy” in earlier periods of history. This concept brings into play a more wholesome balance of the finer human tendencies – such as need to share, reciprocate and cooperate.

Perhaps the more far-reaching manifestation of this trend is the Free Software and Open Source movement. Here, “free” refers to the freedom to cooperate, collaborate and share in the interest of enhanced creativity and more efficient problem solving. Richard Stallman, a one time MIT engineer who launched the concept of free software in the mid-1980s, has set the following criteria for software to be considered free:

• You have the freedom to run the program for any purpose.

• You have the freedom to modify the program to suit your needs. To make this freedom effective in practice, you must have access to the source code.

• You have the freedom to redistribute copies, either gratis or for a fee.

• You have the freedom to distribute modifies versions of the program, so that the community can benefit from your improvements.

- Fair Trade

New Economics is engaged with promoting fairer trade and also going beyond it by locating these initiatives in a wider struggle for more equitable relations in the global economy. As the activists of the Guddalur based « Just Change » organization have found, many fair trade groups in the North lack this larger view and are somewhat narrowly focused on getting a better price for producers. The New Economics perspective aims to address the basic power relations between labour and capital.

- Mindful Markets

Underlying all these trends is a determination to redefine the workings of markets. The New Economics stream celebrates the “bazaar” as an ancient and reliable mechanism for people to gather for multiple purposes from the social and cultural to commercial. New Economics is emphatically not anti-markets. It does, however, have a sharp critique of the narrow and negative view of the human being on which the ‘free market’ ethos is based. For instance, the noted proponent of alternatives, David Korten, has called for systems which enable markets to be more mindful.

Each of these areas is a separately rich topic for study and activism the world over. In this file we will focus on tracing the historical journey of and contemporary initiatives devoted to questioning the conventional economic paradigm and posing alternative perspectives.