Monday, October 17, 2011

After Wall Street, an Economy of Multiple Values and Measures

We are in need of a new kind of economy. The author suggests an economy that stresses creativity, multiple values, direct democracy, diverse thinking.
This article focuses upon on the issue of multiple values and measures for a new economy, how this is different from capitalism, the system that dominates in the USA, and also socialism or a social-democratic type system.
A third system is coming; it is not greedy capitalism, and it is not socialism or statism either. The next system is a “diverse economy” of diverse measures and performance goals, diverse social organization, diverse ownership, diverse firms, and a diverse market. It is the product of a thorough application of the concept of “diversity” to economics, business and finance, and it leads to a completely different system, though it logically follows from the existing one.
This new economy could also be called a “social metric economy”; it appends pure money as the sole performance measure of a firm and adds many other fundamental measures of success; when investing in a company these measures are utilized and when buying products from a business these measures are applied too. The metrics are social because we are using performance goals that concern all of society – local communities, investors, employees, consumers.
Pursuit simply of money and pure profit neglects a myriad of other values and issues; it creates a highly one-sided system. A metric system requires the new metrics; firms would voluntarily join “industrial leagues” and follow the rules of the game. Examples of the new metrics might include: standard measures of efficiency, raw production and consumer data, but more importantly: product quality, innovation, environmental management, charity, community relations, customer relations, employee relations and reward, equity, family support, community service, marketing and advertising ethics, planetary cooperation and aid, measures of long-term investment, raising product standards and many more things. All of these kinds of social metrics would set beside money, we would have a full list of measures to consider rather than one sole measure of company performance, and this would limit the obsession and myopia of money.
This third system would create many new things and behaviors:
•           Economic leagues of consumers, investors, communities that develop their own measures to rate company and product performance. These would force businesses to work with the rest of society.
•           Industrial leagues would arise where the metrics are mandatory and even sacred.
•           A new type of stock exchange would appear helping companies go metric and listing their securities for sale.
•           New metric style investment banking arises.
•           Exploration of many ownership forms rather than the narrow band that exists today, the idea would be to create diverse equity or “dequity”. Cooperatives, democratic shareholding and other forms of direct democracy in business are encouraged.
•           A fairer market would begin, one not dominated by monopolies and huge corporations
•           A new kind of fiscal policy would appear that mixes both conventional fiscal tools with metric ones, and gives focus to small business, localities, the middle class and working class.
•           There would be a changing role for government as regulation would largely pass to individual companies and industrial leagues which self-regulate through their metrics. Government regulation would now be on national issues and those of critical importance and with criminal penalties.
•           Further, a new citizen will be born who thinks in the new terms of metrics and diversity as an investor, owner, employee, consumer, citizen

The diverse economy or social metric economy is a third system that evolves out of these fundamental philosophic concepts: Diversity and Measure and Direct Democracy.
Such an economy is neither capitalist nor socialits. At the same time, it retains the historically proven techniques of capitalism, at least “ideal” capitalism – the free market, competition, innovation, cost reduction and so on. The new economy would thus be an evolution on capitalism, even taking its proclamations about “measure” to heart and following it to its logical conclusion, that is, measuring everything, and recognizing that money is simply one kind of measure among many — a supply-and-demand measure! And the new economy takes current capitalism’s boasts of diversity and applies diversity to all things comprehensively, and arrives at something much better, much freer, open, creative and democratic.
So the new economy appreciates the critique of the left in regards to money and greed, monopolies and control, social safety nets and general well being. But it does not deduce the solution of government or party control. The new economy puts the measures right inside the firm, not in a government bureaucrat’s office. With the metric as a performance goal within a company, you do not need people on the outside making daily decisions, for they do not understand business in general or any specific business. The diverse economy accepts the left’s critique but not its solutions.
The role of the state in the new economy is for the regulation of only extreme issues and national concerns that one industry cannot manage itself. Laws of course would remain in place to control and prosecute wrong doers, but the bulk of the government’s focus would shift to larger issues and more extreme transgressions. The new economic system will handle the daily issues of safety, quality etc.
The state would concentrate on fiscal policy and national economic planning. The state is not negated as in various conservative or Tea Party theories; the state has a role to play, however, not in the daily operation of business. It cannot replace the firms, leagues and citizens for they are the active and direct forces making millions of decisions and actions daily.
Today, we are indeed in a strange and terrifying situation.
Monetary capitalism seemed invincible, world communism fell before it. Capitalism grew, it expanded, it bloated and then it burst. Without the boundaries to free-market thinking, de-regulation or laissez faire, its essential nature was given free rein, and its great inner weakness has been shown for all to see, and not just to policy makers and economists but in a naked and disturbing way to everyone on the planet.
Specifically, why did capitalism fail us in 2008? Very simply, de-regulation spread very bad mortgages across the planet in the form of mortgage-backed securities. George Bush, the SEC, the Treasury, the Federal Reserve sat by and let it all transpire. Why? Profit, greed, selfishness; there is no other possible answer.
How would a metric or diverse economy have prevented the collapse in this situation?
First of all, public metrics on the basic and raw data would have flagged the bad mortgages immediately. Companies as part of financial leagues would have reported the honest, transparent truth.
And if leagues were hesitant, then consumer, investor and community leagues would have investigated and published information to all. Greed is not a value in a social metric economy. Overall metric health is the key concern.
Money operates differently in a metric economy. In the capitalist economy money is the sole measure. More, it is claimed as the true measure, and further, it is a total measure of all value!
But in fact, money is only a measure of supply and demand. Look at the rise and fall of oil prices. The Saudis pay $2 a barrel for their oil; we pay $86 (at the time of this writing). Supply and demand is the essential measure of money. More, if you examine the $2 per barrel cost, you will find even here that supply and demand determines prices of equipment, labor, maintenance and power.
There can be “objective” measures of a product for example but these would include scientific measures of labor time, materials, power usage and etc. But money and the real valuations in a monetary capitalist system have nothing to do with that, these are statistics for plant managers and engineers but not for CEOs or CFOs or MBAs.
The diverse economy has a diversity of measures and goal, that is, metrics. This set of metrics is more ethical, qualitative, practical and human than singular money. They demand not only higher standards but more standards serving the needs of consumers, investors, employees, communities.
Money sunders the “whole” of human values, the metric set in the form of some equation will bring the “whole” back to us, and unite the whole of society through the leagues. The new MBA or “Metrician” of Business Administration thinks in wholes, just as the average citizen as investor, consumer, owner or worker must.
Money has an important role to play as a supply and demand metric. Its job is to tell us about the market, about need, about the immediate value of things, about the immediate direction of things, the flow of resources dictated by purchasing.
The metric economy utilizes a free market because a state system of investment decision making and product distribution is a disaster, as the 20th century has shown. Thus, we have buying and selling of products, securities and firms, but we use metric valuations for prices of goods or a firm’s assets and even salaries and wages. We merely introduce an additional dynamic in the marketplace having to do with the quality and standards of things. The existing market of buying and selling remains, the dynamics of price competition between firms remains, innovation remains and so on.
The exact formats for measure and combing measures with money are diverse, depending on schools of thought, specific industries and even general economic climate. Various equations and approaches can be devised; even this is subject to our diversity and our endless creativity. But these are particular details of the mechanics within such a system, a subject for another discussion.
In this new economy, metrics will be ubiquitous, the government can even provide a “GMP”, gross metric product, for the entire economy, and not just a current GDP which is monetary. A GMP summing up all of our metrics will give us a much better picture of our wealth, our “metric wealth” at any given point.
Further, fiscal policy is appended by the dynamics of the metrics. In a metric economy the role of government moves up to a higher level of overall national planning, overall fiscal policy, overall representation in the global arena, and overall regulation of critical national issues that industries themselves cannot provide. The government leaves metric supervision to the firms and leagues on the axiom that you “cannot legislate ethics”, even in the realm of economics you cannot legislate values.
For hundreds of years a war has existed between capitalism and the state. Capitalism tries to evade control by hiding information, lying, breaking the law, suppressing law suits and bribing politicians. This war between business and government is endless, and can never be won because there is no internal control over the behavior of capitalism which is a very powerful force. A new economic system would completely change the internals of industry so that it would pursue acceptable social values and human values and environmental values. And this would free government to focus on other issues.
However, the present crisis could give us a unique opportunity to use the power of the state to initiate changes toward metric economic behavior. The government could demand that financial, auto, housing and energy corporations begin using new metrics in their reporting in exchange for $3 trillion of the people’s money. Government equities obtained during bailouts could be sold on metric stock markets. The state could legalize and support the formation of economic leagues for industries, consumers, investors, employees and communities. All government contracts could require that companies use metric reporting standards. And many more ideas could be applied.
In this way the government could begin the reform of conventional corporations, and encourage the creation of a new movement of entrepreneurs, new corporations and cooperatives. The problem with the present administration’s strategy is that it ultimately has no power against CEOs or corporations. The state cannot run the economy because it is not a business, it must ultimately rely on the present power holders. But with a strategy of building a metric economy, one can create a second economy, a movement in civil society, forming a dual-economy situation. Further, one can create a battle in the camp of existing firms for control, a reform struggle waged by consumers, investors, employees and communities.
In this way the government can help the formation of a metric economy in civil society; then the state can remove itself as the economy returns on its new basis. Legislation would include temporary powers and deadlines for handovers.
A new economic system is coming. A primary principle of this new world is diversity — diversity of ownership, a diverse market, diverse firms, diverse performance targets, diverse leagues. With these principles in mind, a social metric economy will be built by people who are not greedy or selfish or power-seeking, but are interesting in the quality of their products, creativity and helping others.

Free Ebook: For a New Economics

In the current economic crisis we might want to consider a new economic model and leave behind various systems that are no longer 

Version 2 of this free ebook adds new ideas on creativity, something 
desperately needed for these times.

In the work are 34 articles on various topics of economics. The primary themes of this book are around:

-     A creative economy and creative methods

-     Appending money and profit with other values and measures

-     Using the approach of diverse thinking to analyze economic problems and suggest solutions

-     And the promotion of direct democracy and broad equity for employees, investors, communities, consumers and more.

This thesis has evolved over the last 3 to 4 years.

This economic framework is open ended.

Cage Innoye

link to ebook:

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