To avoid social, environmental, and economic collapse, the world must go beyond the standard choices of capitalism or socialism. That is the conclusion of a new report published on Wednesday from the US think tank Capital Institute.
The bipartisan think tank argues that both systems are unsustainable even if executed flawlessly, and that economists must resort to the “hard science of wholeness” to expose outdated views of both left and right.
Jan Smuts, who coined the term âholismâ in his book Holism and Evolution, published in 1926, defined it as âthe tendency of nature to form a whole that is greater than the sum of its partsâ. In the case of a plant, for example, the entire organism is more than a collection of leaves, stems and roots. The theory argues that focusing too closely on each of these parts could hinder understanding of the organism as a whole.
Viewed from this perspective, the capitalist tendency to isolate an economic process from its precursors and effects is fundamentally flawed. The Capital Institute, founded by former JP Morgan chief executive John Fullerton, says society’s economic worldview relies on breaking complex systems into simpler pieces in order to understand and manage them.
This traditional economic view could, for example, see automobile manufacturing separately from mineral mining, oil production, and the workers it relies on. Furthermore, this view may also fail to take into account the impact that automobile manufacturing has on the environment, politics, and economy of a region. Holism, on the other hand, would consider the entire cause-and-effect chain that leads to and from automobile manufacture.
The Capital Institute report, titled Regenerative Capitalism, emphasizes that the world economic system is closely related to and dependent on the environment. “The failure of modern economic theory to recognize this reality had profound consequences, not least global climate change,” it says.
A long chain of cause and effect
According to the Capital Institute, the consequences of this economic worldview are far-reaching, encompassing a myriad of challenges, ranging from climate change to political instability.
For example, the current capitalist system has created extreme inequalities, the report says. This, in turn, has led to a range of diseases including worker abuse, sexism, economic stagnation, and more. It could even be seen as partly responsible for the rise in terrorism around the world, the report said. In other words, this inequality has become a threat to the system that creates it. Without radical changes, the report warns, “the current mainstream capitalist system is existentially threatened”.
What is needed now, argues the Capital Institute, is a new systems-based mindset based on the idea of ââa regenerative economy, “which recognizes that the proper functioning of complex wholes like an economy cannot be understood without persistent, dynamic relationships”. between parts that lead to larger wholes â.
In practice, this can lead to an in-depth analysis of supply chains, studies of the impact of water use, circular economy initiatives, collaborative economic development work, or a variety of other sustainability efforts.
While some people associate holistic thinking with mystics or hippies, the worldview is measurable, precise and empirically confirmed. “Universal principles and patterns” of systemic health and development actually exist and are known to guide behavior in living systems from bacteria to humans, âthe report said.
Holism can also be used to study ânon-living systems from hurricanes to transportation systems and the Internet; and social systems including monetary systems â. Unsurprisingly, the theory underlies other scientific and social instruments such as systems theory and chaos theory.
A radical change
This holistic approach contradicts many long-held beliefs. For example, while decision-makers usually focus on finding a single “right” answer, holism focuses on finding balanced answers that address seemingly conflicting goals such as efficiency and resilience, collaboration and competition, and diversity and coherence. Viewed from this perspective, holism would not approach the world economy from a capitalism-or-socialism perspective, but rather from a capitalism-and-socialism perspective.
The report emphasizes the importance of innovation and adaptability to rigid structures and belief systems. It also embraces diversity, suggesting the importance of recognizing that each community is made up of âa mosaic of peoples, traditions, beliefs and institutions of unique shapeâ rather than trying to take a globalized, unified approach to change to be found through the long-term pressures of geology, human history, culture, the local environment and changing human needs â.
Ultimately, the report emphasizes that taking a holistic perspective emphasizes that we are all interconnected and connected to the planet, and therefore need to recognize that damaging any part of this web can end up damaging all other parts as well.
What would such a revolutionary change in business look like? The Capital Institute, which a White paper at the Center for Business and the Environment at Yale University said Tuesday that innovators and entrepreneurs around the world are already responsible for thousands of sustainability initiatives and movements that are helping to rethink capitalism, such as social enterprise, B Corps, impact investing, slow food and localism.
The report says that while some critics see these as “decoupled comfort activities outside of the mainstream capitalist system”, they are actually “in line with the framework of the regenerative economy.” In summary, it says, “These forces provide living proof that a new regenerative economy is emerging”.
Beyond movements of change, the institute points to a number of individual initiatives that show how the world could change for the better. For example Mexico Grupo Ecologico has campaigned to finance impoverished smallholders and ranchers and give them the economic freedom to maintain and regenerate their own land.
Similarly is Australia’s Bendigo Community Bank shares its net income with local joint ventures. It directs a portion of the community branch revenues into granting grants and enables local leaders to become active actors in their communities.
Community development is also a major concern for Chicago Manufacture renaissanceforging unusual partnerships between government, unions, educators, the private sector and civil society to create programs that support the region’s advanced manufacturing sectors.
According to Fullerton, there is great potential if society can change the way it thinks collectively: âThis is a monumental challenge that contains the promise to unite our generation towards a common goal. We now have a better understanding of what makes human networks healthy – that alone presents an amazing opportunity. It is time to act. Our actions today are sure to determine the nobility of our lives and our legacies. That is the great work of our time. “