COMMISSION COMMUNITY

INTRODUCTION
Since the turn of our new century the debate over globalization has evolved into a broader debate about the future of the human family on our small, endangered planet. The cutting edge of this new, more sophisticated debate emanates from Brasil. The elegant city of Porto Alegre is not only a gateway to the beautiful historic state of Rio Grande do Sul. This city, which has welcomed immigrants for 300 years, now hosts the World Social Forum where thousands of leaders of the world’s civic society meet annually to re-envision more humane, eco-friendly, sustainable forms of globalisation. The Swiss city of Davos hosts the World Economic Forum, where heads of state meet with CEOs of the world’s biggest transnational corporations to expand export-led economic growth, world trade, open markets, privatization and deregulation, according to orthodox economic textbooks and the now-famous “Washington Consensus.”

Porto Alegre, on the other hand, is the home of the slogan “Another World is Possible” and the growing ranks of creative thinkers and doers. These grassroots globalists are determined to re-shape current economic globalisation to meet the needs of the world’s 2 billion people left out of “trickle-down” economic growth. This growing coalition of global citizens represent civic organizations working for human rights, social justice, land reform, empowerment of the disenfranchised, equality for women, minorities, indigenous peoples, political participation, democracy, access to credit, investment and support for local enterprises and home-grown economic development. These agendas are seen as synergistic and essential for creating ecologically-sustainable livelihoods and communities, re-designing towns and cities around people rather than cars, “greening” industrial products and services, shifting to renewable energy and resource-use, recycling and pesticide-free foods and agriculture.

To the old guard in Davos, only more of the same “Washington Consensus” economic growth can lead to the promised land of more equitable, ecologically-sustainable development. Their World Economic Forum meetings now ring with the same visions: poverty reduction, better healthcare, education, more democracy, a cleaner environment – which they see as best achieved by pursuing the holy grail: economic growth. Economic and technological globalisation was always a project of global corporations, financiers and their political allies in mature industrial societies. The blueprint was the “free” market enthusiasms of Ronald Reagan and Margaret Thatcher. This Anglo-Saxon model of capitalism was followed by the ”Washington Consensus” policies we still see today.

The World Trade Organization (WTO), NAFTA and the incipient Free Trade Area of the Americas, all follow the same recipe for export-led GNP-growth, open capital markets, convertible currencies, privatization, deregulation, increasing world trade. Even though a welter of evidence is now in – from the 1997 Asian meltdown, Russia’s default and now that of Argentina, the ideologues who believe in this form of globalisation still promote these policies with the familiar cry: TINA (There Is No Alternative). As psychiatrists know, people who cannot conceive of any alternatives to their current behavior are deemed to be suffering from clinical depression. And scientists note that it is illogical to imagine that repeating a similar experiment could lead to dissimilar results. Clearly, the clash of these two different visions of humanity’s future must be rooted in very different worldviews, assumptions and belief-systems. Unpacking these differing paradigms of development and economics can help expose the roots of the debate about alternative paths to our common human future. This battle of paradigms is what this book is about.

For me, the battle began in the 1960s, when I helped found a civic group in polluted New York City, Citizens for Clean Air. Mostly, young mothers like myself were worried about our children’s health, the increase in asthma, toxic lead in gasoline fumes and paints, burning of garbage in thousands of apartment house incinerators, factory and power plant smoke, asbestos in construction – as well as traffic congestion, airport pollution and noise. We persuaded the news media and the City government to broadcast a daily air pollution index in all weather reports. We had block captains in all five boroughs of New York City and became quite famous after persuading a public-minded advertising agency, Carl Ally, Inc. to help us air public service ads in all New York media. After sacks of mail and small donations from citizens and many “hate” letters saying that our campaign would hurt New York’s economy, many corporate public relations officials challenged me. I was told that I didn’t understand economics and that Citizens for Clean Air’s proposals (to enforce pollution laws, ban asbestos, take lead out of gasoline and paint, increase auto fuel-efficiency, redesign the city for more pedestrian streets and public transport and eventually shift from fossil fuels to renewable resources and energy) were all unrealistic and un-economic.

Indeed it has taken over thirty years for these alternative technologies and design principles to move into the mainstream. The delay has not been due to the unavailability of these cleaner, greener, more people and eco-friendly technologies. Rather, huge industrial sectors comprising thousands of corporations have impeded the transition. Such companies and trade associations use lobbyists, campaign contributions to compliant politicians, lawsuits against civic groups to intimidate protest and barrages of advertising and public relations on mass media. The long war of paradigms continues over this great transition from primitive industrialism and its unsustainable forms of economic growth to more sustainable paths to development. The battles still create ranks of winners and losers within and between countries in our now interdependent world. For example, the battle to ban asbestos and the cancers and other health problems its use has caused, resulted in 200,000 claims since 1966, the bankrupting of dozens of major companies and insurance liabilities for one third of the expected final bill of $200 billion. The final toll of deaths, injuries and sicknesses from asbestos exposure will not be known until all complaints (ranging from 1.1 million to 2.5 million) are adjudicated. Similar stories involve the battle to ban lead from gasoline and thousands of products after research began in the 1960s in the USA demonstrated that lead levels in children’s bodies were correlated with stunted intellectual development and other neurological damage.

Scientific understanding slowly emerged of how early industrial processes depleted and polluted planetary and local eco-systems, as well as their adverse impacts on human health, welfare of communities and cultures. These new findings present a powerful challenge to the “Washington Consensus” model of economic development and globalisation. Today’s realities of global climate change, desertification, water pollution and shortages, loss of forests and biodiversity, social and cultural disruption, growing poverty gaps are forcing the debate about re-shaping globalisation beyond mainstream economic orthodoxies.

Sophisticated computer models and satellite imagery show clearly the anthropogenic effects on our planet of the now 6-billion member human family. Risk-assessment models calculate the climate-risks of nuclear and fossil fuel based energy technologies, some of which are uninsurable and can only be insured by governments – such as nuclear power plants. Insurance companies, led by giant Swiss Re, no longer insure against climate-change related weather disasters, and have divested their portfolios of fossil fuel-based companies in favor of solar, wind, hydrogen and fuel-cell companies. Innovest, a financial services firm with offices in Toronto, New York, London and Sao Paulo, uses computer models to assess the environmental risks of corporations and to construct mutual fund portfolios of “clean green” investments in new technologies.
Socially-responsible investments in the US alone reached $2.3 trillion in 2001, some __% of the US capital market. Since the Wall Street “dot com” bubble bursts and the terrorist attacks of 2001, investors have lost trillions of dollars. As the ENRON and corporate crime wave scandals broke, millions of employees have lost their jobs, retirement nest eggs and life savings. At the close of 2002, US securities markets remained depressed as frightened small investors pulled their money out of mutual funds and invested their dwindling assets in housing. Horrified by the rampant greed and drive for profits, which had over-ridden fairness, honesty, accountability, fidelity to laws and legal commitments, investors lost trust in US capitalism.

Significantly, while small investors saw their pensions and individual retirement plans vanishing, funds flowing into socially-responsible mutual funds increased by 3%. Newly cautious, these investors wanted the reassurance of the tighter screens on corporate governance, the auditing of social and environmental performance such funds offered. Socially-responsible business is well-established in Brasil, with leadership by the Instituto Ethos de Empresas e Responsabilidade Social, founded by Oded Grajew, and other groups; the leadership and management development institute, Amana-Key Desenvolvimento & Educacao of Sao Paulo (on whose faculty I have proudly served), the small business association SEBRAE, which supports local and community development, and many others.

The Brasilian Agenda 21 provides an innovative roadmap for progressive sustainability for all sectors, spearheaded by Aspasia Camargo, former head of Brasil’s Ministry of Environment, and the Getulio Vargas Foundation, where Dr. Camargo presides over the International Center for Sustainable Development. Today, Brasil and all of Latin America have a historic opportunity to forge the new path to sustainable equitable human development and to spearhead the transformation of primitive industrialism by leapfrogging these unsustainable models of the past. China too is now learning from the mistakes of the old industrial revolution and adapting what is relevant in the old European ideologies of capitalism and communism to forge a Chinese model of development based on its own 6000 year-old cultural heritage. In the same way, many other developing countries are re-valuing their own cultures and experience. This “cultural DNA” is the real wealth of nations: the values of social cohesion, human solidarity, respect for life that are at the core of creativity, endurance, initiative and innovation in all cultures. Such core values and ethics can be documented, as in the 16 principles of The Earth Charter (www.earthcharter.org), in the Declaration of the Parliament of the World’s Religious (1993), The Prague Declaration (2001), now being explored by the World Commission on the Human Dimensions of Globalisation, based in Geneva. These common core values and ethics of all humanity, enshrined in the treaties and norm-setting work of the United Nations since 1945, include the Universal Declaration of Human Rights, are documented in this book. In 2002 the historic ratification of the International Criminal Court by most members-states was shockingly disrupted by my adopted country, the USA.

The debate about globalisation in the next few years must address the challenge of the USA as the world’s single military superpower and the Bush Administration’s imperial ambitions and unilateralist policies. The policies of the USA: the threats of war on Iraq; the crude rhetoric naming countries – Iraq, Iran and North Korea – as an “axis of evil”; the arrogant calls for all countries to line up “either with the USA or against us;” the official document of September 2002 claiming US right to preemptive strike on other nations – not only contravene international law and the UN charter. They create a dangerous climate and precedents that risk emulation by other states, as I pointed out in my editorial for InterPress News Service, “Wanted: Regime Change in the USA” (Sept., 2002, see my website www.hazelhenderson.com).

The global backlash against this reckless US unilaterlism is leading to widespread anti-US public opinion in many countries, including among allies, Britain, Germany, France and others of the European Union. North Korea took the opportunity of US preoccupation with war preparations on Iraq to announce its possession of nuclear weapons and re-start its own nuclear capabilities – hoping to bribe the US into further aid and a long-sought non-aggression pact.

Signs of military over-reach are everywhere – despite US Defense Secretary Donald Rumsfeld’s assurances that the US military (the largest the world has ever seen) can fight major wars on two fronts simultaneously. In reality, the US is losing its global war on terrorism; Afghanistan is descending back into warlordism and reliance on opium poppies as its major export, while the Taliban are returning: AlQaeda still operates from its many new bases in Pakistan and many other countries, including in Europe and the USA as well. The USA illustrates an even deeper set of contradictions, all signaling a lack of systems thinking among the ideologues of laissez faire globalisation. In the West, these interdependencies are recognized as ‘what goes around – comes around.” In the East, the same phenomena are known as “Karma.”

Let’s examine some of these karmic effects of today’s globalisation, now surprising the US and other players in today’s still unregulated global casino. The USA, globalisation’s most fervent promoter, has up to now, reaped the greatest benefits, The dollar became the world’s defacto reserve currency – over valued today by between 15-25%. This has led to unsustainable US trade deficits, the sucking in of the lion’s share of world exports and increasing inability of US-based companies to export. The USA’s long ride on the over-valued dollar is now coming to an end as its trade deficits continue growing to unsustainable levels (almost 5% of US GDP). Until recently, countries which export to the USA (China, Taiwan, Japan, Mexico and many others) kept accepting US dollars in payment and buying US Treasury bills for their currency reserves. This system, with the USA absorbing so much of the world’s exports and capital – trying to serve as the world’s “locomotive” – is now bogging down in the weakening dollar (currently below the euro).

The US Federal Reserve cut interest rates to 1.25%, the lowest in 40 years in order to try to hype the domestic economy – so far with little success. The Japanese “deflation malaise” may be in store for the post-bubble USA as well. Countries holding their towering piles of US dollars in their currency reserves are diversifying into euros (now becoming the world’s alternative reserve currency). This was predicted prior to the euro’s launch on January 1, 1999 by Victor Maruri, PARIBAS head of Latin American investment banking.

Private holders of US T-bonds and stocks look on with alarm as the dollar continued to weaken and the interest earned approached zero when corrected for inflation. These private investors are worried about the US economy’s fundamentals: historically high levels of corporate and consumer debt; many large states facing huge budget shortfalls due to reckless tax cutting, over $1 trillion of unfunded corporate pension liabilities in the auto and other “Old Economy” sectors; the corporate crime wave continuing to undermine confidence in auditor’s reports and stock markets; the Bush “hawks” foreign strategy of playing global policeman; preemptive strike plans on Iraq; warring worldwide terrorism and evil leading to ever-larger deficits – and the unsupportable US trade deficit. It is only a matter of time before more private investors switch to euros, Swiss francs and other investments – where interest rates are higher and fundamentals are more favorable.

US officials and economists say that productivity is higher in the USA than Europe – advising investors to keep betting on the US economy. However, closer examination reveals the different ways that Europe and the USA measure “productivity” (the US method flatters the USA – Europe uses a broader measure). When these methods are compared, the difference in productivity is trivial. Add to this, that US capital productivity in the late 1990s was negative – i.e., trillions of dollars were wasted in “investments” in half-baked dot com businesses – during the bubble. Indeed, a recent survey of 300 global fund managers by Merrill Lynch & Co found some two thirds considered Wall Street the most over-valued of the world’s top five stock markets.

The global economy was always a power game – and currencies are becoming the weapons of choice. Revulsion against all weapons of mass destruction, as well as land mines and small arms are producing a global backlash. Bullying by military superpower – the USA – is producing resentment and may consolidate blocs of opposing nations – and even more terrorist attacks. Even pro-business advocate Jeffrey Garten, Dean of Yale University business school in The Politics of Fortune (2002)urges US CEOs to criticize Bush’s unilateralist policies for imperiling global stability. The attacks of September 11th showed that the 21st century is the age of “asymmetric” weapons – where computer hackers, money-launderers, assorted terrorists’ gangs and even currency traders and OPEC now hold a new balance of power.

For example, the USA, which blocked and then supported China’s entry into the WTO, may regret forcing “Washington Consensus” policies onto the WTO. China must shortly make its currency the yuan convertible, and further open its markets. Today, China is fast becoming the world’s newest superpower – and supplier of many of the world’s goods – producing 50% of cameras, 30% of air conditioners and TVs, 25% of the washing machines, 40% of all microwave ovens sold in Europe, and fast moving into computers, mobile phones and DVD players. China views its low-priced exports as a boon for the world’s poorer consumers and is now seeking investment opportunities in other developing countries for its huge reserves of US dollars.

The US now fears global deflation. Yet lower wages and cheap export platforms used in China and elsewhere by US multinationals were supposed to be one of the great advantages of globalisation. These global supply chains were touted as taming inflation and hyping economic growth. Most central bankers still fixate on inflation, not deflation. Now the US Federal Reserve is bracing for deflation while its main tool of choice – interest rate adjustments – has stripped the gears of monetary policy. Will the Fed fight deflation by “talking down” the dollar? Or – another surprise – when China shifts to a convertible currency (now pegged at 8 yuan to the dollar) will the Chinese yuan (now undervalued) lead to the dollar’s further devaluation? China has already become the locomotive of the Asia-Pacific region and is seeking closer ties with Brasil. As sages have said: “Beware of what you ask for – because you may get it.” What will happen to Bush’s “global policeman” ambitions then?

Today, the world stands at a significant choice point:

1) a continuation of the Westphalian, competitive nation-state system of sovereignty and national interest-based policies – and a US-led open-ended global war on terrorism, backed by TNC’s and other private-sector interests?

2) a continuation of the UN-based 57 years of building multi-lateral, cooperative, legal regimes to address global issues that can not be solved by any nation acting alone: globalized epidemics, terrorism, crime, money-laundering, financial meltdowns and instability, increasing poverty and information gaps within and between countries – climate and ecological disruption, species extinction, loss of forests and biodiversity and peace-keeping in a world of increasing non-state actors?

These two radically different paradigms and approaches to international relations and governance will drive our strategies for shaping globalization and the values, goals, ethical norms, standards and regulations to steer humanity toward more equitable, ecological and socially-sustainable human development, as I outlined in Building A Win-Win World (1996).

TRANSITION PATHS TO SUSTAINABILITY: INFORMATION, ENERGY AND MATTER

This transition of industrial societies toward ecological and social sustainability is under way amid widespread disarray. Cognitive dissonance and confusion over definitions, criteria, political and economic decisions – not to mention moral and cultural stances – are part of all paradigm shifts (see Figure 1, Post-Cartesian Scientific Worldview). The paradigm shifts that “sustainability” implies are unprecedented. Sustainable development is commonly defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. For such a paradigm shift to occur, whole cultures and societies will need to embrace a planetary and biospheric view – beyond their anthropocentrism. Further, as explored by Robert Wright in Moral Man (1994) and Mauro Torres, MD in A Modern Conception of Universal History, (TM Editores, Bogotá, Colombia, 1998), humans will need to re-examine their biological and cultural evolution as a continuum. All societies need to extend such concepts to political democracy, social equity, economic efficiency, environmental preservation and cultural diversity, as described by Elise Boulding in Toward A Culture of Peace (2001), as well as by Barbara Marx Hubbard in Conscious Evolution (1999) and Riane Eisler in The Power of Partnership (2002). In my Building a Win-Win World (1996), I claim that standards of sustainability must include the extension of non-zero sum human interactions, i.e., win-win games and the evolution of human cooperation. Thus, game theory is a more useful framework than today’s prevalence of economics, which emphasizes competition (see Figure 2, Full Repertoire of Human Behavior).

Both competition and cooperation are essential in human societies, but their content and modes are changing in today’s shift toward global interdependence. As ecological and social niches are filled, competitive, win-lose strategies – which were ideal for lower population densities and unexploited environments – begin to fail, as discussed on p. 18. Thus, today’s globalization of markets and technologies rooted in such competitive economics often becomes “lose-lose,” cut-throat competition – which leads to the kind of corporate crime wave we see in the US, or leads to “winner-take-all” election outcomes. Other effects include destructively over-efficient fishing boats, which collectively have led to collapses of fisheries, not to mention the marginalizing of whole countries, by-passed by information and financial networks.

Within one generation, according to the Living Planet Index assembled by the World Wide Fund for Nature and the London-based New Economics Foundation, around 30 percent of Nature’s productive capacity has been lost. A total systems view of productivity – beyond economics and GNP-measured progress is shown in Figure 1 on p. 11. A report, Pure Profit from the World Resources Institute (2002), focuses on ecosystem risks overhanging the balance sheets of many companies, for example, in the energy, chemical, pulp and paper industries, all part of the early industrialization process.

As I point out in Chapter I, today’s globalization of economies, finance, markets and trade is driven by two mainsprings. The first is technology which has accelerated innovation in telematics, computers, fiber optics, satellite and other communications; their convergence with television, global multimedia, electronic bourses for trading stocks, bonds, currency, commodities, future options and other derivatives; and the global explosion of e-commerce and the Internet. All of this was described by markets and media as the “new economy.” The second is the fifteen-year wave of deregulation, privatization, liberalization of capital flows, opening of national economies, extension of global trade and the export-led growth policies that followed the collapse of the Bretton Woods fixed currency-exchange regime in the early 1970s. Evidence shows this kind of globalization is unsustainable and increases poverty gaps, social exclusion, pollution and depletion of resources.

In this book, I have summarized many of the sensible, innovative proposals that civic society groups have advanced. The World Social Forum has provided valuable institutional support for elaborating such proposals. The landslide victory of President Luis Ignacio Lula da Silva and the widespread support enjoyed by his Parti Trabadores, founders of the World Social Forum, suggests that many of these innovative proposals will find favor in Brasil. For example, widespread skepticism about the Free Trade Area of the Americas (FTAA) may revive MERCOSUL as an alternative to the US-dominated FTAA. Not surprisingly, globalization has also strengthened social movements, including those for human rights, feminism and environmentalism. All joined forces with labor unions in opposing the World Trade Organization (WTO). Reactions to globalization, and to “western” technologies and ideas have also included rising fundamentalism (Christian in the USA, Muslim in many countries) and new searches for identity in ethnicity or nationalism - and the conflicts these often engender. These tensions were exploited by AlQaeda and other Islamic groups opposed to US oil-dependency policies in the Mid-East.

Globalized electronic markets offer a “fast-forward” view of what we can expect – even after the collapse of so many companies after 2000 in the aftermath of the Wall Street “bubble. As described in Chapter I, over half of Business Week’s one hundred biggest global corporations in 1999 were in information and financial services. They unwittingly accelerated the “digital divide” in their competition for market share. The dominance of the below-full-cost price system (today's prices still do not include social and environmental costs) still expands financial markets. Metcalfe’s Law describes how “network effects” of the global Internet can lead to monopolistic expansion, as with Microsoft, mega-mergers in finance and media – the “winner-take-all” syndrome. Most large corporations in the “smokestack” industrial sectors bought electronic technologies and software to increase their energy and materials efficiency. However, these technologies are extremely energy and materials intensive – produce an array of toxic wastes in their production and disposal – therefore lack systemic efficiency.

Today’s world trade accounts for less than 10 percent of the twenty-four hour global currency trading of US 1.5 trillion every day – another bubble de-linked from the economies of “Main Street.” The “digital divide” begins with offshore tax havens as described in Chapter I. In 2000, Former US Treasury Secretary Larry Summers, together with the G-7 and the OECD, began to crack down on money laundering, drug kingpins and tried to shut down tax havens. Before the terrorist attacks of 9/11, President G.W. Bush had opposed this crackdown, but soon changed his mind – to pursue AlQaeda financing. The corruption and disordering of the world’s money-systems makes barter and counter-trade, payments unions, such as existed in the former COMECON countries, more attractive. Some 25% of world trade is conducted in barter today and electronic barter companies are flourishing, as described on p. 51.

All traditional economic models are money-based and rooted in concepts of materialism, scarcity and therefore competition. Information on the other hand is abundant and non-exclusionary. If you give me information, you still have it as well. Sharing information creates synergy, innovation and abundance. This is why bartering; formerly a local phenomenon of traditional societies (and still used by some 2 billion people who are marginal to the world’s money economies) is now going high-tech. In Argentina, barter is a necessity, with millions now trading with each other at flea markets and increasingly over electronic networks.

There are two ways that humans transact (see Figure 3, Two Ways of Transacting): 1) via money-systems and currencies, which are still creating artificial scarcity and reinforcing competition (e.g., via the rationing and steering of credit and restrictive monetary policies, high interest rates, etc.); and 2) via all forms of barter from local to corporate barter, counter trade, payments unions (familiar to Eastern Europeans). Therefore, as we devise reforms for the international financial architecture, banking and money-systems, we must keep in mind that today, high-tech barter and freestanding electronic platforms are bypassing malfunctioning money-systems.

Barter has been the province of the 2 billion humans not fully part of monetarized and urbanized sectors. Countries use payments unions, while corporations routinely exchange an estimated $1 trillion worth of goods and services annually, both domestically and internationally. Because all these barter exchanges are made by agreements, contracts, letters of credit and local scrip currencies, etc., i.e. information, their value is not tracked well in conventional monetary statistics. Even the use of reference currencies is not necessary. Many of these barter exchanges involve 2, 3, 4-way or more commodity transactions. Barter is a bedrock of sustainability because it more fully utilizes all resources, through second-hand use, sharing and matching unemployed people with local resources and services as former Mayor Jaime Lerner demonstrated in Curitiba.
Barter in wider areas was inefficient – and cumbersome – prior to computers and the Internet. Today, it’s a snap – and barter has several advantages over currency-based trading. Firstly, barter enables resource and commodity based economies to trade directly with each other – without first needing to earn or hold foreign exchange in key currencies. For example OPEC, which dollarized its oil 40 years ago, is now whipsawed in today’s $1.5 trillion daily global casino. While OPEC still has considerable pricing power (OPEC controls 65% of all the world’s proven oil reserves) and the world is still gulping its products, many of OPEC’s member states are still developing and short of foreign exchange or in debt. Direct barter (or very low interest rate loans, which can also be repaid in goods and services) open their trading options and opportunities enormously. As an advisor to the South Commission in 1988-1989, I urged the member countries to set up a jointly-operated computerized barter-trading system for all South countries’ major commodities, including oil.

For non-OPEC developing countries, barter deals allow them to avoid high dollarized oil prices (currently over $30 per barrel) and obtain the oil they need by trading their under-valued commodities in exchange. Similarly, governments can procure needed capital goods, infrastructure components, etc., by bartering with each other – just as corporations barter media time, band-width, airline seats, hotel rooms, equipment and a host of other goods and services. All this can be facilitated with robust computer software that can handle different countries’ tax regimes, and all the requisite back-office clearing and settlement systems for this type of information-based, credit-trading. I am an investor in two electronic barter systems, ManyOne Networks in the USA and VIA3 based in London, linking civic society groups.

As the volume of real commodities on such systems grows, today’s fiat currencies will tend to float against these “baskets of commodities” (e.g., oil, generators, machinery, agricultural commodities, etc.) whose prices in currencies are often tracked. We must remember that currencies, money per se, has no value, but performs as a tracking and scoring system – and when properly managed – a store of value. As we see for example, in the case of oil: this “black gold” is more liquid, valuable – and fungible than most fiat currencies. Furthermore, oil is the essential energy source that still drives most of the world’s transportation systems. Venezuela, the country that invented OPEC, understands all this and President Hugo Chavez has taken leadership in signing 12 new oil agreements with Latin and Central American countries to provide their oil needs under innovative concessionary, exchange terms. Bankers and their economists, still trying to re-impose scarcity on the Internet (via encryption, cyber cash, secured credit cards, etc.) are horrified. The Bush Administration’s efforts to help destabilize President Chavez failed, but continues to oppose his bi-lateral deal with Cuba: oil in exchange for Cuban doctors and paramedics who are setting up public health clinics in rural Venezuela. The paradigm clash between money and barter is evident in this case.

Economists tend to dismiss barter as “primitive” as their textbooks teach – but it will be Internet barter companies and real traders in real commodities that will prove those textbooks obsolete (see for example, Barter News, an industry journal in Mission Viejo, California). How can barter be facilitated among the world’s 2 billion people largely outside money-systems? They are not “poor” (which is what economists call people without currencies). These 2 billion people are richly resourceful, often living sustainable lives. Today, off-grid, solar-powered microgenerators, such as those being supplied to rural villages in Africa and Asia – by Equal Access, Solaria, Inc., SELCO, Hewlett-Packard and other companies – provide connectivity. Barter menus, from global to local can be accessed via cheap hand-held devices. Villagers may find a local menu of barter partners and little need to make a long trip to a market town with no assurance of selling their produce. For example, in Laos, the new Linux-based mini PCs of the Jhai Foundation powered by car batteries charged with bicycle cranks are connected by solar-powered relay stations to the Internet to allow farmers to check produce prices in markets in Phon Hong, 30 km away (The Economist October 2002, p. 76). Similarly, TARAhaat founded by Princeton-trained Ashok Khosla, President of Development Alternatives in Delhi, one of the world’s leading innovative socio-technical enterprises, links villages in rural India.

Luckily, more humans, particularly in our wired and networked world, have more access to information and are adept at creating new feedback mechanisms, such as the World Social Forum. Brasil is famous for its diverse citizens groups – active globally and domestically. Robust civil society is an important “third sector” in governance at all levels, as Thais Corral describes in Rio+10 Brasil (2002). Even with little or distorted mainstream media coverage, civic groups organize and clarify their proposals via the Internet. Howard Rheingold describes in Smart Mobs (2002), how the Internet is expanding people power. All social interventions must be applied differentially at many levels from global to local as I have suggested in Chapter 3. Electronic communications now allow diverse civic groups with diverse solutions to align and coordinate their programs around shared goals of sustainability. Human societies’ transition from 300 years of industrialism is toward accelerating information flows and de-materializing of OECD countries’ GDPs toward services.

These shifts triggered the crisis within economics, which is slowly moving away from equilibrium theories, simple, static models of human behavior and its pseudo-scientific misuse of mathematics. Today, the growing “hyphenated” societies of ecological-economics, social-economics, political-economics and evolutionary-economics attest to their broadening focus. Clearly, definitions, standards, criteria and performance monitoring of “sustainability” are all works in progress. Similarly, development models are in disarray. My own model sees development as the evolution of human societies’ understanding of three basic resources: matter, energy and information and the substitution patterns toward greater thermodynamic (not economic) efficiency (see Figure 4, Models of Resource Use). Thus, societies’ key resource is information and the extent to which its culture educates and nurtures its human and social capital, and applies its knowledge base to managing its material and energy resources. An example is the evolution of fossil-fuel technologies since 1850 from solids and liquids to gases (see Figure 5, The Shape of Things to Come). This transition is still dominated by the transnational corporations dominating energy systems, fossil fuels, nuclear power, high-tech weapons systems, industrialization, agribusiness and genetic engineering of living organisms, chemicals, pharmaceuticals, transportation and communications technologies, mass media and networks, as David Korten has described in When Corporations Rule the World, (1995).

As I described in Chapter 2, the powerful academic and institutional apparatus of neoclassical economics steered and legitimized this form of globalization. Biases within traditional economics were transmitted to policies of both private and public sector financial institutions and other government decision-makers.

Examples of these paradigm problems include the recent narrow-gauge approaches of the IMF, the WTO, and other institutions to regulation and reform of international financial architecture. The myopia of “Washington Consensus” policies of development has blinded a generation of public and private decision-makers – however well intentioned and democratically inclined. Such tragic myopia and even psychological states of denial within academic economics – particularly in the USA and the UK surprised me as I researched my book The Politics of the Solar Age (1981, 1988). I described the social processes whereby this discipline (economics is not a science) came to bestride public policy worldwide – crowding out many other relevant disciplines – from sociology, psychology and anthropology to game theory, thermodynamics chaos theory and ecology. The costs of this myopia in wider poverty gaps and social exclusion include continued erosion of non-money-based local livelihoods and cultures. Expanding micro-credit can usefully bring millions of traditional small entrepreneurs into money-based economies. Unfortunately, these money-based systems, now globally linked and highly unstable, must be overhauled to prevent the massive epidemics of new and exacerbated poverty they can precipitate. We witnessed such impoverishing of millions in Thailand, Indonesia and the other “tiger economies” during the Asian meltdown, as well as in Argentina.

Too often, luring people from their traditional ways and communities into monetarized urban areas – where promises of “development” and the advertised “good life” – has proved unsustainable and led to such human tragedies. Public relations efforts of governments, TNCs and financial players in today’s global markets blame domestic causes for these national meltdowns – from cronyism, lack of oversight, transparency and institutional structures to faulty macro-economic policies. As I point out on p. 41, national governments are not powerless. Many are corrupt. Nevertheless, they have many options. Since the default of Argentina, we see also the mistakes of the IMF, well described by Joseph Stiglitz in his Globalization and its Discontents (2002). The usual remedies prescribed: austerity budgets which worsened recessions, “market discipline” of governments via floating currency regimes or pegs, even dollarization, and ever-wider opening of their markets to “free” trade. It is how common knowledge that IMF loans are more to bail out creditors than to help borrowing countries. Meanwhile, currency speculators feast on the arbitrage opportunities they create. Brasil luckily will no longer have to accept the IMF’s now-discredited loan conditionalities – with the now-widespread awareness that countries including South Korea, Malaysia and China have progressed economically by flouting IMF recommendations.

An example of “market discipline” and how finance threatens democracy was the self-fulfilling prophecy of George Soros – amplified by mass media – warning that the Brasilian real would fall if Lula de Silva were elected. As Harvard economist Dani Rodrik documents in “Trading Illusions” (Foreign Policy, Mar-Apr, 2001, pp.55-62) this “incessantly repeated openness mantra,” echoed by officials of the IMF, the World Bank and other international financial agencies has perverted development priorities in many developing countries. Like Rodrik, I have also stressed the need to build homegrown economies without falling into the longer-term traps of import-substitutions, excessive tariffs, etc. In any case, global FDI flows are shrinking from $1.1 trillion in 2000 to probably less than $800 billion in 2005. The share going to developing countries is estimated to remain around $200 billion, still only 29% of the total (The Economist, Feb. 24, 2001, p. 80). Today, with the global sharing of experiences, more pragmatic development can be country-specific, employing multiple strategies more fitted to culture, knowledge, geography, ecological and social assets.

The 2002 corporate crime wave in the USA has brought to light the erosion of values and ethics underlying US-style capitalism and markets. To all this we can add that finance and its market players show little respect for the value of democracy. Even business journals, including BUSINESS WEEK and FORTUNE reject the notion that a few CEOs were “bad apples” and point to the wider systemic breakdown of ethical behavior needed to operate capital markets: honesty, transparency, accountability and contractual fidelity. Excessive greed, fraud, accounting tricks, conflicts of interest of security analysts, investment bankers, commercial banks, cash contributions to politicians in exchange for regulatory favors and the “bull market” hype of the financial media further inflated the Wall Street bubble. All this is described by former US chairman of the Securities and Exchange Commission Arthur Levitt in Taking on Wall Street (2002), and was predicted by Robert J. Shiller in Irrational Exuberance (2000).

The continuing US stock market shakeout of the electronics sector is similar to that which occurred in earlier stages of technological evolution, from railroads and electricity, to telephony and automobiles. Each of these waves of technological innovation produced thousands of start-up enterprises. This ended with the consolidation of these sectors under three or four giant producers – or, as in the case of electric utilities and telephony, government-regulated monopolies. Both telephony and electric utilities were de-regulated and over-invested – leading to the wave of telecom bankruptcies. The Houston-based energy giant, ENRON, saw itself as a trading platform and electronic-marketplace for energy futures and water futures. Investors were duped by this business model (revealed as a scam) and by Arthur Andersen’s accounting, until ENRON’s bankruptcy bought its widespread fraud and criminality to light. So far, ENRON’s former CEO, Kenneth Lay has escaped prosecution, due to his close ties with the Bush Administration. Even Lay’s lobbying of Vice President Dick Cheney and its influence on the Bush energy plan has yet to come to light in spite of the lawsuit by Congress’s General Accounting Office.

Investor confidence and fears were amplified by the Bush Administration’s unilateralism and global war policies. President G.W. Bush, contrary to his pre-election promises, sees the USA as the “world’s policeman.” His now fired top economic advisor Lawrence Lindsay, estimated that the planned war on Iraq would cost a “manageable” additional $200 billion. Meanwhile, $7 trillion of nominal equity wealth has evaporated and the USA has gone from the surpluses of 1999-2000 to an approximate $200 billion deficit in FY 2002, with further deficits as far as the eye can see. Unemployment has risen from 4% in 2000 to 5.9% in 2002 with 1.5 million jobs lost in the private sector. Public sector jobs in homeland security and the defense sectors have increased, as the US economy has taken on a global war footing. Not surprisingly, the dollar fell into virtual parity with the euro – a stabilizing factor for the world. The US is still addicted to wasteful automobiles and infrastructure and still importing too much of its oil from OPEC – a dependency that underlies US polices in the mid-east region. As I have editorialized (see www.hazelhenderson.com -- Editorials). The majority of the US public (65-70%) does not want the USA to be the world’s policeman. A September 25th 2002 survey (PIPA – Knowledge Networks – University of Maryland) found 64% agreeing that the USA should only invade Iraq with UN approval and the support of allies, and 62% agreed that “The UN should first try to disarm Iraq peacefully and see if that proves to be effective or not.” Yet, the Bush warnings and campaigning – amplified in all mass media took public attention away from the economy. By November’s election, 47% agree that “resolving the problem of Iraq” is now very urgent although a similar percentage believes that the economy is more urgent as unemployment nears 6%. North Korea has since altered Bush’s calculations.

I welcome the recent honesty of defectors from “old-time religion” orthodoxies, including Joseph Stiglitz, Jeffrey Sachs, Amartya Sen, George Soros and the more cautious Paul Krugman and Lester Thurow – to cite those who are well known. Jeffrey Sachs has evolved the furthest after leaving Harvard and working with the World Health Organization and other UN agencies. In an invited article in The Economist (Oct. 28, 2002) Sachs, as the new Director of Columbia University’s Earth Institute, blasts the Bush administration for undermining the UN and going back on its many promises to support UN agencies and their development programs, while spending additional billions on its military buildup. I hope they are helping expand the horizons of the economics profession toward a more humble, inter-disciplinary stance – rather than the usual conceptual imperialism of economics. London’s The Economist, for example, has been claiming the territory and contributions of game theorists, psychologists, ecologists, etc.. all as part of economics. This kind of intellectual inflation is understandable, because circulation, consulting fees and textbooks sales are at stake!
The UN Summit on Financing for Development in Monterrey, Mexico in 2002 debated national policies for tightening oversight and regulation of capital flows, domestic banking and corporations’ borrowing and central bank supervision. The US delegation headed by Nicholas Negroponte lobbied these proposals off the weakened “Monterrey Consensus.” Chile has provided the world with useful models of regulating short term capital flows. Since Argentina’s default, proposals for debt workouts, bailing in investors and country bankruptcy procedures are gaining a hearing. I have advocated that bankruptcy procedures should be modeled on Chapter 9 (not chapter 11) of the US Bankruptcy Code, which covers municipal defaults and allows for continuation of all public social services (see my “Revolution Required in Global Finance,” Price Waterhouse Coopers, May 2002). Currency markets can use fully transparent “best practices” trade reporting, such as the FXTRSsm, described on pages 44-46. Such independent, “virtuous circle” regulating is understood better by game theorists than economists. For example, in the US in 1910 the state of Kansas bucked the lawless trend of lax corporate charters. Yet in two years, twenty-four other states followed Kansas’ lead with modern, accountable charter laws, which restored investors’ confidence.

Many countries will continue setting their own domestic rules and financial institutions’ frameworks according to their own cultures and domestic concerns. This is especially so, since the bouncebacks of Korea, Malaysia, Thailand, and the Philippines which ignored IMF advice and used Keynesian deficit-spending to stimulate their recoveries. Japan is still trying to re-structure its economy, with much conventional economic advice about “opening up” which misunderstands Japanese culture and goals of social stability and full employment. National governments can act creatively, without waiting for international agreements or bowing to the dictates of the IMF or currency traders and corporations. Two key policy innovations can move mature industrial societies toward more efficient energy and materials use and sustainability. The first is shifting their tax codes away from taxing incomes and payrolls toward taxing waste pollution, energy-inefficiency and the extraction of virgin raw materials. This would encourage work, full employment and business efficiency as well as recycling and remanufacturing. European Union member countries are spearheading these tax shifts. The second is more accurate corporate accounting (see Figure 6, The GRI Global Reporting Initiative); and by correcting their national accounts (i.e., Gross National product and Gross Domestic Product indexes) as 170 nations pledged in Agenda 21 at the UN Earth Summit in Rio de Janeiro, 1992. Brasil is a leader in this global development of broader, multi-disciplinary statistics and more systemic approaches to measuring development. Its Brasilian Indicators of Sustainable Development (2002) track economic, social, institutional and environmental trends in a set of 57 indicators, under the leadership of the Brasilian Census and Geographical Agency (IBGE). Nations can support global monitoring and feedback; higher standards; criteria; better rules; regulations and codes of conduct and principles – embracing human rights, equity, and Earth Ethics. All these must embody better science and information based on new biological knowledge of our relationship to nature.

Doubtless, the Administration of President Lula da Silva will advance this statistical research and development to help put Brasil's riches (both ecological, natural resources and its social, cultural and human capital), in a more correct, updated GDP national accounting system. This can be done while teaching the financial markets about sustainable national accounting, since in reality, Brasil is a very rich country with valuable ecological, social and human resources – a potential domestic market of 170 million people. Similarly, by the new indicators, Argentina is also a rich country with a highly educated population and vast natural resources, as are many countries in Latin America. To advance awareness of the new indicators and promote public understanding about policy shifts toward sustainable forms of development, an inter-disciplinary institute for social sciences at a major university in Brasil could host, in cooperation with Brasilian statistics agencies, an international conference on "IMPLEMENTING THE NEW INDICATORS OF SUSTAINABLE DEVELOPMENT". The host institutes could invite all the best expert statisticians from Latin America and around the world, including UN Statistics, Eurostat, Statistics Canada, the Chinese Academy of Social Sciences, the U.S. Federal InterAgency Sustainability Indicators Group; the Calvert-Henderson Quality of Life Indicators, the Dow-Jones Sustainability Group, the London FTSE 4 Good, The Global Reporting Initiative, the Domini Social 400, the CALVIN Index and many others.

The Conference could announce its conclusions on the "state-of-the-art" national accounting protocols, following the AGENDA 21 requirements. These include adding asset accounts to complement GDP's current "cash flow" approach, which over-states indebtedness, as well as ecological assets (estimated by ecological economists at an uncounted subsidy to global GDP of some US $36 trillion annually); social/cultural and human resources (which the World Bank estimates at 60% of the Wealth of Nations (1995). This new asset side of national accounts should include the infrastructure projects (roads, hospitals, universities, ports, parks, airports, dams, public buildings, etc.), which were created by tax payers and carried as public debt. These infrastructure assets should be amortized over their useful life -- often 50-100 years. The USA made this correction in Jan, 1996 and since then, this one "stroke of the pen" accounting correction contributed approximately 1/3 of the USA's surplus from 1996-2001. The balance came from the huge tax revenues from the Wall Street "bubble" and lower defense budgets. Canada followed suit in 1999 and went from a deficit and cuts in social services to a $50 billion surplus, as pointed out on pages 12, 13. Additional recommendations would include re-categorizing the budgets for education and health from "expenses" to the asset side as "investments" in the human capital required for the Information Age, where healthy, well-educated citizens are the most important factor of production. Brasil’s leadership education program, Bolsa Scuola, the brainchild of former Senator Christovan Buarque keeps children in school by linking their attendance to welfare payments to their parents. This successful project is admired and imitated worldwide, and is a good example of the systemic approach needed to address complex problems.

The Report and recommendations of such a global expert conference on IMPLEMENTING THE NEW INDICATORS OF SUSTAINABILITY should receive as much media attention as possible. Brasilian people are beginning to understand the truth -- that Brasil is one of the richest countries in the world – thanks to such studies as Rio+10 Brasil, edited by Fabio Feldmann (2002). After receiving and assessing the Conference Report, Brasil’s new Administration would have the option of announcing that it would be one of the vanguard of governments who signed AGENDA 21 to implement the new System of National Accounts. Such an innovative policy, with worldwide expert support would help the old guardians of the "Washington Consensus" and Wall Street to revalue upward their calculations of Brasil's true assets and its therefore much smaller public debt (actually less than half of that in the purely financial view). Such a leadership move might then be emulated in all the other ecological, cultural, social and human asset-rich countries in Latin America. The mental sickness of "economism" might be balanced by this broader systems view of wealth -- beyond money. Many Brasilians at the PETROBRAS Conference on "Economics and Sustainability," could help organize such a global expert group. This strategy, with civic society outreach, might further open the eyes of the world to Brasil’s vast wealth and investors as to the opportunities in the "sustainability sector" and allow policy-makers some more room to turn around the IMF and "debt" scenarios.

The foreign debt and investment model of economic growth is now giving way to more sustainable paths to home-grown domestic markets and enterprises. As discussed on p.52 all countries have the sovereign public power to coin their own currency and benefit from the seniorage this confers. This is why dollarization is such a bitter bargain. Countries can also make public works loans directly as opposed to the practice (often caused by political pressures from private banks) of loaning the federal funds directly to private banks that then lend on to consumers at market rates of interest. This fractional-reserve banking system term has become the norm in the US and many countries. Many believe that the sovereign power of creating a nation’s money should not have been ceded to private banks, who can lend it out at interest while only retaining a fraction (usually 8 percent under BIS current rules) in reserves. Other essential strategies for local control and building thriving, home-grown economies include local credit-unions, micro-credit, small banks devoted to local lending (mandated in the USA by the Community Reinvestment Act), local business development groups, and networks of local venture funders, as discussed on pgs. 52-53.

Today, we relearn that any person, business, CSO or country short of official national, or hard currencies can engage in as much barter as necessary. Today, these include high-tech exchanges using personal computers, local exchange trading systems (LETS) and the many kinds of local scrip currencies now circulating in hundreds of towns in the USA, Europe, and other OECD countries. In Argentina, millions of people meet their basic needs for goods and services through barter and local currencies they trust more than the official Argentina peso. In a perfect example of the clash of paradigms, the government, the IMF and orthodox economists insist these barter networks and local currencies be made illegal. The most successful Internet second-hand auction company, e-Bay is based on the same model. These tools can complement scarce national currencies, over-valued US dollars, or where monetary policy is ill conceived or too restrictive so as to help clear local markets, employ local people, and provide them with an alternative local, purchasing power. In short, no poverty-reduction strategy will be complete without barter. At a regional level, a revived MERCOSUL might well emulate the European Union’s euro and create a new Latin American currency – perhaps partially backed by the region’s vast energy resources: oil, gas, hydro, biomass, solar, wind power and bio-diversity.

Information and energy management are two fundamental technologies of human social development. Both must now be measured in terms of ecological and social sustainability (which require equity and justice, as well as efficiency). This means that investments cannot be measured using traditional capital asset pricing models (CAPMs), because they omit social and environmental costs. Crucial to steering our societies toward sustainability, will be all new scorecards, beyond GNP/GDP and other over-aggregated macro-economic measures of wealth and progress that measure energy-efficiency, education, health, infrastructure and other social domains. My partnership with The Calvert Group of socially-responsible mutual funds created the Calvert-Henderson Quality of Life Indicators measuring twelve aspects of quality-of-life in the USA: education, energy, employment, environment, health, human rights, income and its distribution, infrastructure, national security, public safety, recreation and shelter. These Indicators tell a more realistic story about trends in the USA, such as 40 million people with no health insurance, 2 million in prisons and wasteful energy use. Updates are posted frequently on www.calvert-henderson.com, together with my overview and commentaries (click on FOREWORD).

My service from 1974 until 1980 as a member of the Technology Assessment Advisory Council of the US Office of Technology Assessment (OTA) sparked my interest in new indicators and led to my research into more benign, diverse, decentralized forms of solar, wind, tidal, wave and biomass sources of energy and the huge unexploited opportunities for energy-efficiency improvements. At that time, the powerful trade associations and lobbyists for the coal, oil and nuclear energy sectors had influenced the US Congress to subsidize them to the tune of some $150 billion. The fledgling renewables sectors were left to compete unaided on this unfair, tilted playing field. The Carter Administration accepted the many reports from the OTA on the need to increase efficiency of all energy uses: in machinery, agriculture, construction, transportation and the household sectors (available on CD-ROM from the US Government Printing Office, Washington, DC, stock number: 052-003-01457-2, phone: 202/512-1800, $23). Many small programs were pushed through a resistant Congress, from insulating houses and rating appliances, increasing automobile mileage to setting up the Solar Energy Research Institute in Golden, Colorado. During this period, energy consumption was de-linked from US GDP-growth due to efficiency gains. By 1992, this new information led to a new “supply” of “conserved” energy representing 24.3% of US consumption (27.9 quads) and almost equaling the 29.4% of petroleum (33.7 quads) -- with renewables at 5.6% (6.4 quads). The balance was in natural gas at 18.1% (20.8 quads). Coal at 16.9% (19.4 quads) and nuclear at 5.7% (6.5 quads). By 1998, efficiency gains were the largest “source”, 28% bigger than oil and six times bigger than nuclear power and total consumption was 94.7 quads, according to the Rocky Mountain Newsletter, Vol. XVI #1, Spring, 2000.

In The Politics of the Solar Age (1981, 1988) I traced the history of the fossil-fuelled Industrial Revolution in the UK and Europe. I showed how economic theories of value changed over this period – leading to the Keynesian revolution from the late 1930s through the 1970s. I showed the lag in economic theories in properly evaluating the role of factors of production – particularly the special role of energy and knowledge (which were subsumed under “capital,” “land and labor”). I showed how this error had lulled industrial societies into under-pricing and overuse of energy, while under-investing in education and human capital. These errors, together with Europe and the USA’s growing political, corporate and military power had contributed to their addiction to petroleum. Europe values energy-efficiency more highly than the USA and uses only half as much energy to produce its GDP, as does Japan. I viewed OPEC’s quadrupling of the price of oil in 1973 as a necessary correction toward full-cost pricing (even though environmental damage and other externalities were still not included). The imbalances in world energy consumption continue to become more extreme – now resulting in the US designs on Iraqi oil and reducing the role of OPEC.

The recent petroleum price increases have led to scapegoating of OPEC. Even with mid-2000 prices of $25-30 per barrel, in inflation-adjusted terms – these prices are really half of what they were in 1975. Furthermore, OPEC’s share of the prices consumers pay in North America and the European Union for gasoline are only between 1/5 and 1/3 of the total, due to local taxes and refinery mark-ups. Many US interests, particularly small producers and investors in costly exploration, actually want oil prices to remain high. US politicians criticize the big oil refiners for high US gasoline prices and have called for a US anti-trust investigation.

President Hugo Chavez has focused on OPEC, founded by Venezuela, and the need to re-think World Trends and the Future of Oil and Energy, the title of the international seminar he hosted (in which I participated) to enrich the mix of options discussed at OPEC’s Second Summit held in Caracas, September 2000. Chavez’s efforts to shift resources to Venezuela’s poor and” democratize” PDVSA, the state-owned oil giant led to the strikes of December 2002 by PDVSA’s top managers (erroneously reported as a worker’s strike) supported by Fedecamera, most TV stations, along with many middle-class activists determined to oust Chavez.

The now-consolidating oil “super-majors,” PETROBRAS, Shell and BP Amoco, are increasingly investing in solar and hydrogen. A venture capital boom is beginning in decentralized, renewable energy (solar, wind, fuel cells) as I had predicted in the 1980s. As traditional economic analyses were broadened, large central generating plants incurring huge transmission losses are at last, seen as un-economical. (The Economist, Aug. 5, 2000, pg. 27). Public pressure on automobile companies and California’s “zero-emission” standards are now paying off in electric and hybrid vehicles. Toyota and Honda hybrids (with approximately 50-70 miles per gallon performance) have been in US showrooms since 2001. I have owned a Toyota Prius for over a year and can attest to their performance. The good news is that these technological advances, together with e-commerce, are peaceful paths toward reducing oil dependence. The bad news is that US military intervention to assure oil supplies is still the policy of the G.W. Bush Administration, particularly focused on Iraq, with the world’s second largest reserves after Saudi Arabia. Brasil, long a leader in ethanol fueled cars, has the opportunity to assure that future automobile plants produce lower and zero-emission cars to serve its own domestic and its future export markets.

The need to expand into renewable resources, “green” energy technologies and environmental protection and restoration is now on the radar screens of governments and venture capitalists, as well as the oil “super-majors.” The market for “green” products of all kinds in the USA is now $230 billion (LOHAS, vol. 3, No. 3, Fall, 2002, Boulder, CO, USA) All oil companies and OPEC will also need to get on this renewable technology train before it leaves the station. Today’s faulty accounting and CAPM models still makes it easier to follow the herd than to look at the underlying deep processes at work and find really cutting edge new businesses. Similarly, today’s forms of globalization look good because traditional accounting disenfranchises a significant minority, ignores the running down of natural resources, and discounts future risks. Meanwhile, visionary enterprises and business plans are beginning to underpin the great transition now underway from the Industrial Age to the information-rich “Age of Light”. The sustainability debate, which PETROBRAS is now promoting, and higher oil prices are kick-starting the wave of new business opportunities in hydrogen, fuel cells, solar, wind, wave and biomass companies. Much financing goes into continuous improvements in resource-utilization, energy storage and efficiency gains, i.e., information technologies.

Although improvements in communications and materials sciences have led to a profound de-materializing of OECD economies, today’s debates involve the extent to which, this process - which futurist Buckminster Fuller called “ephemeralization,” can continue substituting services, knowledge, communications, recycling and renewables for virgin natural resources. Between four-fold and ten-fold efficiency increases in energy and materials use are possible. Here is where investments in people and social infrastructure are key. Societies cannot continue de-materializing their economies without investing in education, health and maintaining infrastructure, social architecture and human capital for further advances in research. Knowledge, human capital, trust, cohesive values and sound management of the planet’s biodiversity and natural resources are now the key factors of production. All must be carried as assets in expanded national accounts rather than being written off, as such public investments in education, health and infrastructure still are today in many countries. Brasil and all newly-industrialized countries can benefit from older industrial societies’ mistakes and leapfrog into the decentralizing technologies and distribute intelligence of the emerging Age of Light.

Today, neither governments nor private investors can ignore that ever more problems and issues have become global—beyond the reach of national governments: from climate change, cross-border pollution, desertification, aids and loss of bio-diversity to space junk. Civic society groups are the leaders in these issues. Proliferating weapons-trafficking, drugs trading and unregulated currencies favor the business of organized crime. Nuclear and toxic wastes must be contained. Epidemics spread by air travel, as well as global terrorism, cannot be addressed by any nation acting alone. We cannot avert our gaze in the globally interdependent world we have helped create. Powerful new biotechnologies such as cloning and genetically-modified organisms require international safety-testing, labeling and standards.

Socially-responsible companies and investors can support and even capitalize on global standards that raise the ethical floor under the global marketplace, as I point out in Chapter 3. Meanwhile, dealing with the continued growth of mega-cities - while maintaining safety nets - requires massive public and private investments. This is why all national accounts (GDP) must now include an asset side to properly value these infrastructure investments and balance their public debt. Few realize that the USA instituted this change in January 1996 or that Canada followed suit in 1999. Politicians naturally preferred to take the credit.

All these new problems and issues are driving national governments into pooling or sharing their sovereignty to set up or strengthen international agencies, rule-making bodies and global standards. The UN Global Compact, launched by Secretary-General Kofi Anan invites companies to voluntarily engage with its 9 principles of “good corporate citizenship.” Labor unions and civic groups rightly pointed out that no monitoring or enforcement was required. They demanded accountability – and since 2001, the UN Global Compact has developed higher standards and accountability mechanisms. Sovereignty issues need re-thinking and re-strategizing for today’s challenges. Money has become the curse of democratic political processes in many OECD and developing countries aspiring to become more democratic, as public-interest pollster Alan F. Kay describes in Locating Consensus for Democracy (1998) and on www.publicinterestpolling.com. Subsidies have propped up the fossil-fuels sectors and stifled innovations of clean, zero-emission cars. The US farm and steel subsidies enacted by the Bush Administration are at odds with its “free trade” rhetoric. In fact, such farm subsidies are now helping to destroy small farms in Mexico. While in Mexico City in December 2002, I urged the Mexican government to re-negotiate NAFTA. Few such subsidies finance the small companies building the new sustainable “green,” agriculture or clean energy sectors. There is still time for newly-industrializing countries to avoid huge infrastructure costs by shifting to off-grid solar photovoltaics, wind and biomass energy – as well as expanding wireless telephony as in Brasil and accessing the internet directly with palm pilots and solar-powered radio, computerized with modems.

The new mechanisms of the Kyoto Accords on Climate Change (1998) however flawed, can also be used to advantage. These include the Clean Development Mechanism (CDM), Joint Implementation (encouraging cross-country partnerships in “green” technology) in which Brasil played an innovative role. Emissions Trading (ET), which has commenced in Chicago and on other futures exchanges, to trade “credits” in SO2 and CO2 (sulfur oxides and carbon dioxide) is still inequitable. ET subsidizes dirty companies and technologies while punishing renewable and sustainable ones. Worse, the credits have been given to companies instead of being auctioned. Only a per-capita distribution can meet equity standards. Even though the USA may be the last to ratify Kyoto – many companies recognize these new profit opportunities in reducing their polluting emissions and investing in less-polluting technologies. Countries can take full advantage of these new revenue streams allowable as they shift toward natural gas (with 50% reductions in CO2 emissions) and for all cleaner processes and investments in renewables. To take full advantage of these new revenues is another reason countries need to overhaul their national accounts to fully account for their existing infrastructure. Such asset accounts in Brasil, when fully calculating all un-priced ecological assets: water services of forests and watersheds, biodiversity resources for pharmaceuticals, tidal and wind energy assets and their huge daily insolation rates will reveal that Brasil is one of the world’s energy giants. For example, sunlight reaching Amazonia each day contains the energy equivalent of some sixty hydrogen bombs, which is usefully captured by the forests. The Ecologist’s Peter Bunyard warns that exploiting these forests will lead to massive fires and desertification. With all ecological assets, energy sources and human capital fully accounted, all developing countries will be in much stronger negotiating positions vis-à-vis industrial countries of the OECD.

There is much good news brought by the globalization of the new networked information economy, including distance-learning, pioneered in Mexico, and college courses for people confined to their homes. Other positive aspects of today’s uneven globalization are the rapid proliferation and sharing of concepts of sustainable development. Human time and attention, as well as living ecosystems are becoming recognized as just as valuable as money. At the same time, we live in “mediocracies” where a few media moguls now control the attention of billions of people—for better or worse. This has changed politics forever. As I point out in Chapter 3, we are already living in the new Attention Economy (See Figure 11), and shifting away from material goods, still over-measured by the traditional GNP. Burgeoning services are slowly added to GNP and such re-calculations account for much of the recent “rise” in productivity. More intangible factors in living standards are measured by the Calvert-Henderson Quality of Life Indicators, mentioned earlier. A pioneering Latin American initiative to correct the GDP was the 1989 Caracas Report. New Ways to Measure Development for the South Commission. Brasil and Costa Rica have also provided leadership in re-vamping its national accounts to include ecological assets.

As our economies dematerialize toward more services, it will be harder for business and governments to hype wasteful goods-based GNP-growth in the global economy. They will be accountable for, and need to assess progress in human health, education, human rights and environmental quality. This requires measuring toxic wastes, resource-depletion, health, water and air quality, public safety, poverty gaps and overall quality of life – all of which require a systems approach and appropriate metrics beyond money coefficients. Newly-aware citizens, consumers, employees, investors and advanced management training such as that of Amana-Key and Instituto Ethos in Sao Paulo are driving the growth of socially-responsible corporations.

When GDP is re-categorized and re-calculated for the Attention Economy sectors in all countries, we would find that these information/services sectors already are even more dominant than they appear in current revisions. Mass media and entertainment are a growing percentage of global trade, much of it promoting the worst in human behavior and values. Tourism accounts for some 10% of global GDP – much of it unsustainable. On the plus side, eco-tourism, with minimal impacts on fragile environments is growing rapidly and providing incomes to indigenous inhabitants. Global e-commerce is predicted by Forrester Research to reach $3 trillion by 2003. Twenty-eight percent of US citizens are “down-shifting”— in typical Attention Economy style, tuning out the culture of information overload and costly mass consumption-oriented value systems. They are choosing more free time and less money income and moving to quieter, less expensive, rural towns where life is slower, commuting easier, and communities are still intact. Consumers are seeking their own (not advertisers’) definitions of “quality-of-life.” In addition, Attention Economy consumers increasingly demand global corporations to reduce emissions and employ fair labor standards and promulgate codes of conduct.
Today’s haphazard globalization must be reshaped, democratized and shared. Education and healthcare are now recognized in many political campaigns as urgent public issues, because they are key sectors of information economies. Knowledge, intellectual, social and ecological capital are the key factors of production. Fossil-fuels have served as platforms for the Industrial Age. The Information and Solar Age sectors will continue to grow worldwide – particularly in Brasil, Mexico, Malaysia, China and India.

Both “public” and “private” sectors in our economic and political textbooks must now move over, as the third, civic sector where most of the world’s poor exist, takes its rightful place in human affairs. University courses now study these civic sectors; economists and politicians misunderstand them. After the battles of Seattle, Washington, London, Prague and Davos, both governments and corporations have learned to respect them. Even the World Bank now agrees that “human capital,” civic organizations, social structures, family culture and values must be studied and accounted in economic development. The Earth Charter together with the many other manifestos of human solidarity, and all the UN conventions on human rights, point toward the evolution of ethics and global standards necessary to address our Age of Global Interdependence.

The world is slowly and unevenly moving toward balancing win-win strategies and domains of international agreements and laws to tame cut-throat competition and exploitation, both of people and ecosystems. Democracy is slowly spreading in Latin America – most spectacularly in Brasil with the landslide election of President Lula da Silva. Primitive industrial technologies are slowly giving way to decentralizing ecologically benign information and energy technologies. These transformations do not rely on new religions because the Earth is providing humans with all the feedback needed to steer us to higher levels of consciousness. Human populations have increased, so that today our species consumes 40% of the planet’s biomass photosynthesis. We will become ever more interdependent. We must learn the lessons of this interdependence and build a win-win world if we are to survive. Today, the planet is our programmed learning environment. All our self-interests – seen from this larger perspective – coincide. Charles Darwin speculated over a century ago, as brought to light by David Loye in Darwin’s Lost Theory of Love (2000), morality is becoming ever more pragmatic. This evolution of moral sentiments has always been a driver in human affairs. Cooperative behavior will no doubt continue to play a key role in expanding human consciousness and shaping forms of globalisation toward our highest values and aspirations. Indeed, another world is possible and achievable as we humans participate democratically to build a sustainable future for all our children.

St. Augustine, Florida USA
January 2003

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