by Patrick Wood
The highest levels of academia are fishing for a new economic system that could replace capitalism.
The Harvard Business Review/McKinsey M-Prize for Management Innovation seeks to find new solutions to their stated topic: The Long-Term Capitalism Challenge which “seeks to accelerate the shift toward a more principled, patient, and socially accountable capitalism — one that’s truly fit for the long term.” The challenge is issued via the Management Innovation eXchange that was founded by Professor Gary Hamel, a frequent contributor to Harvard Business Review and Visiting Professor at the London Business School.
“It’s time to radically revise the deeply-etched beliefs about what business is for, whose interests it serves, and how it creates value. We need a new form of capitalism for the 21st century — one dedicated to the promotion of greater well-being rather than the single-minded pursuit of growth and profits; one that doesn’t sacrifice the future for the near term; one with an appropriate regard for every stakeholder; and one that holds leaders accountable for all of the consequences of their actions. In other words, we need a capitalism that is profoundly principled, fundamentally patient, and socially accountable.”
This is a very sophisticated effort to build consensus for a system that is viewed as “sustainable” and “socially accountable.”
A solution is not offered, but readers are encouraged to submit their ideas for “radical” solutions. Discussions will follow.
In the end, this will be where Sustainable Development meets “Sustainable Management” which, of course, will be necessary to manage all things sustainable.
According to the United Nations Governing Council of the UN Environmental Programme (UNEP), “our dominant economic model may thus be termed a ‘brown economy.” UNEP’s clearly stated goal is to overturn the “brown economy” and replace it with a “green economy”:
“A green economy implies the decoupling of resource use and environmental impacts from economic growth… These investments, both public and private, provide the mechanism for the reconfiguration of businesses, infrastructure and institutions, and for the adoption of sustainable consumption and production processes.” [p. 2]
Sustainable consumption? Reconfiguring businesses, infrastructure and institutions? What do these words mean? They do not mean merely reshuffling the existing order, but rather replacing it with a completely new economic system, one that has never before been seen or used in the history of the world.
Unfortunately, Technocracy is the only possible economic/political system that fit this challenge.
If somehow society could regain its ethics, morality and Biblical values, capitalism could easily digress back to free enterprise. However, society is headed in the opposite direction.
Technocracy will be constructed upon the engineered distribution of scarce life-supporting resources such as energy, water and food.
The famous novel by John Steinbeck, The Grapes of Wrath, chronicled the exodus of farmers and citizens from Oklahoma as a result of severe drought conditions that turned the entire region into a dust bowl. Without water, plants and animals cannot survive. Hot winds picked up topsoil and stripped fertile ground of essential growing nutrients.
Of course, Oklahoma recovered and has enjoyed agricultural and economic prosperity for several decades since.
However, the dust bowl is slated to return soon and will engulf a much larger region: Texas, Kansas, New Mexico, Wyoming and South Dakota. Underneath these states resides the world’s largest aquifer, covering 100,000 square miles. Water is pumped from the Ogallala to irrigate 15 million acres of crops each year.
As water is pumped faster than it can be replenished, the aquifer is shrinking. Water tables are dropping. The lack of rainfall means replenishment isn’t happening.
The implications for the next 20 years is that water and the food it grows will become more costly.
Technocrats cannot take any credit for this scarcity, but it is tailor-made for them to manage. With distressed life-support systems, people will beg for allocation and rationing on the basis that it’s better have a little than nothing at all.
According the the latest Case-Shiller Home Price Index, we can say that housing has entered a “triple-dip” and appears to be headed lower. With banks rushing to restart the foreclosure engine (mostly dormant during 2011), new bank-owned properties will appear on the market in 2012 in bulk. This will keep the pressure on for even lower prices.
Just when people thought it was safe to jump back into gold and silver, wham! After setting a 1,791 high in early trading, the yellow metal fell like a rock to close at $1,696 (it was down $100+ at one point). Silver suffered an even worse drop, falling over 10 percent at one point from its high of $37.53.
In any case, both metals seem to have snapped from their counter-trend rallies.
In concert, the dollar closed sharply higher, indicating that it is resuming it upward march.
Stocks closed down modestly, not showing near the vigor that metals and the dollar did. My guess is that this will be short-lived. For several weeks stocks have crept upward while internal breadth deteriorated. Today’s action all but confirms that stocks have found their upward limits and can rise no more.
It is worth remembering that Robert Prechter (Elliot Wave International) has carefully documented the relationship between economic activity and rising/falling stock markets. This week’s peak ends a 20 month period of advances and the economy has followed along in trend but not in intensity. What most analysts are calling “green shoots” should soon turn brown as the market rolls over.
Look for more surprises to the downside in both metals and stocks.