The name for this essay can sound strange, but this work is not about ruining, but about building, building the new society with all the good things we already have.

What’s wrong?

During 20th century our life changed dramatically we went through war, dictatorship, communism, democracy, capitalism, globalization etc. Though it seems that the balance can be find it is still far away from being perfect. Human capitalism, which was built in majority of developed countries doesn’t work (at least for the majority of population). Why? It is difficult to identify the one reason; we rather will call it system crisis. Though our list of potential problems described below is not comprehensive, it can create momentum for thinking about current social position and trying to identify new development vectors.

Systems of values

Apparently there is a crisis in the system of values, which leads to the multiplication effect and creates danger for further social deterioration. We can identify three great areas where value system is not appropriate. They are: economics, social life, morality. Each of the areas is discussed below.

Economics

The first axiom of modern economics is that resources are limited while needs of economical subjects are unlimited. This creates competition for distributing limited resources among subjects of economic system. This postulate is the basis of all economic theories existing today. It can be compared with the notion that parallel lines are never crossing, but if we suggest that lines cross – will we collapse all the system? The answer is NO! We will create completely new world, which is described in Lobachevsky non-Euclidean geometry.

Why not try to create “non-Euclidean economics” by changing the major economic axiom?

The first part of the axiom says that resources are limited. Unfortunately in science more confirmation of limited resources exists than the contrary. The saga about limited resources started from the very early times by numerous economists and philosophers. The climax of this theory was reached in 18th century by publication of Thomas Malthus Essay on the Principle of Population, which actually preached the death of humanity if growth of the population will not be stopped. Another example of the limited resources panic is the book “Out of gas” by David Goodstein (?) here is another example of resource limitation – humanity dependence on oil will bring the world economy to collapse. Unfortunately now there are more confirmations of the global crisis with oil consumption. Surge in oil prices reflects big gap between demand fueled by growing consumption and supply which is limited due to the natural reserves. But it is not difficult to predict that this oil deficit will not bring to the energetic collapse. The main reasons for that are: development of alternative technologies, consumption limitations and improving effectiveness of oil usage. Let us note that all this regulation of resources is driven by so called “invisible hand” or market. In other words high price for the resource boost its more effective consumption and research in the direction of alternative or substitute resources. Our suggestion about absence of the resource limitation is rather hypothetic, but it has one major pillar after it: the absence of the limitation of the initial source of all energy bearing substances on the Earth – the energy of the sun. Though theoretically sun can die sooner or later the period of time before this happens is really big and making any forecasts in this respect is worthless due to the impossibility to predict the development of the solar system in the long run (for example a new sun can emerge). So we consider sun energy unlimited and so the major elements produced directly or indirectly by sun energy. This part of energy resources supports mainly organic energy and elements. From the other hand non-organic elements are supported by atomic energy, which is also potentially unlimited. So, theoretically, in fact resources are unlimited.

But what about second part of our axiom? Unlimited needs. We will try to analyze this part from two points of view: economical (practical) and ethical. Let’s start from the common sense approach. How much human being need? To tell the trough not a lot – shelter, food and entertainment. Though first two elements can potentially be relatively big (shelter can be in a form of few acres chateau) and food can be in a form of the few kilograms of black caviar per day, they are still limited by the nature of the human body. Man can not eat more than certain, limited amount of food and can not be physically present in few places simultaneously and can not reasonable occupy more than certain square footage. What is really unlimited in the modern economic system is entertainment.

We are not trying to exaggerate the trend, but fashion for entertainment is really became the curse of modern civilization. Here entertainment is understood in general meaning, everything which is not minimal food or shelter, not regarding materiality of the object. For example chateau is entertainment, expensive car is entertainment and even excessive food is entertainment. In general there is nothing bad in desire for entertainment, because it is one of the aspects of the human nature. Man as a social being needs something except food and shelter to please his mind, but is this need for entertainment really unlimited? Can the reasonable person consume more entertainment than his brain really need? Though the first evident answer is “yes”, in fact it is not. Most people say yes because of the seemingly unlimited ability for fantasy. Human fantasy really can create pretty bizarre entertainment universes, which are probably unlimited. These fantasies could be based on real things (like fashion, comparisons, etc.) and non-real things (unique). This feature of desiring to implement fantasies (and not only personal, but copycats with other’s people fantasies) is used by modern economic system to stimulate demand and consumption. Fantasies are stimulated (by TV, fashionable life style, etc.). So fantasies are unlimited as well as desires and needs. The main argument for this is that if one reached his certain fantasies she is not happy any more and produces another, more advanced fantasies, thus creating unlimited cycle of needs. But the main issue here is that all this cycle is fake, because there is no ending fantasy. In fact ending fantasy is oblivion, or end of the human life, where all material world vanishes. The main problem is that society does not recognize the notion about absence of the “perfect fantasy”, thus making its members enter the endless fight for this shadow thing.

The “perfect fantasy” could be realized and as the history teaches us was realized few times by few humans. But this was made through building the system of believes and was lying far away from the material world. The point here is not in making all people believe in some kind of religion and abandon material world, the pint is that in fact consuming of excessive resources never satisfies, just because satisfaction is lying in the non-material sphere. And if we return back to the economy, material resources can not satisfy the person, they are mere instruments for achieving moral satisfaction.

And if the satisfaction is not dependent from material world, it brings us to the idea that entertainment needs are in fact limited. And this limit is created by the standards, which are dominated in the exact community. This trend is easy to see by comparing the “fashionable” level of consumption in different countries/regions. For example in some communities in the USA it is considered impolite to demonstrate high wealth, while in some countries with “nuvoriches” it is a good habit to show off by exposing luxury items to peers. The level of consumption is also dependent on number of factors such as religious standards, availability of luxury goods, etc. But the main point here is that level of consumption is not constant and can be easily changed by external factors, thus in creates additional support to the argument about true limit of greed to consume.

Thus we came to the conclusion that all parts of needs are limited, while resources are not. That gives us a lot of opportunities in speculating about modern economic system and socio-cultural environment.

As was discussed above suggestion about needs and resources shaped the way modern economy runs. It is difficult to make direct correlations between fallacy in initial assumption (axiom) and the set of problems we have today: starting from global environmental problems and finishing with the level of life of the majority of the population. Somehow the world is ruled wrong. Majority of community groups (including nations) have leaders, which are certainly not perfect from the point of view the high moral leadership standards, we still have wars, religious disputes, poverty, social injustice and huge waist of resources. Nevertheless the list of independent factors which influence world problems could be big enough, importance of the basic rule of economy is high enough to make substantial influence on other spheres of life – social and cultural.

Therefore, let’ return to our basics. Let’s try to analyze the current economic situation. Let’s choose USA as the first object of our analysis. There are no doubts that USA is the leading world economy, which creates moment for the rest of the world to follow trends and traditions developed here. That is why we will focus on the USA with comments to the other countries worldwide.

During post world war two period economy of United States was in the direction of stimulating demand and consumption as main drivers of the sustainable growth. This was influenced by developments in economic theory (a great work done by J M Keynes), which proposed the multiplication effect in the major areas of economy: finance, consuming, production, etc. In general words multiplication says that consumption stimulates production, which in turn stimulates demand for the new consumption which is the base of sustainable growth. The notion that needs are unlimited creates desire to consume more. This desire is supported on all levels of social life – political, economical, financial, social etc. Majority of the population are becoming consuming machines by eating more, buying more clothes, appliances, real estate, etc. The consuming list is endless. More to this, consuming is hardly stimulated by constantly changing fashion and technology. Consuming is also backed by the credit system.

The general trend supposes that is better to consume than to invest. Though investment infrastructure is highly developed in the USA, effectiveness of investments for the majority of population is rather low. The call to consume is overweighting in the majority of cases. The climax of senseless consummation can be seen everywhere: beginning with huge development of “designer” industry and finishing with luxury cars, yachts etc. All this is promoted to the population as the goal everybody should like to achieve, thus creating fantasies and stimulating overconsuming.

The luxury life style for the “chosen ones” in turn crates myth about limitation of resources, but in fact that is not limitation in resources it is problems with society values.

How the new economy will be looking like?

At first let’s return to basics. And consider three major participants of the economy consumers (households), producers and government.

The first group consumers are doing two major things: consume and invest. As was explained above consuming is very limited by its nature, though some exaggerations could be created by social standards and fantasies, which lead to unjustified entertainment. But there is nothing bad in the entertainment per se, the danger is in the “wrong” entertainment. It is very difficult to define wrong and right entertainment, but the feeling of this is present in any human species. The right and wrong entertainments were defined in a lot of religions philosophical works, etc. So there is no need to “invent the bicycle”. Society just has to return to the forgotten things.

Just to give some examples of right and wrong entertainments, let’s consider this. There are some kinds of entertainment, which somehow already recognized by society as wrong: drug and alcohol abuse, sexual abuse, killing animals (hunting), etc. On the other hand other kinds of entertainment, which are also “bad”, are not recognized by society. They are: excessive possession for things, such as clothes cars, real estate, etc. Why somebody needs 400 pairs of shoes while some people have nothing to eat? Overeating, which is also bad entertainment, gambling, etc. The list actually can be endless. The problem is that society stimulates and even supports wrong entertainment.

The list of right entertainment is also easy to imagine. That is everything which is moral and brings happiness to every member of the society. Examples are: music, literature, outdoor activity, scientific research, community activity, etc. Unfortunately these kinds of entertainment are not stimulated. Usually people who consciously trying to consume wisely are considered as very modest and out of fashion or even greedy. In vast majority of cases these people do not have a lot of success in society, just because they do not meet the standards of luxury life.

So how the behavior of the consumers could be changed if new economic axiom will be accepted? At first consuming will become wise, e.g. consistent with the notion of limited needs. Society should stimulate reasonable consuming and blame exaggerated fantasies. The general idea is that overconsuming people should be considered unfashionable (or sometimes insane) because they are living in the world of fantasies. By the fact they are ill people because they are trying to realize themselves through finding the wrong goal of happiness by expanding their possession power, but as was explained above this is not achievable and more it’s dangerous for the society. That is why unwise consuming should be blamed and even limited. From the other side wise consuming should be supported and should be fashionable.

Another function of consumers is investment. Here investment is understood as a rather broad category and though in its classical understanding investment is alternative to consuming, here sometimes consuming is overlapping with investment. There are three major types of investments: investment in yourself, investment in community and investment in the economy. The first type is overlapping with consuming, but the distinction can be easily made. Investment in yourself can be achieved through education, physical development (but not the consuming like plastic surgery for the sake of fashion), travel (intercultural development), etc. investments in community and economy could be done in several forms and through numerous mechanisms and should be generally supported by society, but with one notion. In our world of unlimited resources and limited need there is a fight for distributing unlimited resources between limited needs, which creates a background for wise investments. So the main argument in justifying any kind of investment is whether this particular investment satisfies particular need, or will create product/service which can potentially bring overconsuming temptation, thus wasting limited needs resource? This can sound strange, but with some thorough thinking this criteria can make sense.

In the respect to the said above society and government should support wise consuming and investments, while limiting overconsuming and unreasonable investments through tax and credit system as well as with using other indirect mechanisms.

Let’s turn to producers. In new economics the role of the producers is still the same – to satisfy needs of the consumers, but accents and motivations are different. Producers are no more compete for the limited resources, they are competing for the limited needs. So how this is different from what we have now? At first producers which are working in consumer markets now trying to stimulate demand by different methods, including aggressive advertisement, fast changes in fashion, price wars etc., consumer credit, etc. Actually producers are stimulating wasteful consumption. This relates to almost every part of modern life starting with food and apparel and finishing with mass media and art. The key for wasteful consumption is the notion about potentially unlimited needs. In the contrary if it will be understood that in fact needs are limited, the point of competition will substantially change. Now producers will compete for the needs not for the resources.

At the first glance this idea seems to be utopical and difficult to understand, but in fact it is not so unrealistic and actually we can see some examples of the notion at work in contemporary business world (though, sometimes it grows to the exaggerated form, like for example gourmet restaurants where people are getting very small portions of high quality food for very high price). A good example of moving in this direction is the development of the sustainable business theories as well as community oriented businesses. Another example is grocery shops, which are selling “healthy” food, like Trader Joe’s or Market of Choice. The true concept underlying here is to curb wasteful consumption buy limiting purchases with smaller quantities and higher prices, thus making consumers consume more qualitatively than quantitatively.

The nature of business probably will shift from mass production to customized production, taking into account “true” needs of the customer, not her exaggerated fantasies. The savings achieved through mass production are actually killing the industry and community. The endless price wars and deterioration of quality combined with stimulation of consumption distorted the economic system and social values in general. The economy should move to wise consumption and production.

As was mentioned producers are not compete for the resources any more, they are competing for the limited needs, by producing the best product, which will fit the customer best. Though the free market and is a good concept as well as free competition, somehow it doesn’t work well enough. The main to reasons are overcompetition, which leads to overproduction and overconsumption and another big reason is that in fact there is no “free” market. The free entrance market is another myth created by distorted economic system. If current markets would be studied closely one can find that majority of them are in fact closed or limited to the entry because of monopoly access to resources, state regulations, capital limitations, etc. The competition is present in one form or another between gigantic corporations which control majority of resources and which business in not always “crystal clear” (let’s not forget Enron at al). And the small business (which in fact could best meet customer limited needs, just because it knows customer best) is dying. For big corporations customers are usually faceless, and they don’t really know the actual needs of each customer, though they could understand the needs of the average, very average customer.

Industrial revolution and concentration of capital brings a lot of sense in developing huge corporation, but society also lost a lot. The main problem for today is trying to combine high technology need for capital with going individually to each customer in order to identify true needs. The decision of this problem can be seen through collaboration of small, community based businesses with corporations. Where first sell the set of needs to the corporations and corporations produce right products.

The last notion about producers is related to the unlimited resources suggestion. In fact resources could be limited, but only in the short run. But this short run is related to the certain kind of resources. For example shortage for the electrical energy resource could be relatively shorter comparing to the shortage for the technology. In fact non-touchable resources usually have the longest shortage period and thus could be a subject for the competition. Thus producers could also compete for the technology in the short run. But technology is a matter of investments, so it’s not the pure resource, but mix between resource and product. To summarize, producers are competing for the needs and technology (by investing in it) and do not compete for the resources.

Government as economy agent plays important role in identifying structural standards and regulating redistribution of goods in the society. In new relationships government should play important role in setting band controlling promoted standards. Government should become a leader in creating stimulus for wise consuming and appropriate investments.

Though the main instruments are taxes, reserve rates and money supply, new policy should be elaborated in promoting moral and ethical standards. These could be done through educational system, mass media, etc. The main point is that possession of money should be considered as burden as far as pure possession should be discouraged, but wise investment is difficult to perform. Money which is not invested properly should be considered as obligation or burden for the owner.

Development of appropriate government regulations, the system of checks and balances and new economic instruments is very complicated issue and will not be done soon, but some steps in this direction are vital even today.

to be continued...