4: World Economy as a Closed Economic Domain
The present controversy regarding the World Trade Organization (WTO) and free trade should raise profound questions regarding the very bases of capitalism, including the modern market economy.* But few people are inclined or prepared to penetrate below the surface of events and issues.
On the one side, it is argued that the WTO is an inevitable result of the global economy. The free flow of goods, services, and capital are seen as essential factors for continued economic growth, which is, in turn, crucial for future prosperity. Anyone who takes this position considers those who oppose free trade to be outdated and ill- or uninformed national protectionists.
On the other side, and with equal passion, the WTO is characterized as an organization that benefits transnational corporations and relatively few individuals. Furthermore, it is maintained that the WTO trade agreements and rulings will result in widespread human and environmental exploitation and tend to turn every-thing into a commodity. Strategists who oppose the WTO claim that its track record is so bad that once people are informed about its activities, a significant number of them will unite to demand its transformation or disman-tling. Rather than viewing the WTO as an inevitable result of existing economic conditions, many opponents of the WTO say it is a destructive ideological construct that must collapse.
In order to gain clarity about these perspectives, it is necessary to examine and challenge some key aspects of modern economic life that both sides of the debate accept as givens—for example, the impersonal market economy and the self-interest and competition upon which it is based. In addition, we must fully consider the degree to which business interests influence, if not control, both legal or rights matters and cultural life. This influence on the nation-states was blatantly revealed when 125 countries formed the WTO in 1995. In effect, they acknowledged and authorized the creation of the WTO as a governance body with authority and power superior to that of the nation-states themselves, a body whose sole purpose is to promote free trade. In order to understand how this could occur, let us consider how economic life has evolved and how it relates to the other sectors of society.
The Evolution of the Economy and the Universal Law of Life
In lecture eleven of World Economy, Rudolf Steiner describes the evolution of economic life.** The major phases described there are:
Private businesses and economies
World (global) economy
Historically, private (local or regional) economies gradually merged into national economies, which in turn quickly came under the influence of the state. Countries then engaged more and more in world trade, mainly of raw materials and finished goods. Then world trade dynamics and activity was gradually transformed into a single world or global economy in which all of its aspects—production, distribution, and consumption—became integrated.*** Steiner maintained that, at least up to his time (1922), the underlying motive for this evolution of growth and merger was hidden below the waking consciousness of most people and was not so much the desire to obtain more profits as the need for survival. To explain his position he refers to a universal law of life that also applies to the private businesses within the economy.
When private economies join into a national economy, ladies and gentlemen, they gain on the whole; they derive advantages. Event single one derives advantages. But, apart from this, what is it that impels them? It is not always conscious insight which impels them thus to join together. Their joining together is, as a rule, not brought about by conscious economic insight, for in most cases the feeling for liberty is too great; the private businessman is not as concerned as all that with the piling up of the profits which arise in this way. Economically, these profits certainly arise; but the process is more complicated than that. The fact is that the single private economies or businesses have the same characteristic as every living organism. Namely, their life tends in the course of time to become weaker and weaker. It is a universal law, and it applies equally to economic life. An economic life which is not being constantly improved always deteriorates. Thus, as a rule, the merging into "wholes" did not take place with the object of making private businesses profitable beyond their original level but with the object of protecting them from imminent decline. (World Economy, pp. 140-141)
*The WTO has as its goal "the substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international trade relations..." (from the Agreement Establishing the World Trade Organization). See our page 33.
**There are two translations in print of Steiner’s world economy course given in 1922. One is World Economy, Rudolf Steiner Press, London, 1977, and the other is Economics: The World as One Economy, New Economy Publications, 1993. The latter also has discussions with Steiner that followed some of the lectures.
*** Steiner also maintained that the evolution of economic life consists of a series of successive stages, but one in which the earlier stages continue to exist side by side with the later," and that "the more primitive processes are constantly penetrating into the more highly evolved ones." (World Economy, p .135-136)
The all-important question that naturally follows is:
What happens now that we have reached the point of a closed world economy? There is nothing beyond the world economy, nothing for it to merge with in order to gain advantages that can offset the decline of life forces over time as was the case with the earlier stages of economic life already described. While mergers are still possible within a world economy, and Indeed they are forming with greater rapidity and are of a size not to be imagined in the past, at the boundaries of the world economy we have reached an entirely new situation in which merger is no longer possible.
As a consequence, individual businesses must look within the economy or into other sectors of society to gain rejuvenating forces. With these thoughts as aback-ground, we can understand the urgency and passion with which many business people and economists sup-port the WTO and unrestricted trade. In a desperate attempt to forestall economic decline, or to put it in more attractive terms, to assure continued growth and prosperity, our investor-driven market economy and the businesses within it must resort to using their power to implement a variety of measures including:
o enter into larger and larger business mergers;
o remove environmental protection laws and regulations to increase cheap access to natural resources;
o continually move factories to where wages are the lowest;
o expand consumer demand by using the media to increase the desire to own and consume more and more goods and services (this includes aggressive advertising that focuses on younger and younger children);
o turn everything possible into a commodity;
o expand the market by increasing corporate property rights in the hitherto public domain in areas such as public water supplies and indigenous plant species;
o expand the market through research and development in the area of life sciences without appropriate safety and ethical review;
o increase consumer demand by continually accelerating the pace of technological refinement and obsolescence;
o increase future market efficiency and worker. motivation by inculcating self-interest and the desire for profit in children through national educational goals and standards developed by big business and government;
o instil the desire in people to make investments based on speculation rather than on the recognition of human capabilities and production potential;
o hire as many part-time people as possible to avoid providing benefits such as health care and retirement;
o downsize the number of workers, forcing those who remain to increase their work load.
All of these practices enable some people, businesses, or sectors of the economy to gain certain advantages. But all of these measures result in a stealing of advantages, or In exploitation of some form or other. Taking all the above into consideration, our present-day global market economy can be viewed as an organism besieged with invasive, antisocial tumors. In total, the effects of these practices leave workers filled with anxiety, corrupt and destroy our spiritual-cultural life, undermine the life of rights, and exploit the environment.
We are presently in the most extended period of economic growth ever, but at what and whose expense?
The Need for a New Economic Science
Fortunately, many people are recoiling in horror at the results of such antisocial measures, many of which are encouraged and fostered by the international trade agreements and rulings of the WTO. We can be grateful for the many people and organizations that have actively opposed some of its more obviously onerous measures. Important trade-related battles have been won. But almost no one is challenging our market economy based on self-interest and competition, not even the opponents of the WFO. At most, they recommend a government-directed market economy that favors domestic over international businesses, or government taxation and entitlement pro-grams that try to mitigate the harmful aftereffects of economic competition.
In so doing, references are often made to Adam Smith and Karl Marx in order to justify going in a certain direction or taking particular actions. But their theories were developed in the 18th and 19th centuries, prior to the advent of a global economy, and are outdated. Al-ready in the 1920s Steiner called for a new economic science based on a world economy consisting of one worldwide closed economic domain. In their own limited and self-serving way, the proponents of the WTO recognize the fact that we are in a single global economy, but in the name of prosperity and growth they resort to the most antisocial measures imaginable. Critics of the WTO justifiably object to and oppose such behavior, but they don’t address the core issues with creative solutions based on a new economic science that acknowledges the fact that we are indeed in one large interconnected world economy.
Necessary Conditions for a New Economic Science.
Efforts to address the problems connected to the WTO or the economy cannot be separated from general social conditions and arrangements. The debate regarding the WTO has brought into the light of day some deeply rooted flaws already inherent in society. The, WTO did not create these flaws; it is a natural outgrowth of them. The proponents of the WTO are correct when they say that it is an inevitable and necessary result of existing economic conditions.
One of the most obvious and fundamental problems starkly revealed by the advent of the WTO is that so-called economic freedom, as it relates to trade and commerce, supersedes human rights and spiritual-cultural freedom and values.
In a healthy society, democratically formed human rights and spiritual-cultural freedom must take priority over decisions connected to purely economic matters. This means, for instance, that rights issues such as work-ing conditions, income, and personal safety, must be taken as a given by those engaged in the economy and that trade agreements and rulings must not take precedence over rights. It would also mean that a democratic rights community would ensure that all workers would be guaranteed a basic Income to ensure them and their dependents a dignified existence. The distribution of wealth should be a question of human rights, not economic power, and it can be properly dealt with only when each of the three sectors of society has achieved a relative autonomy.
Historically, it is easy to trace the development of the economy, which to a large degree is appropriate for our age. However, the democratic political life and the spiritual-cultural life have not developed to a similar degree. When it comes down to day-to-day matters, the economy is the most complex and powerful sector of society. If we add to this the fact that in virtually every modern nation-state the three main sectors of social life—namely, politics or law, economic life,-and spiritual-cultural life—are intertwined within its administration and jurisdiction, it is easy to understand how powerful economic interests can influence the spiritual-cultural sphere indirectly through the state, in addition to the economy directly exerting its influence over spiritual-cultural and political affairs. The very creation of the WTO is a confirmation of the economy’s present power and dominance over the nation-states. Why else would the nation-states so readily give up their sovereignty?
In order to work toward a healthy society and to counter the direction of the WTO, certain apparently radical ideas need to be considered. For instance, in order for the life of rights and spiritual-cultural life (including education) to develop appropriately, and for balance and harmony to be established among the three spheres, each one requires its own administration and relative autonomy. This would allow each of them to operate on its own basis, and according to its own suitable dynamics. Only then can the other two sectors grow into vibrant centers of activity based on their own inherent dynamics that can match legitimate economic interests. Furthermore, each of the primary sectors needs to develop the right relation to the others and stay within its jurisdictional limits. For instance, majority rule of the state should have no say over a person’s education or spiritual beliefs, and economic power should not be able to influence human-rights legislation.
Even though, in such a threefolding of society, each of the three sectors would have its own jurisdictional limits, unity of social life would naturally arise through the fact that everyone is connected to all three spheres at every moment. All legitimate requirements of life can be recognized and true social unity can exist only when each sphere has its own relative autonomy; it can never happen through the unitary state in which all three are entangled under one administration.
Through an independent, democratic rights life, people can feel that they are equal and worthy members of a community they know and love. Through such communal feelings the desire can arise to work enthusiastically on behalf of a community out of interest in others rather than self-interest. Also, in a free spiritual-cultural life it will be possible not only to cultivate the skills and capacities necessary for people to work in the existing economic order but also to enable them to create new economic forms more befitting the human spirit. Government-controlled education in which economic interests dominate will only educate children to serve the existing structure and interests, not only in terms of developing practical skills but also through instilling and fostering self-interest, competition, and the desire for profit—all essential attributes of the existing market economy. Review, for instance, the new proposed U. S. national standards for high school curricula in economics to see how children will be indoctrinated with ideas that serve and perpetuate the existing order. Under such conditions it is virtually impossible for the rising generations to develop new creative ideas about economic life.
Arrangements in a Healthy Closed Economy
Our modern economic life depends on the division of labor and on sophisticated technology. As a consequence, amassing capital is essential to produce goods and provide services. However, people rightly point out that those who own and control capital often abuse economic power. This, for instance, often leads to an unfair distribution of wealth. From a socialistic perspective the main way to overcome the evils of capitalism, particularly those that arise from the private ownership of capital, is to communalize the means of production and distribution and place them under state control. Historically it has been shown that such a communal arrangement is grossly inefficient in comparison with a market economy based on private ownership, self-interest, and competition. In addition, working for the state did not engender a high degree of motivation. Replacing private capitalists with state capitalists has proven to be no solution for the evils traditionally associated with capitalism.
In our search for an economic system that is appropriate for a closed economic domain we need to address the question: How do we create an efficiently run economy in which there is a high degree of motivation that does not lead to the injustices and inadequacies that have long been associated with both capitalism and socialism?
In an attempt to bring about a more socially responsible economy the issue of ownership must be addressed. Today the publicly-traded stock company is the dominant legal structure. The primary duty of corporate management is to maximize profit and stock value. Management, in its decisions regarding production, location of facilities, working conditions, and worker in-come must, in the end, bow down before the gods of profit and shareholder equity. Even corporate philanthropy is becoming, on the one hand, a marketing tool, and on the other, a means to exert economic power over cultural or political life.
In a healthy closed economy the means of production, including land, would no longer be treated like a commodity, that is, it would no longer be bought and sold. It would be given free of charge to capable people who want to produce something on behalf of society. When a person is no longer in a position to use a particular means of production it would be passed on to another capable person or group of individuals. Ownership of the means of production would be transformed into right of access and right of use. Corporations arising from the spiritual-cultural sphere would be entrusted with the oversight of land use and other means of production. Their decisions would be confirmed and upheld by the rights state. Investments in businesses would be based on human capabilities and have the character of loans with a percentage of the principal investment as a return.
For those looking for practical ways to start implementing such ideas, the Community Land Trust movement offers social forms in which land is no longer treated like a commodity, and its use is governed by community trustees.
Stating that the economy is subject to the same universal law that governs living organisms, Steiner points out that just as other living organisms need to be repeatedly nourished in order to maintain life, so too the economy needs continual rejuvenation and corrective measures.
This can be accomplished through the formation of economic associations that include people from all aspects of economic life—producers, distributors, and consumers. As described by Alexis de Tocqueville in his Democracy in America, the principle of association has played a vital role in the United States since its beginning. But it is now time to employ this principle within the economy encompassing all its aspects just mentioned. These associations, consisting of people directly involved in the economy or indirectly involved through their representatives, will be in a position to make informed decisions about economic life. These decisions will include the determination of what should be produced, based on consumer needs; production standards; and appropriate prices. As a result, the chances of the impersonal market economy will be replaced by human reason.*
Technically, there is no great obstacle to beginning to work in this way other than the lack of will to use the knowledge, skills, and the human connections that al-ready exist. Working from the principle of association could begin immediately in the areas of food production, distribution, and consumption. Indeed, within the Community Supported Agriculture and the Fair Trade (distribution) movements we have elements of associative activity already in place. But people have to recognize these elements as such. If the principle of association and its importance for economic life were understood and upheld as an ideal, particularly among consumers, new economic forms and arrangements could rapidly develop.
This would enable people to go beyond merely protesting and combating what already exists. Build the new and let the old crumble to dust should be the guiding thought for real change.
*Another way that associations would continually bring about a rejuvenating effect on the economy, which is too complicated to go into here, is by overseeing the amount and flow of purchase money, loan money, and gift money. See Steiner’s World Economy for more details.
According to Steiner, economic associations should guide the economy, including the introduction of restorative and corrective measures when appropriate. In carrying out these tasks associations would:
o determine the comparative value of goods and services and establish appropriate prices;
o determine which goods should be produced based on direct insight into consumer needs;
o help investors find those businesses that are in need of loans;
o ensure that education and spiritual-cultural life have sufficient financial support;
o establish a currency based on consumable products and control the amount of currency based on goods. services, and the means of production available;*
o help determine the best distribution of the work-force;
o ensure that goods and services are available to those who require them.
Such associations could restore dignity and a cooperative spirit to human relations and encourage people to take an interest in each other and in social needs instead of basing decisions on self-interest and the desire to maximize profits. Associations of producers, distributors, and consumers could help bridge the gap that exists between producers and consumers, investors and workers, and management and workers. Thus, our present investor-driven economy would be remodelled into a consumer-driven associative economy.**
A society that would strive toward such arrangements would also consider free trade a worthy goal, but as things are now, the brand of free trade that the WTO stands for can only lead to human and environmental degradation.
Through such measures as briefly outlined here, two tenacious problems that have persistently dogged the modern market economy—an uneven distribution of wealth, and human exploitation— could be dealt with in a fundamentally new way. All kinds of ideas have been theorized and even implemented in an attempt to offset the concentration of power and wealth that inevitably occurs in a traditional capitalistic economy—the graduated income tax, luxury taxes, entitlement programs of all sorts, subsidies, and even a guaranteed income. As already suggested by the examples given, a threefold social order would be based on the principle that it would not even be possible for a capable person to receive an income without also working in some way on behalf of society. A person should be freed to work, not freed for a life of idleness or self-gratification. Steiner maintained that the mere possibility of a nonworking person deriving an income is the equivalent of a tumor residing in a human organism. In keeping with these ideas, in a threefold society the political state would ensure that every capable person who works would receive an adequate income to lead a dignified life. This would include support for dependents. Conversely, it would not be possible for a capable person to opt out of contributing to society by living on gains from stock and land speculation.
* Steiner suggested wheat as a possible basis for currency. See World Economy, lecture XIV.
** Another important point made by Steiner is that for an associative economy to succeed, it is necessary for a certain minimum number of people to take up spiritual science in order to appropriately interpret the information and perceptions that would arise within the associations. See, for in-stance, Spiritnal Science as a Foundation for Social.Fonns (lectures to members) (Hudson, NY: Anthroposophic Press, 1986), lecture XI.
This is not an accusation regarding any particular person’s or group’s actions, life style, or investment decisions. When it comes to human exploitation, every-one contributes to a certain degree, even if it is only through the acts of purchasing. A poor person on welfare who buys items produced in sweatshops is no less an exploiter of workers through such an action than a person who has made a fortune through stock specula-tion and who buys the same or a more expensive item made under similar conditions.
It is a distraction from the root cause of social problems when particular people, groups, or organizations such as the WTO, transnational corporations, or greedy politicians are cited as the sole or main cause of injustice or exploitation. Rather, the problem is our whole social structure, the thoughts that underlie it, and the commonIy accepted antisocial actions that are routinely carried out everyday by people from all walks of life.
The threefold social order is not a theoretical construct that is to be externally and forcefully applied to social arrangements but is rather a reflection of and intimately connected to the complete nature of the human being—body, soul, and spirit—and its evolution here on earth. The three primary spheres of life are already recognized to a large degree. It is becoming more and more common to see the three spheres of politics, culture, and the economy referred to in the media.
Through a proper threefolding of society, individual spiritual development, democracy based on equality, and a truly social economy can arise. Threefolding models based on a market economy, a political state dominated by interest groups, and a politicized cultural life will only increase social injustice. The threefold social order, as Steiner described it, will arise when outdated thoughts and materialistic tendencies are removed. A true threefolding will continually address problems and imbalances as they arise in a manner befitting the human spirit..
Reprinted with kind permission of Gary Lamb, co-editor of the Threefold Review, an independent magazine based on the social ideas of Rudolf Steiner. This article originally appeared in the Fall 2000 issue.
(The ThreefoId Review, P.O. BOX 6 Filmont, NY 12565 USA [518-672-5605]. Subscriptions are $28.00 for four issues.)