These are turbulent times, on that there can be no doubt. Every major system -- economic, financial, social, and environmental -- is under distress right now with no end in sight. In the past, if one or more of these systems were under stress, the solution could be one system focused and produce results. But the last 35 years has created a phenomenon never before encountered: a global economy resulting in, as Thomas Friedman recently wrote, "an interconnected world where a crisis in one system ultimately creates a crisis in all systems."
We are in, what could be called "the perfect storm". All the forces of a collapsing financial system, combined with an economic system in its final transition from a consumer/industrial economy to a knowledge/service economy, creating major social upheaval and breakdowns in health, family and community resiliency along with environmental degradation and resource depletion reaching peaks that cannot be reversed are now merging together. We are challenged with dealing with not one crisis, but many. Solutions will need to be new, different and immediate and it is entirely doable. The question is not can we do it, but will we? We have the know how, we have the technology, we have the knowledge. Do we have the will?
The perfect storm: A hurricane, a tornado, a tsunami and earthquake walk into a bar and the hurricane says "As a hurricane, I can create the biggest havoc which makes me the perfect storm. To which the tornado just laughs and says, "That's nuts, I can leave a debris field five miles wide with everything obliterated to dust. I clearly create the biggest havoc of all storms. The tsunami shakes its head and says, "No way, I can wash over an area and suck it all back out to sea, never to be seen again--this clearly is more devastating than either a hurricane or a tornado--I am the perfect storm. At which point the earthquake begins to take off its coat and say, "What does it matter which of us creates the biggest mess? After any of us, the world is never the same for the people, the environment, and the businesses/finances of that land. What could be more perfect?
FESE: Financial, Economic, Social and Environmental.
We could dissect this perfect storm as starting at any one of these four primary systems but in truth, they are all so interconnected that our time is far better spent seeing how changes in one motivates us to create the proactive responses necessary in all. For that is where we are right now: none of our current systems will remain in their current state due to the devastation of this perfect storm. The people, the environment, the businesses and the financial systems have already been forever changed.
The Perfect storm: what comes after it is our choice.
We are now challenged to emerge from the cellar after the financial tornado that has left millions of people without sufficient money to live their lives; We will have to climb down from the tree after the economic tsunami that has left millions of the old consumer industry businesses wiped out; We will have to crawl out from the disruption caused by the social earthquake that has uprooted families and re-configured communities; And watch as the flooding recedes from the environmental hurricane that has left our land, air, oceans, rivers etc., devastated and in need of much repair.
Financial tornado: The economic meltdown in 2008 has left financial ruin across the world. In 2010, Greece, Spain, Portugal, Italy and Ireland are all on financial life support and dragging the financial resources of everyone down with them. The U.S. debt levels are the highest ever. Every state in the US but one has a severe budget crisis.
There are a myriad of reasons why this has occurred. But the simplest of drivers is the fact that we operate a single bottom-line economy that rewards anything that makes money, even if it does so at the expense of people, jobs and the environment. Wall Street's Hedge funds, Collateralized Debt Obligations (CDO) and Credit Default Swaps (CDS) all expose the decision by a few to head down a "wealth creation' direction of "making money on making money" (something Warren Buffett has called Weapons of Mass Financial Destruction). Without assessing any consequences to social, economic and environmental systems, the sub-prime mortgages enabled the CDO and CDS instruments to become a fixture in the global financial system. But when that collapsed, a few made massive quantities of money, the grand majority saw their savings wiped out, their homes devalued, whole industries closed and families/communities devastated.
The financial system is weaved within all our lives -- personal, community, environmental, and economic. As it has faltered, so have the other systems. As it stands today in the US, all but one state, North Dakota, have severe budget shortfalls and CA, the 8th largest economy of the world is on the verge of total bankruptcy with a $22 billion deficit. Lending has virtually ceased as the Too Big to Fail Banks, bailed out by $700 billion in taxpayer funds continue to hold these reserves to compensate for all the "bad loans/toxic assets' on their books. The financial tornado that started on Wall Street continues to leave debris along its path; Business failures, mortgage foreclosures, mortgages upside down, the list goes on.
Economic tsunami. The consumer/industrial economy is being swept out to sea and a knowledge/service economy is replacing it. For those who rode the crest of the success called the consumer/industrial economy--it is difficult to appreciate what the new landscape will look like. The people who will work here will be very different than those who worked in the consumer/industrial economy
Beginning in 1975, the first step in transition from the consumer/industrial economy to a knowledge/service economy was taken. It was innocent enough--the oil embargo made the manufacture of cheap goods questionable. Seeking a way to return to maximum profits that were being hit by rising oil prices, outsourcing to third-world countries with low-wage employment enabled U.S. corporations to compensate for rising oil prices and continue to rake in large profits. It's taken 35 years, but the US is clearly no longer an industrial producer. Where once companies like GM, US Steel and Motorola electronics manufacturing and other production businesses dominated the business sector, today they've been replaced by finance/banking, insurance, and medical care as the largest, most successful businesses. We make nothing and those countries that do, India, China and Indonesia are already beginning to see the reality that they too will no longer be able to fuel their economy on cheap goods production. The "learning curve' for them will be very short. We produced for 150 years"they for perhaps 50.
Several reasons why this is true:
"¢ Cheap resources--quickly coming to an end. Peak oil has occurred--thus demand will make supplies ever-more expensive. Oil is present in every product that is made--whether directly like in plastics or indirectly through the energy needed to produce it and transport it for sale.
"¢ Resource depletion--not only oil, but many minerals are in short supply. Water is a commodity we can't do without but many think that water wars will be inevitable for food production and general life need.
"¢ Technology--we've created machines that can do much of this work. Thus millions are being permanently unemployed. Think of the car industry, home manufacture, other factory production--at every turn, technology is cheaper and will replace the human worker.
"¢ Cheap labor--citizens in India, China etc., who have tasted their first bite of improved economic situation are beginning to demand higher wages and no longer are willing to accept such degrading situations. Matched with this, consumers are becoming aware that in order for them to purchase cheap goods, they must condone these dehumanizing conditions to others. We will shortly reach a cross-point and the era of cheap, global labor will not be tolerated.
"¢ Progression of changing systems--a Knowledge/Service economy reflects the ongoing growing journey of the human story. While the transition phase is difficult, it was always to be expected but somehow we lost touch with accepting change and seeing its benefits. This progression is a good thing--but the full transition into this economy will be rocky to say the least. But it is inevitable--if we would embrace it and plan for it, it would be far less chaotic than what resisting is proving to be!
The financial meltdown of 2008 was the last gasp of trying to maintain the "unlimited growth and production' equals a profitable economy. Financiers created "fake products': CDOs, Hedge Funds, CDS and sold them as if they were real and tangible. The pressure to do this comes from the unlimited growth pattern and production equaling profits mania that fuels the consumer economy. When the US stopped making anything tangible, it still needed to have unlimited growth and production of something, and so the financial services industry made up "new financial instruments' and sold them to the world. And then one day, the house of cards came tumbling down.
Social Earthquake: the US unemployment rate is currently at 9.9%, though many would contend that it is as high as 17.5% if one were to include those who have given up even looking for employment. From 1998 to 2008, there was a 0% job increase and now with high unemployment, a "jobless recovery' is predicted as we emerge out of the 2008 recession/depression. That could leave upwards of 15 million people permanently unemployed in just the US. World-wide, even more will be without work. This is an untenable situation and will devastate families, communities and the world at large.
The social upheaval of long-term unemployment is tremendous. We're seeing a rise in homelessness and the use of food stamps throughout the country is the highest ever--now approaching 25% of the population. Cities like Detroit have watched a mass-migration. Detroit once housed 2 million people. It now has a population of 900,000. The economic and financial systems collapse is impacting schools, social services and other much needed social safety networks that will touch the lives of millions of our children for the rest of their lives. Crawling out of the debris left by the financial and economic system's changes will impact at minimum one generation of children, possibly two.
Environmental Hurricane: as of this writing the Gulf oil spill--the largest oil spill ever is in day 60 and no end in sight. Clean-up from this eco-disaster will take years and impact the livelihood of millions along the Gulf shores. This will restructure families, communities, not to mention the wildlife and coastal marshes for several generations just as it has in Alaska due to the Exxon Valdez.
But this is not the only environmental assault that the earth is dealing with. Whether one believes in global warming or not, it is clear that our air and water systems have been seriously compromised over the last 100 years. Recently, commodity farmers in the mid-western Ohio basin have learned that due to too many wells pulling out too much water over the last 40 years to water their large mono-cropping systems, the water-table has fallen so low that rationing will have to be instituted and they must plant less crops. This has happened in S. CA as well where avocado ranchers have cut half their trees because they cannot be watered.
I could go on citing many examples like this, but most would concur that our environmental systems are being pushed to their limits. Add to this a world population projected at 10 billion by 2050 and the impact on land, air, water and natural systems will continue unabated.
The perfect storm is swirling all around us. Financial, economic, social and environmental systems are all challenged simultaneously and thus, our response much be a multi-system approach if we hope to emerge from this perfect storm and begin anew to build a world that has adjusted to the changes wreaked by the perfect storm.
The calm after the storm:
Turbulent times can lead to incredibly resurgent energies that create new opportunities and chances for change. In 2010, in the middle of this storm, it is hard to see our way out just yet, but while we hunker down, it provides us the time and opportunity to begin planning how we will not only clean up the mess of this perfect storm, but rebuild stronger, more resilient financial, economic, social and environmental systems that will support us for the 21st century. Anything less is to abdicate our responsibility for using the capacities we've acquired over the last century. It is time to use all the knowledge, technology and information available and create a win-win world.
The U.S. leads again:
As difficult as the task that lies ahead can seem, the natural leader for this, I believe, is the United States. We have predicated our entire history on creating new ways of doing things. Now more than ever, it is time for us to accept this banner and take the lead in designing new and healthier financial, economic, social and environmental systems in such a way that all of them are factored into our decision making process of designing a new world.
One major step in this new foundation is a transition from a Single bottom-line economy to a Triple Bottom Line economy. We know the Single bottom line--it is tied to the current consumer economy's "unlimited growth and production equals profits' mantra and anything that makes money is good (even though it might do so at the expense of the environmental or social systems.) This system has been in place for the last 100 years. But to continue it will, as noted above, result in much social and environmental destruction and as we've seen--financial and economic upheaval as well.
In defense of the Single Bottom Line economy, let me say, that when it was implemented in the early 1900s, it was done based on the knowledge and data of those times. Coming out of the 1800's, there had been 13 cycles of depression/recession. At that time, the leaders of that time had three options to deal with this chaos:
Option 1. Let things continue on as they had for the last 100 years. This wasn't a very inviting option to say the least. Option 2. Recognize the emerging consumer economy and try to make that a solution by increasing consumption with "insatiable desire' as the way to go.
Option 3. Look at all the systems--social, business and environmental and design a balanced system that benefited all of them.
Well, Option 1 was out--that already produced total chaos that benefited no one. Option 2 was very doable. The emerging consumer economy offered what appeared to be a great solution--encourage consumption through the use of "credit' and this would enable an unlimited growth and production system resulting in large profits that would benefit everyone. Option 3 was not yet possible due to a lack of knowledge and awareness of how all these systems could work beneficially together.
So, Option 2--build a successful consumer economy was chosen. It was impossible for our past leaders to look 100 years hence to see that this would impact the environment resulting in polluted air, water, resource depletion etc. As well, once this Single Bottom Line economy took off, the imbalance towards "profits are everything', fed a mind-set that became ever more narrow criteria for defining success. Men and eventually woman, who came into the workforce in the early 70's/80's were blinded by this narrow view and took it to its extremes. So, here we are, at the start of the 21st century discovering that what looked like a great option--and it has produced some very good things--but in and of itself, it is not sufficient to meet our needs.
Just as was true at the start of the 20th century, we start the 21st century in chaos. We must once again ask the question: What's a good solution for building a global world that lives in harmony and not chaos. Option 1--let things remain the same is not even worth considering. Option 2--try to make the consumer economy work better again is not sufficient. With a world population of 7 billion slated to rise to 10 billion by 2050--resources simply cannot keep up to maintain consumption at the levels all would want. Option 3: build an economy that factors in social, environmental and business needs to create a win-win system. What was not possible in 1905 due to a lack of knowledge/information etc., is now possible. We have the data, the technology--everything we need to do this.
Welcome to a Triple Bottom Line economy.
The Triple Bottom Line economy is an inclusive economy. It enables us to factor in the social and environmental systems as part of the financial and economic design. It works for people, the planet and businesses. It enables a knowledge/service economy to create the most dynamic economy the world has ever known and in doing so, the quality of life for all--people, the planet and business thrives.
Moving to a Triple Bottom Line economy will force us to look at how we currently measure and monetize the economy (GNP Gross National Product). Right now, "profits' from the market sector set the stage for all our measurements. Bottom Line--if it doesn't make profits, it's not measured. The current traditional market, government and illegal sectors are the only way that one can "make a living in a Single Bottom Line economy. One works in one of these 3--in order to secure the funds necessary to live. You either create, own or work for a business, you work for the government and if you can't find a job in either of these, you end up in the illegal sector. The Illegal sector is the drug trade, underground economy, sex trade etc. Many people overlook this sector but actually the illegal employment sector filters as much money through it as the market sector does! Millions of people make their living here and it is measured by economists!
But the GNP does not meet the needs of a Triple Bottom Line Economy and that will be one of the first steps we'll need to take as we move forward.
Robert Kennedy, in a 1968 speech, highlighted this when he said:
"Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product " if we should judge America by that counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
"Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans."
- Robert F. Kennedy Address, University of Kansas, Lawrence, Kansas, March 18, 1968
The good news? We have a choice. We can continue to measure and monetize our economy as we have in the past, or we can build a new measurement system and build a new, thriving, Triple Bottom line economy.
We already have many experts working on this issue and could switch to a much broader measurement and monetization process as soon as we decide we want to do this. Using the knowledge accumulated and the Triple Bottom Line of social, environmental and business factors as the foundation for the measurement systems, we will discover new employment sectors and endeavors that will produce a quality of life beyond our greatest imagination and we can see it happen globally with benefits for all.
There's no reason not to do this, As the perfect storm we're now experiencing begins to subside, let us be prepared to launch a new Triple Bottom Line economy instead of a decimated version of the old Single Bottom Line economy.
Anything less is to ignore the advancements made since our forefathers were confronted with similar challenges in the early 1900s. Then, they could not act on Option 3, there was simply not enough information for them to do so. But today, we can and we must. Let's build on what our forefathers enabled out of Option 2, but let's not stay stuck in it. It's time for Option 3: a Triple Bottom- Line economy.