SAJEMS NS VolS (2002) No 2 271 The Search for a New Economic System Continues 1 INTRODUCTION Much work has been done in South Africa and indeed everywhere in the world to close both the intellectual and the policy gap in the understanding of the interface between the economic and environmental systems. How far has this search progressed? Some will argue very far. They will quote the increasing importance of carbon trading and the introduction of international treaties such as the convention on biological diversity and the Kyoto protocol as important milestones and a watershed. The notion of clean technology has also begun to penetrate the marketing arena under green labelling or branding and as such has considerable fmancial value for a firm. Without detracting from these successes, actually in an effort to support and intensify the current research and policy trend, this editorial adopts a rather different view, asking the question: has economic theory changed symbiotically to the change in world philosophy that took place during the last number of years? Unfortunately the answer to this question is negative. In addressing these issues, the origins of modem economics are briefly examined. Thereafter, the change in current philosophy and by contrast, the stagnation of economic theory are discussed and a brief look at the ongoing research trends concludes. 2 THE ORIGINS OF RATIONAL SELF-INTEREST The 1700s witnessed a change in the general philosophy or world-view of the time. The incumbent philosophy accentuated the importance of the human ability to reason, of individual freedom and the fulfilment that man had to derive from life itself. This new philosophy was personified by Jean Jacques Rousseau (1712-1778) and neither the dwindling influence of the Roman Catholic Church nor the fledgling Reformation movement at that stage could change or halt this surge in humanism (Schumpeter, 1954: 107-15). It was in this climate that Adam Smith (1723-1790) wrote An Inquiry into the Wealth of Nations (1776). It is therefore not surprising that Smith accentuated individual self-interest, savings, capital accumulation and the division of labour as necessary factors to accomplish the set ideal of increased national product (or economic growth). A deterministic R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 272 SAJEMS NS Yol5 (2002) No 2 Newtonian self-regulatory mechanism, an invisible hand, i.e. the market forces, would ensure this required economic growth (Heilbroner, 1985: 65-66). Heilbroner refers to this Smithsonian economic system as a growth model, illustrating it as a propulsive force that will put society on an upward growth path, as well as a self-correcting mechanism that will keep it there. Ever since Smith, this underlying philosophy has not changed, as clearly highlighted by Shiva (1988: xvi-xvii): The rise of a patriarchal science of nature took place in Europe during the fifteenth and seventeenth centuries as the Scientific revolution. During the same period, the closely-related Industrial Revolution laid the foundation of a patriarchal mode of economic development in industrial capitalism. Contemporary science and development conserve the ideological root and biases of the scientific and Industrial Revolution even as they unfold into new areas of activity and new domains of subjugation. Long before Shiva, however, Schumacher (1973: 13) has foretold the potential impact of this Smithsonian system of SUbjugation: Modern man does not experience himself as a part of nature but as an outside force destined to dominate and to conquer it. He even talks of a battle with nature, forgetting that if he won the battle, he would find himself on the losing side. Until quite recently, the battle seemed to go well enough to give him the illusion of unlimited powers, but not so well as to bring the possibility of total victory into view. This has now come into view, and many people, albeit only a minority, are beginning to realise what this means for the continued existence of humanity. Today the evidence or result of the battle between man and nature that Schumacher has referred to, is all around us and highlighted in all the articles in this volume. But why the perpetuation of this system that is threatening the existence of humanity? 3 FROM RATIONAL SELF-INTEREST TO A SEARCH FOR A NEW DESIGN Smith introduced a new and modernistic economic system during a time when the global world-view or philosophy changed. Not unlike the era during which Smith lived and wrote, post-modernism is currently replacing modernism. The differences between these two opposing world-views are summarised in Table l. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 273 Table 1 Modernism and Post-Modernism Modern paradigm Post-modern paradigm Human being as a rational, autonomous Human being as a relational being being Universe (nature) as object of the n~s Universe (nature) as a dynamic of the human being organism Absolute, deterministic influence of Science: chaos and qualitative science and technology General optimism with regard to the. Development and progress - scarcity prospects of development and growth - i and limitations i.e. improvement Truth as objective and neutral Truth, objectivity and neutrality subject to the role of belief and value systems Cosmoloai cal view Stable Unstable/chaos Closed ()pen (holistic) Determined Relative/randomness/ indeterminacy Predictable/measurable/controllable Complex Adapted from: Sohnge (1995) The impact of this change from modernism to post-modernism is visible over a wide front, as is shown in Table 2 with regard to corporate management systems. From Table 2 it is clear that the management style of the 21$1 century did not just amend the 20th century management style - it is a completely new design. The problem, however, in economics is that a post-modem replacement (or new design) for the Smithsonian system is still to be found. This search for a post- modern economic system resembles the search for a unified theory of gravity as illustrated in A Brief History of Time by Hawking (1988). Modem-day economics, still taught in almost all universities of repute, is based on the microeconomic premise that the collective outcome of rational individual decisions in pursuit of self-interest for the maximisation of either producer or consumer surplus will lead to optimal resource allocation and efficiency. This premise, however, relies heavily on a large number of assumptions. Failure to uphold them will inevitably lead to failure on a larger scale - and to negative environmental externalities. From a macroeconomic perspective, the natural environment is treated equally neatly under the ceteris paribus clause, as if the stock and quality of natural resources do not change. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 274 SAJEMS NS Vol 5 (2002) No 2 Table 2 Comparison between two management and organisational behaviour styles Characteristics 10m Century n It Century corporation corporation Organisation The pyramid The web or network Reach Domestic Global Focus Intemal External Structure SeIf·sufficiency Interdependencies Operations Vertical integration Virtual integration Resources • Atoms: physical assets Bits - information Source of strength Stability Change Style Structured Flexible Leadership Dogmatic Inspirational Motivation To complete i To build Workers Employees Employees & free agents (outsourcing) Job eXPeCtations Security Personal growth Strategy Top-