John Fullerton described the current financial collapse in his May 2008 essay “The Relevance of E. F. Schumacher in the 21st Century.” It now seems prophetic.
In the same article he warned us not to look to the tweaking of current economic systems to solve our problems, but rather to reach to the teachings of our common wisdom traditions to find new ways of assessing the truth of our situation and to collectively build new economic systems that are just, ecologically responsible, and permanent. In fact he names this rebuilding as the central task of concerned citizens in the first decades of this century.
We have posted his full article at the Schumacher Center’s website and excerpted sections below for your reading pleasure.
Excerpts from: “The Relevance of E. F. Schumacher in the 21st Century” by John Fullerton, May 2008
Our global economic system is broken not because of the credit crisis; it is broken because it is predicated on perpetual, resource driven growth with no recognition of scale limitations.
What we are not hearing, at least in the mainstream media, is a critical reframing of the questions that address root causes. . . . . We are not hearing a debate about the sustainability of a perpetually growing global economic system nested within our finite biosphere. We are not hearing a debate about the wisdom of allowing financial power (and systemic risk) to be increasingly concentrated in the hands of a few financial institutions of increasing complexity and scale. We are not publicly questioning the wisdom of the system we have allowed to evolve in response to capital’s quest for ever increasing financial returns. Nor are we debating where to look for creative responses.
However, nothing could be more important at this critical time. What we must grasp is that the financial crisis we are reacting to is but a cyclical side show to the bigger issues we face regarding the sustainability of our economic system. We should see the present financial crisis as a wake up call to this far greater challenge. We should search with an open mind for the wisdom we need to transition our economic system onto a sustainable path, grounded in ecological reality, with a respect for human justice and a deep appreciation for all life.
What is needed is nothing less than a new economic myth, which incorporates the central issue of scale in order to supplant and transcend the “invisible hand” of the free market. We need a “post-modern (post-materialist) economic theory”.
At the beginning of the 20th century, scale did not matter. At start of the 21st century, scale redefines our economic challenge.
In my personal quest for this new economic myth, I was stopped dead in my tracks after discovering E. F. Schumacher several years ago. Most who know of Schumacher know him from his seminal work, Small is Beautiful – Economics as if People Mattered (1973). The fortunate ones have also read his final published work, A Guide for the Perplexed, a title that grabbed me and did not disappoint. Most disciples of Schumacher probably encountered his clear thinking during the 70s. Many went on to become leaders in the environmental movement. I was in junior high school when Small is Beautiful was published, and then was busy building a career in global finance during the 80s and 90s on the belief that finance rather than politics would dominate international relations during my lifetime. I got that right, but not in the way I expected. Seeing global finance, what I do, as a root cause in fueling our unsustainable economic system, has shaken many of my prior beliefs on economics.
. . . it is now time that we transcend to an economics built upon wisdom. Schumacher’s instruction is clear and compelling. “From an economic view point, the central concept of wisdom is permanence. We must study the economics of permanence.” This intention takes us in a profoundly different direction than conventional, Cartesian thinking. “Permanence” suggests valuing durability over efficiency, stability over speed. These are different values from those typically celebrated in the marketplace.
We need to think about what adjustments are necessary to “insure” the permanence of our collective home, which must include a stable civil society. Such thinking must address the very nature of our economic system. Without a sustainable and just economic system, there is no permanence. We need to inject these ideas into the public debate by reframing the cyclical economic concerns that preoccupy the mainstream media. We see little true recognition of this profound challenge among our business, financial and governmental leadership, which remains absorbed with short-term tactical issues.
Following Schumacher’s lead, we should look to the great wisdom traditions for direction in this truth. Where better to look than to the ideas and teachings from all cultures that have stood the test of time, rather than restrict ourselves to contemporary economic theories that we know are limited and incomplete.
Schumacher is relevant to our critical 21st century challenges precisely for this reason. His philosophy, his concern about the limits of materialistic scientism, his distinctions between divergent and convergent problems, and his ideas of decentralism, appropriate technology, and human scale to name but a few, are all rooted in the great spiritual and philosophical teachings. Not surprisingly, his ideas, in addition to being humane and just, are aligned with nature and nature’s sustainable way, the only truly sustainable system we know. They are, I believe, rooted in truth as best as Schumacher could discern it, and therefore they represent wisdom, the wisdom of permanence.
If you examine Schumacher’s personal library, which is carefully stewarded at the Schumacher Center in the Berkshires, you will find that most of the texts are not about economics. Instead, they include the great philosophical and spiritual texts from all traditions. Schumacher’s gift and genius was to derive economic principles and ideas from these teachings, to have the courage to speak the truth, despite knowing it often flew in the face of conventional economic thinking, and to make the truth accessible with his clear and witty prose. What emerges is certainly not the final word on the economics of permanence. Some of his thinking is outdated, or simply missed the mark. But as a foundation to build upon, it is invaluable. The reason his ideas about economics ring true is because they are built upon these wisdom traditions. The contradictions of modern economics are gone.
Our challenge now is to refine and update this thinking and to chart a practical path of convergence between the reality that exists in our economic system today and the principles we strive to uphold and upon which our long run prosperity undoubtedly depends. . . . The opening decades of 21st century may be our best chance to launch the critical transformation of our economic system to an economics of permanence. We need to get it right, as only our collective consciousness will allow.
Transitioning to a sustainable and just economic system is the ultimate challenge of the 21st century. History no doubt will judge our generation by how well we acknowledge, embrace and take up this challenge.
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John Fullerton is a former Managing Director of JPMorgan, where he worked for 18 years in New York, London, and Tokyo, and subsequently was CEO of an energy focused hedge fund. He is now seeking to launch an investment fund for high impact sustainability initiatives and is working on “The Purpose of Capital,” a book about the role of investment capital in sustainable economics.