In Pope Francis’ recent environmental encyclical and in his many pronouncements since them, most notably his address to the US Congress and at the United Nations, he was in effect telling the world that the time has come for all of us to take a long hard look at a false god that has, since the beginning of the Industrial Revolution been and continues to be venerated by so many.
The Pope is telling us that the architecture on which markets justify their operation and find their “raison d’etre” is now shaking under its own weight. That architecture is grounded on the free-market god belief described by Adam Smith in the 18th century as a “Hidden Hand.” The Pope is telling us that, like an insidious disease the “Hidden Hand” is working against human survival on this planet. He is saying it is not just a false god, but a very dangerous one.
(To request a copy of the encyclical with relevant parts underlined, as well as a chapter in my new book; “Chapter # 8 A Dangerous Zero Sum Game—The “Chicago School vs the Planet From Adam Smith to Milton Friedman to Alan Greenspan,” email me at Lesprit351@AOL.com and say Pope Encylical)
All around us there are indications of the power of this false god; from the toxic tar sands in Canada to the overfishing in the oceans, to the acidification of those oceans, to the increasing CO2 in the biosphere, to the fires blazing in California, to the Ozone leakage in the Arctic, and the list goes on. Planet earth is sending our species a message. It is pointing to its rejection of this god.
Under its power Capital Markets in our current age have grown to a size where they are energizing ecologically and socially destructive forces of a magnitude that has never before been seen in the history of the planet. Resource allocation is being misguided and misappropriated on a massive scale. Irreparable planetary harm is being done.
Fingers can be pointed in many directions for this; human greed, political dysfunction, just plain stupidity. But in the end, it is a false god worshiped by humanity gone wrong.
The dark ecological cloud forming on the horizon as a result of this false god worship has not registered with the one discipline in our society with the expertise to steer us in another direction; the economics profession. That profession has not come forward with new ideas. It remains silent or at best it only comes forth with quick fixes around the edges of the problem.
Economists need to be thinking and writing and speaking about new ideas that will save our planet and our species on it. Physical scientists throughout the world are now identifying ecological problems with great clarity – and offering solutions. It is time for economists to do the same.
Boiled down to a few words; our resource exploitive capital market system needs to be transformed into a constrained yet incentive directed market system emphasizing the equitable and humanistic provision of both the material and psychological needs of all humanity. The long lasting functionality of all the earth’s resources to meet these needs must take on the highest priority. Every element of today’s energy intensive market driven consumerism must be made to meet this planetary survival/functionality test.
How can we mechanistically achieve this? Negative external costs and positive incentives must be built into every investment decision. And these costs and incentives must be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the University to the athletic field to the hospital. Economic outcomes with negative social and/or ecological cost must be recognized. Such negative externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.
Every investment decision must be internally priced to reflect its socially constructive or destructive outcome. Croplands, grasslands, forests, fisheries, inorganic resources; all of the earth’s natural resources, must be internally priced so as to prevent their exploitation and damage to the planet.
In our present world, none this is happening on a broad enough scale to make a difference. We see cigarette, liquor and gasoline taxes and some others like them, but across the board, any attempt to recapture “negative external” cost is almost nil. Disincentives/ Incentives in ecologically vital areas like energy are being poorly handled, if at all. The most simple questions are being avoided such as; is this or that delivering real worth to society and to the health of the planet. Some progress is being made in northern Europe, but on a world scale it is insignificant.
Humanity is crying out for an entirely new form of economic/monetary theory. Social/political theory must necessarily be a part. A response is coming from some enlightened intellectuals in the world community – with Pope Francis being an example; however, there is at present no universal consensus, nor are there long term solutions at hand. Our species remains in gridlock.
The economics profession inside and outside the academic institutions remains notably silent, content on using its advanced theories of algorithms for trading purposes, but not for the above.
How much time do we have to come up with a revised capital market system? Some highly accredited scientists say our present trajectory will present very serious planetary problems within the next fifty years and they even point to the end of our species after three hundred.
Can we abandon our god belief in Adam Smith’s “hidden hand”? Can we turn ourselves away from this faux belief? Do we have the courage?
If not, there is the possibility our great-great grandchildren will find themselves at the bottom of Dante’s inferno with no escape. That is the Pope’s message.
The time has come for humanity to understand what he is trying to tell us:
Unless we can change the way the market prices what we desire to consume, the biblical prophecy of the end of times may very well prove to be self-fulfilling.