V. The Terrain: The Integral Economy

The goal of this chapter is to show that a new macroeconomic theory, based on the emerging integral worldview, is steadily coalescing and rising to dominance. And it stands to change everything.

This new economic theory is predicated on a major shift in thinking and behavior among the general population. And though such a mass change of behavior seems monumental, it is not unprecedented. Think, for example, about the relatively rapid shift from the view of slavery as the natural and necessary underpinning of a thriving economy to the belief that it is morally wrong and anathema. In 1801, if you had asked someone from the American South if they could imagine a thriving economy without slavery, they would have answered with a resounding no. Ask again in 1901, and the economy would already have been reshaped without slavery. In The Problem of Slavery in Western Culture, David Brion Davis explains that such a change in thinking and behavior was part of a transition toward valuing personal liberty (or divergence, in the language of the Living Systems Model).

Admittedly, that change in thinking was given a decisive shove in the United States by Abraham Lincoln and a bloody civil war, and the subsequent transformation of economic behavior was far from easy. Nevertheless, the example is encouraging for our times. As previous chapters asserted, there is much evidence that a new worldview is emerging, shaped by broad recognition of integrality – the understanding that we are all distinct, but not truly separate, parts within an unbroken living whole. It stands to reason that this shift will have a similarly dramatic impact on economic theories and behaviors. This era's full transition may or may not require the nudge of a modern-day Lincoln (or, more likely, a global coalition of them), but the early indications are that it is unfolding rapidly.

Despite all this talk of dramatic change, the emerging economic concept does not dispute current economic theory; instead, it includes and also goes beyond existing thought. Unlike popular declarations from the 1990s of a fundamentally New Economy, this view represents a new-found awareness of principles that have existed all along outside of our perception. British Nobel laureate economist John Hicks explains this well in his 1983 essay on “revolutions” in economics.

Our theories, regarded as tools of analysis, are…rays of light, which illuminate a part of the target, leaving the rest in the dark. As we use them, we avert our eyes from things that may be relevant. …Since it is a changing world that we are studying, a theory which illumines the right things now may illumine the wrong things another time. This may happen because of changes in the world (the things neglected may have grown relative to the things considered) or because of changes in our sources of information (the sorts of facts that are readily accessible to us may have changed) or because of changes in ourselves (the things in which we are interested may have changed). There is, there can be, no economic theory which will do for us everything we want all the time.

Thus, like Bernoulli’s principle of lift, ours is a search for unseen principles that will enable us to transcend the known rules while still acknowledging their validity. And it is just such a new set of principles that seems to be coming into view.

Though there is not yet complete consensus about what this new vision is, this chapter presents the pattern that seems to be emerging from many different theories. What they all have in common is a desire to breathe new life into the field of economics – literally and figuratively. Each seeks to reconcile the machine metaphor of mainstream economics with the living, breathing, integral reality within which we actually exist.

And indeed, we can easily recognize the five defining aspects of living systems in our economies:

  • They have divergent parts (communities, governments, institutions, companies, individual people, and myriad resources).

  • These parts come together to form a convergent whole (an economy) with defining properties of its own.

  • Economies exhibit open interaction and responsiveness both internally and with their surrounding context (the natural environment, cultures, neighboring economies).

  • There is an unseen and intelligent property (Adam Smith’s “invisible hand” comes to mind, as does Friedrich Hayek’s “spontaneous order”) that integrates parts into a coherent, connected and transcendent whole.

  • The fundamental nature of economies is regenerative and creative.

Shopping inside air conditioned malls or making purchases online, it is easy to believe that the natural world exists only as an “externality” and that its rules do not apply to our economic activities, as Mechanistic Economics would have us believe. But the new theories help us recognize that the economy is a living subsystem of the ecosystem, an embedded and integral part of the natural world. Thus, ecological economists focus on a society's metabolism, which they define as “the flows of energy and materials that enter and exit the system.” And evolutionary biologist Stuart Kauffman talks about the “econosphere,” noting that the economy exhibits biological tendencies because it literally is a biological entity. These should be very appealing views: nature is inherently creative, adaptive, self-regulating and sustainable – highly desirable qualities in our economies and organizations.

In fact, it may be that we are now able to see those life-giving characteristics because the economic system has only recently evolved to the point that all its facets are clearly visible, as earlier chapters revealed about other aspects of life. A look at the history of economic activity shows a familiar pattern:

  • Within hunter/gatherer cultures past and present, individuals define themselves and their economic activities within the convergent context of their tribes and all of nature. In other words, they perceive no separation from each other or from all of nature, and that view fundamentally shapes their economic activity. In Stone Age Economics, economic anthropologist Marshall Sahlins explains that these cultures “trust in the abundance of nature's resources” and share resources freely without expectation of reciprocity, in what may be called a “gift economy.” He calls them “the original affluent society,” in which “human material wants are finite and few, and technical means unchanging but on the whole adequate." Indeed, Sahlins refers to this way of life as "the Zen road to affluence” noting their happiness, high ratio of work-to-leisure time, and ease in fulfilling their needs and desires.

  • Agrarian economic activity was reciprocal and redistributive in nature in order to serve the relationship needs of families and communities.  Transactions and exchange existed only as a sub-set of social activity. In The Great Transformation, economist Karl Polyani cites historical and anthropological evidence that the Agrarian man's economic activity “is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end.” It was during this developmental phase that the beginnings of commerce blossomed, encouraging openness, tolerance, sharing of knowledge, responsibility and trustworthiness.

  • Roughly 300 years ago, the market economy was born, eventually ushering in high levels of individual divergence, with capital, laws and institutions to support it and large populations of intelligent, informed, empowered participants to enact it.

  • Now, it seems that we’re experiencing a powerful wave of integration, as economic activity becomes more globally interconnected, as individual actors are able to make ever more significant contributions to the whole economy, and as there is increasing recognition of the economy's integral role within society and the environment. Importantly, we're also witnessing a resurgence and integration of earlier economic concepts. Affluence, rather than scarcity, is being reconsidered as the natural economic state; for example, economist Mark White asserts that we are moving “from a capital shortage and labor surplus -- more people than useful things to do and tools to do them with -- to a capital surplus and labor shortage -- more useful things to do and tools to do them with than people.”  The concept of the convergent context is being further reintroduced with the peer-to-peer and open source movements and growing talk of a gift economy. For the first time since the Industrial Era, environmental and social needs are being included in our economic conversations. And relationship is gaining recognition with things like systems thinking, emotional intelligence, and social networking.

  • This surge of integration is leading to ever more transcendent outcomes, with higher than ever levels of innovation, a record number of new companies being born, and an emergent global economy.

What is responsible for such a wave of integration? The Living Systems Model suggests that Smith's “invisible hand” – which enables each person's pursuit of their own self-interest to result in the greatest good for society – is none other than the animating, integrative spark of life. What is new since Smith's day is that:

  • We increasingly recognize that our self-interest cannot be separated completely from the interests of the whole.

  • We have more complete information than ever before about the needs of the parts and the whole, giving us an expanded definition of self-interest.

  • More and more of us are able to hold the seeming paradox of acting in individual self-interest and also in the interest of the whole.

  • And our understanding of what constitutes the “whole” has broadened to include the environment and all of humanity.

What has also changed is that we are faced with rising social, financial and environmental crises that can no longer be ignored, forcing us to evolve our thinking in search of new solutions.

What, then, might be the defining principles of such a new economic theory? A review of the alternative hypotheses, together with a glance at the Living Systems Model, suggests the following tenets:

  • Integral Economics views an economy as an open, dynamic living system whose natural and ongoing outcome – given the proper conditions and the absence of barriers – is transcendence (that is to say: creation, adaptation, innovation, evolution and regeneration).

  • Integral Economics defines an economy as any interaction between two or more people, in which one has a valuable contribution to offer the other and a mutually beneficial exchange is enacted. National and global economies have become vast and infinitely complex, but the simple interpersonal transaction remains their basic unit. Integral Economics, then, is concerned with the nature and goals of such interactions, individually and in their aggregate patterns.

  • Integral Economics recognizes that, as people come together in interaction and exchange, a new higher level form of life emerges. Two or more parts (people, organizations) come together to create a whole (a living economy). If the proper conditions are in place, the core essence of life flourishes within this whole and it then takes on properties of self-organization and transcendence, exhibiting behavior that cannot be understood solely by studying the behavior of the parts.

  • Integral Economics recognizes that humans, like all living things, are driven to create and transcend. This is only possible through connecting with others to make a life-enhancing contribution that may then be integrated into the whole. Thus, Integral Economics views the purpose of economic activity at any level (global, national, regional, organizational or individual) as (1) enabling connection and contribution (2) in order to engage the integrative and innovative power of the unifying spark of life as fully as possible (3) in the ongoing pursuit of transcendence.

  • In summary, Integral Economics is the study and support of the dynamic patterns of interactions between individuals, organizations, communities and the natural environment in the continuous and iterative pursuit of life's enduring urge to transcend itself.

This is a tremendous departure from Mechanistic Economics.

And yet, at the beginning of the last century, Harvard economist Joseph Schumpeter foresaw much of this thinking. Instead of incremental improvements to existing processes, as Mechanistic Economics proposed, he emphasized the creation of new processes. “Entrepreneurs regularly introduce innovations that upend the established order, unleashing a 'gale of creative destruction' that forces incumbents to adapt or die.” This "process of industrial mutation," he explained, "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." In his view, this is how economies evolve – a decidedly biological concept.

With this in mind, the emerging theory grants the option of adapting within an unpredictable, ever changing environment, and also of integrating novelty in contribution to the convergent whole. In Mechanistic Economics, our only means of progress was to go bigger. Integral Economics gives us the option of becoming different, better and special.

What, then, are the practical implications of this new set of views and the new interpretations of reality they seem to be ushering in?

Though the discipline has not quite coalesced enough at this point to present a detailed, definitive set of principles and practices, it seems clear that the rise of Integral Economics will alter:

  • The goals of economists and economic activity.

  • The measurement of economic activity.

  • The ways we encourage the economic system to work better.

These three topics will be explored below.


1. The goals of economists and economic activity.

According to mainstream thought, the goal of macroeconomic activity is to keep the production/consumption machine churning and growing so we all have the jobs and income we need to survive. This income then allows us to consume more, which signals companies to produce more, which then supports more jobs and income, and so on in a never-ending and ever-expanding cycle, as depicted in the following diagram.

So important is ever-increasing consumption to this cycle that father of modern macroeconomics John Maynard Keynes considered recessions and depressions a problem of “underconsumption.” This is why the 2009 US economic stimulus package, inspired by Keynesian ideas, was designed to encourage consumer spending. Keynes even viewed savings as counterproductive, preventing income from entering the consumption/production cycle.

The challenge we face in overturning the dominant economic concept is that there is undeniable logic behind the current emphasis on production and consumption. It all makes sense – and indeed has been borne out in the market -- until you consider that the current economic system's ability to support life is steadily diminishing with every turn of the production/consumption wheel. Though it may produce jobs and generate increasing monetary returns on investment, the economic system is also decreasing the real vital capacity of our complex life support systems. It is becoming more and more evident that, pursued relentlessly in isolation of other factors, the Mechanistic economic belief set is detrimental to human health and therefore to the health of the economy.

Dissenting economists generally share the observation that ever-increasing production and consumption of material “stuff” is not the sole measure of individual welfare and economic vitality, as Mechanistic Economics would have us believe. Moreover, it cannot continue to be the single defining goal that we pursue, or the Earth will no longer be able to sustain us. Despite their unanimity, however, there is far less agreement about a viable alternative model.

  • Some propose that we all backtrack to more basic ways of living, a path that is neither popular nor practical, at least not in the extreme. Though the hunter-gatherer lifestyle does have its advantages, it seems more in keeping with life's patterns to bring that convergent consciousness forward and integrate it within a fuller theoretical and practical repertoire, rather than abandoning the relationship and divergence we've worked so hard to develop in the past 10,000 years.

  • Others recommend introducing non-monetary measures of human well-being – including measures of environmental sustainability. While this is a step in the right direction, it still falls short of offering an alternative economic model.

  • Some propose abandoning money altogether, but this seems to diminish our ability to be in life-enhancing relationship with each other. The better approach seems to be to change the beliefs that guide how we use money.

  • And others argue that we must reach a state of zero growth. But this argument inevitably leads to an intellectual stalemate, as the unavoidable necessity of growth keeps popping back up persistently.

To move beyond this impasse, we may look to nature for inspiration. Nature also pursues a never-ending cycle in which growth features prominently. The outcome of that cycle is endlessly increasing diversity, in options, in adaptability, in the ability of life to flourish and prosper. Somehow, it creates increasing returns on effort, as every turn of its wheel makes the system richer and more robust.

What's the difference, then, between nature's growth cycle and our own? The difference lies in two things: (1) the goals of those participating, and (2) the other stages of nature's cycle of life, in addition to growth.

Let's start with what nature has to teach us about the role and goals of participating actors within the cycle of life.

In nature's cycle of life, every living thing functions as an integral part, working always to make a life-enhancing contribution to the wholes to which it belongs. Only humans believe that we stand somehow apart from each other and the rest of the world, existing only to consume. In this way, we see that we do want more jobs and more income, and our own interactions and exchanges in the marketplace are the key to keeping the cycle going. Keynes had that right. The problem is with our emphasis on consumption rather than contribution.

Think about it: is it any wonder that our economic system is self-destructive when we call ourselves “consumers”? We are consuming the Earth's resources, just as our economic theory tells us we should, without any obligation to return any of that natural wealth back into the system. The word “consumer” gives us no sense of mutual responsibility or interconnectedness with each other or with the rest of the ecosystem. And the word “employee” is hardly better – when we're not using up resources, we're being used (employed) . “Labor,” “Human Resources” and “Human Capital” take the point even further.

Imagine if we instead thought of ourselves as contributors to life's richness and possibilities. Imagine if our economic cycle were intended to enable life-enhancing contributions, instead of just jobs. Imagine if the fuller goal of our economies were transcendence – adaptation, innovation, regeneration and ever more robust forms of life – rather than simply production growth as the means to employment and consumption.

The diagram would then look something like this:

Focusing on contribution instead of consumption opens up the possibility of exchanging value without necessarily generating income or producing a tangible good, as the arrow in the middle of the diagram indicates. This potentially solves the mainstream economist's dilemma of how to account for volunteer work and unpaid childcare or elder care – and how to account for the growing gift economy.

In fact, with an integral view of economic activities, there is little distinction between purchasing and providing -- between accepting contribution and offering contribution. They are two sides of the same coin, each representing valued participation in the flow of life. Even the word “currency” – which means “flow” – supports this concept. As we spend money, we contribute resources to the flow of life. Designer and community builder Milenko Matanovic expresses this concept beautifully. Though he is speaking of selling artwork, the same principles apply to work of any kind.

...[J]ust as the sale of one's work is necessary for the livelihood of the worker, so a spiritual giving of the product of work is necessary for growth and creativity. In so doing, the artist acknowledges that the created thing acquires a new layer of meaning as it is received by others. This completes the cycle by enriching the community and clearing space within the artist for a new beginning. In the end, there should be three results: completed artwork, a wiser person who grew within the creative process, and an enhanced community gifted with a new way of seeing, hearing or thinking.

With this in mind, we might even collapse our diagram to show that increased income enables people to make increasing contributions (in the form of purchases, investments or donations), which triggers increased production (of goods or services), which enables increasing contributions (in the form of work projects), which leads to increasing income, and so on.

Such a view reinforces the concept that “you vote with your dollars,” creating awareness of the impact of our purchases and the responsibility that comes with them. It invites us to seek out products and services that make a life-enhancing contribution to all involved. Indeed, this is something we see happening already with the rising popularity of Fair Trade, organic and cruelty-free products.

In all, the fuller concept may be not only contribution but compassion, born out of recognition of the unity of all life.

Though many may skeptically dismiss such an attitude as idealistic or romantic, reserved exclusively for the starving artist, the following two chapters will show that, not only is it a rising trend among individuals, but fostering such an attitude is increasingly a competitive requirement for organizations.

This conceptual shift from consumption to contribution (or even compassion) is essentially a new story about our economic lives. And this new story has the power to change everything: how we craft organizational strategy, what we expect from our work, what kinds of products we're willing to create and buy, and how we interact with each other in transaction and in collaboration. Clearly, such a new story and the changes that come with it are exactly what is urgently needed. In Daniel Quinn's 1992 philosophical novel, Ishmael, the wise protagonist – who happens to be a telepathic gorilla – explains:

There's nothing fundamentally wrong with people. Given a story to enact that puts them in accord with the world, they will live in accord with the world. But given a story to enact that puts them at odds with the world, as yours does, they will live at odds with the world. Given a story to enact, in which they are the lords of the world, they will act as the lords of the world. And, given a story to enact in which the world is a foe to be conquered they will conquer it like a foe, and one day, inevitably, their foe will lie bleeding to death at their feet, as the world is now.

With such a new story and new goals to go with it, how will we resolve the persistent problem of growth?

Clearly, humanity's physical presence on Earth cannot continue to expand indefinitely. Paradoxically, however, Integral Economics would suggest that it is not necessary, desirable or even possible to eliminate growth as a core factor of the economy. As we've seen, living systems have an inherent urge to connect and create novel forms – which equates to growth. Says physicist and author Fritjof Capra, “Growth, of course, is characteristic of all life.” But he goes on to offer an important qualification: “[I]n the living world, it has not only a quantitative but also a qualitative meaning. For a human being, for example, to grow means to develop to maturity, not only by getting bigger, but also qualitatively through inner growth. The same is true for all living systems.”

Shutting off this urge to grow is impossible. Certainly, humans can deny our strongest urges if we must, but the situation will be unnatural, uncomfortable and, therefore, not sustainable.

Where, then, does that leave us? How do we develop an economic model that includes an appropriate level – and type – of growth?

Part of the solution is to be found in a model called the Adaptive Cycle. Developed by Buzz Hollinger and elaborated by Frances Westley, the model shows that natural systems exhibit a continuous four-part process (typically depicted as a figure eight) of:

  1. Germination followed by

  2. Growth followed by

  3. Consolidation followed by

  4. Death and renewal, returning to germination, and so on.

In our economies, we have plenty of germination, growth and consolidation. What our system generally lacks is sufficient death and renewal, with resources returned fully into the germination stage. The solution, then, may not be the total absence of growth – it may instead be a proportionate increase in economic death and renewal.

Getting more comfortable with the concept of death and renewal seems to be an important part of the shift beyond Mechanistic Economics toward a theory of economies as living systems. But it may not be as bad as it sounds. Some options – offered for illustration – might include:

  1. Producing only those goods that can be returned into the system fully and relatively quickly as germination (cradle-to-cradle manufacturing). Making such “good” products cheap and “bad” products very expensive.

  1. An increased proportion of economic value generated by intangibles, which can germinate, grow and consolidate without taxing the living system. This trend is already underway, with both the expansion of technological and service sectors of the economy and the individual shift toward connection, contribution and sustainability (which will be explored in a later chapter).

  1. Reducing the pressure on companies to grow rapidly and incessantly (removing the legal obligation, encouraging new forms of governance, such as cooperatives, and revising the general understanding of organizational purpose).

  1. Allowing failing companies to die so that the diversity of the economy is preserved – and so that society is not obligated to prop up companies that are “too big to fail”. This harkens back to Schumpeter's concept of creative destruction.

  1. Fundamentally reforming the financial industry (debt and speculative markets, in particular) (1) so that it no longer overstimulates growth unnaturally and faster than that growth can be processed through to renewal and (2) so that it no longer jeopardizes an economy's resilience with excessive debt-to-GDP.

With changes of this sort, economic value could continue to grow without limit, but material production would ideally net out to zero growth, in what some economists refer to as “dynamic equilibrium” or a “steady-state economy.”

This raises the challenge of determining just how much growth would bring us to an equilibrium state. And it may be that the Earth will give us the answer. As it stands, when consumer spending falls, this triggers the US Federal Reserve Bank to lower interest rates in order to stimulate more spending. Instead, perhaps we'll need a system in which any reduction in the health of the biosphere would trigger a tightening of financial stimulus to growth.

2. The measurement of economic activity. 

Such a fundamentally new economic story, featuring new roles and goals, will undoubtedly necessitate new economic indicators. And indeed, the need to look beyond GDP has long been acknowledged and embraced by leaders around the globe. Multidisciplinary teams have been trying to answer this call for several decades, with economists Hazel Henderson, Herman Daly, Robert Costanza and a host of others leading the charge. Henderson explains how GDP could be adapted to offer a more complete picture:

To correct GDP, we must begin sorting out the “goods” from the “bads” and deduct all the social and environmental costs of production to calculate the “net” GDP.... Likewise, companies need to internalize on their balance sheets, all the social and environmental costs of their products. This way, consumers will pay these full costs of production in the price of products. This, in turn, will mean re-designing their product lines to minimize pollution, waste and social harm. Products will become safer, cleaner and “greener” while some goods will disappear.

But as Henderson and others are quick to point out, even a new-and-improved GDP will not be enough. If our goal is the full vitality and sustainability of the system, we need information about the subtle aspects of individual and organizational contribution.

Happily, a range of new indicators has been developed and proposed in recent years, with eleven of the top contenders described in a table at the end of this chapter. Some are more comprehensive than others, and they have varying points of emphasis. What unites them, though, is their focus on a broader definition of progress and well-being.

Even with an expanded GDP and new, more broadly descriptive indicators, current quantitative measures like unemployment rates and housing starts aren't likely to fall completely to the wayside. But what probably will fall to the wayside is pronouncements of these figures in isolation. Talking about unemployment rates alone, for example, doesn't help us understand why unemployment is high or low or what actions would be most appropriate in response to the situation. And it doesn't tell us about the quality of the employment there is. Today's partial information contributes to our view that we are at the mercy of a little-understood and regularly malfunctioning machine called The Economy. It invites us to place all the power – and blame -- into the hands of one leader, the nation's fix-it man. Instead, we will be better served by a more comprehensive set of indicators accompanied by wisely interpreted narratives that give us a broader understanding of the true nature of the living economy.

It is not at all clear which of the new, broader and narrative-based indicators will rise to dominance, if any. But the search is most definitely on.

3. What we do to encourage the system to work better.

Within mainstream economics, the core debate has centered on whether the economy is able to self-regulate or whether it must be actively managed. Harvard political economy professor Dani Rodrik describes these two camps as follows:

  • Capitalism 1.0: The “miracle of markets” as a creative, dynamic “engine” requiring a minimal state. This view came into favor with Adam Smith's The Wealth of Nations.

  • Capitalism 2.0: The Keynesian view that markets aren't self-creating or self-regulating and need to be “embedded” in a wide range of guiding institutions. This view rose to dominance with the Great Depression and World War II and continues to be the guiding philosophy of most Western nations.

Though the debate over these two versions of capitalism has raged on in academic circles, for the past seventy or eighty years the role of leaders and economists has been as manipulators of the machine, particularly in times of economic recession. At such times, the machine metaphor (or, more specifically, John Maynard Keynes) suggests that you just have to inject cash into the system to spark consumption, akin to jump-starting a car engine. With this in mind, macroeconomic interventions have been designed to stimulate the economy from without, primarily through direct payments to citizens and through government funding of infrastructure improvement projects.

Even if this actually succeeds in stimulating the economy – and there is debate over this as well – the first problem with such an approach is that it is necessarily accomplished through amassing a sizable debt that must be repaid with interest. Principal and interest payments continue to mount, as the business cycle brings another recession every few years, signaling the government to take on yet more debt. This tendency seems to be especially prevalent – and problematic – in the United States. According to an Associated Press article issued on August 25, 2009: “[T]he White House is predicting … [that] by the next decade's end the national debt will equal three-quarters of the entire U.S. economy.... Even supporters of Obama's economic policies said the long-term outlook places the federal government on an unsustainable path....” At some point, debt payments will become an unsupportable burden on the system.

The second problem with the external “jump-start” approach is that it doesn't address why the car has run out of power to begin with, or how to enable it to start well the next time around. And it doesn't enable us to see which features of the system – including the interventions themselves – are exacerbating cyclical downturns.

What, then, will be the role of leaders in Integral Economics -- or Capitalism 3.0, as Rodrik might call it? With a view of the economy as a living system, economic leaders will likely be less fix-it men-and-women and more gardeners or farmers, actively cultivating the fertile conditions for life's processes to flow naturally. Importantly, this view integrates the two earlier renditions of capitalism, embracing the seeming paradox that both theories can be right and finding novel solutions in the tension between them.

This is more than just a cute new metaphor or even an attitude change. It represents a fundamental shift in what is done, by whom. As more and more leaders adopt an integral worldview, they'll recognize that the economy is not an artificial, external man-made construct (as Mechanistic Economics claims); it is the living patterns of people engaging with each other. With this view, it will become clear that the economy encompasses more complexity than any leader can anticipate or manage, particularly as monumental debt repayments limit government resources to intervene and as our goals expand beyond the tangible and measurable. There will continue to be a need for wise intervention and guidance at a national, macroeconomic level, particularly in ushering in the structural changes described in the paragraphs about growth. But as more ordinary citizens gain integral awareness, we'll increasingly recognize our own role and responsibility in shaping the economy.

Tom Atlee, founder of the Co-Intelligence Institute, concurs: “[C]entralized approaches cannot adequately deal with the complexity and urgency of emerging crises. These require more systemic, distributed, self-organizing approaches.”

For this reason, we're likely to see more and more participatory processes in which people within communities come to a shared understanding of the economy's current conditions and what they're doing to create those conditions. And we'll see more examples of community-based collaboration to develop and enact a new vision for the future, along with ongoing collective learning about what has already been done.

In contrast to classic Mechanistic interventions, such integral approaches will be designed to build the lasting capacity of the economy from within. It's the proverbial teaching a man to fish – or, more precisely, creating the conditions for him to learn – rather than simply giving him a fish. It's about enhancing the resilience of a community and supporting its ability to solve its own problems. This is the spirit of integral interventions.

Atlee describes how this approach could work, and indeed is already working in many places:

We need to extend our vision of participatory governance to embrace citizen engagement not only in decision-making but also in action and the kind of review, evaluation and course-correction that characterize collective learning. Collaboration would come to mean real ongoing partnership between officials and community because the situations we face are simply too challenging to handle otherwise....

As collective intelligence and community wisdom come to be seen as vital aspects of public participation, the role of government will necessarily shift. Effective management and leadership become less a matter of telling people what to do when and more a matter of being effectively catalytic, evocative, inspirational and facilitative -- helping existing potential energy, wisdom and collaboration find creative expression for community benefit.

A table at the end of the chapter lists Atlee's practical suggestions for how this can work.

In fact, there are already many recent and well-documented cases of these kinds of approaches being enacted in communities, cities and even nations around the world, with inspiring results. The UK in particular appears to be a leader in engaging local communities in active, creative co-governance and shared responsibility for economic development. The nation's Department of Communities and Local Government proclaims its mission as: “Strengthening local democracy by giving citizens a much bigger role in shaping the places in which they live and the public services they use."

At the community level, the UK has encouraged the development of a network of Local Strategic Partnerships, which are supported by national government funding but are completely self-organizing and self-determining. In a report entitled Building Successful Cities, the Conference Board of Canada lauds the UK's example, noting that “most cities in the U.K. have improved their economic performance dramatically in the past decade.”

Non-profit organizations that support such community-wide collaborative efforts include Imagine Chicago, the Asset-Based Community Development Institute, AmericaSpeaks, the International Association for Public Participation (IAP2), the Human City Institute, the National Coalition for Dialogue and Deliberation, and the Institute of Community Cohesion.

Among these, Imagine Chicago is a particularly inspiring example. In true living systems form, what started as a community development initiative in one city grew into a self-organizing movement encompassing over seventy Imagine projects in more than twenty countries on six continents. Described as a set of “tools and practices for liberating imagination, improving communications and helping communities listen for and organize collective visions and actions,” the movement is built around Appreciative Inquiry, a highly engaging process that identifies and builds on a community's strengths rather than solving its problems. According to founder Bliss Browne, this gives it quite a new perspective:

[The Imagine movement] has worked to … encourag[e] and challeng[e] people and institutions to understand, imagine and create the future they value, to move from understanding and dreaming community to building it. This is “mothering” work in the way Sara Ruddick describes it in her wonderful book Maternal Thinking where she suggests that motherhood is a sustained response to the promise embedded in the creation of new life. That for me is the challenge: How do we bring worthy collective dreams to birth and honor the new life they represent by creating the structures to sustain life's promise on a long-term basis?

"I like to think of community as something of a garden," Browne continues. "In order to make it work one has to have a keen sense of the interdependence of things. And if one wants to be an active player in community, then one also has to be aware of the ecology of things."

Notice the decidedly life-centered concepts she evokes: mothering, gardening, ecology. This is a substantial shift from viewing an economy as a machine. Note also that economic development is not treated separately from community development; they necessarily go hand in hand.

What each of these approaches reflects is a trend toward the increasing cohesion, identity and self-organization of local communities. Though at first glance this rise in community power and identity might appear to be increasing fragmentation, in fact it is a beautiful example of the rich pattern of life: individual communities (parts) are increasing in their internal convergence, enabling them to contribute enhanced divergence to the surrounding whole (the living national economy). Rising transcendent creation is sure to follow. What a welcome relief that will be from The United States of Generica.


As we have seen throughout the first part of this book, the strength and vitality of any living system is a function of its capability to interact continuously and responsively with its context, to integrate divergent contributions from its contingent parts, and in these ways to evolve and adapt. With this in mind, we can now recognize that the strength of any economy is not only its physical resources or measurable output, but its fertility... its resilience... its cohesion... its ability to support transcendence.

This chapter seeks not only to document the unfolding transformation in economic theory and practice, but to move it along. At the heart of this transformation will be a necessary rise in individual wisdom, responsibility and self-reliance, as well as a fundamental shift in business priorities. Both of these prerequisites will be explored in the next two chapters.


A Selection of Proposed Measures of Progress and Well-Being

The Index of Sustainable Economic Welfare and the Genuine Progress Indicator are similar instruments used in different countries around the world. Both are based on the GDP but subtract costs that detract from social well-being (crime, pollution, commuting, family breakdown, income inequality) and add the value of positive but unpaid activities (i.e., parenting, volunteering).

The Sustainable National Income is an alternative to GDP that calculates “the maximum attainable production level whereby, with the available technology in the year of calculation, vital environmental functions remain available ‘for ever’.”

The Canadian Index of Wellbeing measures eight factors: living standards, healthy populations, community vitality, education, environment (ecosystem health), time use, civic engagement, and arts, culture and recreation. It also reveals how each of these is inter-related.

The United Nations' System of Integrated Environmental and Economic Accounting adjusts the System of National Accounts (Europe's version of GDP) for changes in the quality of the environment and depletion of natural resources.

The United Nation's Development Program has created the Human Development Index. Measured annually since 1990, it covers “poverty gaps [and] relative budget priorities between military spending and education, health, gender, environment and other aspects of government performance in over 180 countries.”

In 1995, the World Bank released a Wealth Index, attributing 20% of a nation's wealth to its environmental assets, 60% to its human and social capital, and 20% to human-built capital like factories and financial assets.

Hazel Henderson has co-created the Calvert-Henderson Quality of Life Indicators, a quarterly compilation of multidisciplinary statistics covering twelve non-monetary aspects of well-being and progress: Education, Employment, Energy, Environment, Health, Human Rights, Infrastructure, Income, National Security, Public Safety, Re-creation, and Shelter.

The New Economics Foundation publishes a Happy Planet Index, assessing both the ecological footprint and the level to which people are able to live long, fulfilling lives. It is described as “a measure of the environmental efficiency of supporting well-being in a given country.”

The Legatum Institute publishes an annual Prosperity Report, which encompasses both material wealth and life satisfaction. What is notable about this indicator is that it measures not outcomes but a nation's intrinsic ability and efforts to generate wealth and happiness. On the other hand, it has little reference to environmental or social costs.

Developed at the initiative of the European Commission, the European Innovation Scoreboard measures a nation's innovation rate and the structural conditions needed to support additional innovation.

The tiny Buddhist nation of Bhutan measures Gross National Happiness, the four components of which are “the promotion of sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and establishment of good governance.” In 2007, an international conference on the topic drew 800 participants.

Suggestions from Tom Atlee, the Co-Intelligence Institute

* CATALYZE PARTICIPATORY CONVERSATION: Use and experiment with non-directive participatory conversations to engage the passionate co-creativity of communities, diverse stakeholders and ordinary citizens. So-called "emergent processes" like Open Space, World Cafe, Future Search, and Dynamic Facilitation provide productive channels for existing passions and creativity -- and even conflict -- with little effort to direct the outcome. Programs can start with simple, powerful do-it-yourself processes like Open Space and World Cafe that participants can then carry into their neighborhoods, networks and organizations. Meanwhile, government can build community facilitation resources -- including communities of practice -- to cover a broader range of processes the community needs. Government can also play a crucial role in ensuring the continuous availability of affordable venues for public events and conversations.

* SUPPORT ONLINE CONNECTIVITY: Actively promote coherent collective use of existing online resources for conversation, networking, social interaction, deliberation, and collaboration to engage citizens in addressing thorny issues and emerging crises. Where a government does not have resources to support multi-dimensional effective public participation on their own websites, they can use their websites to tell the public how to use Facebook, Twitter, chats, free conference call lines, GoogleDocs, MeetUp.com, YouTube, WiserEarth, and other online resources to better work together on local issues and participate in local government work.

* HELP COMMUNITY SHARE THE LOAD: Invite and enable citizens and community groups to take on more of the actual work of governance -- from solving problems to gathering and evaluating information to implementing policies and programs. Sometimes this can be designed into a process so citizens contribute to governance without even realizing it, while they're having meaningful fun. For example, in Eugene's participatory community planning process, we plan to immerse commission members and decision-makers in a community-wide World Cafe, followed by a creative participatory prioritization process focusing on "What should we be doing in this community to address climate change and peak oil?" This immersive experience will give officials a dynamic experience of community ideas, energy, and priorities without resource-intensive compilation efforts that generate piles of paperwork they then have to plow through.

* TAP POSITIVE POSSIBILITY: Use participatory approaches that tap into the energizing power of positive possibility -- from inspirational engagements like visionary backcasting and Transition Town initiatives, to exploratory approaches like Appreciative Inquiry and Asset Based Community Development, to behavior-change support programs like Positive Deviance and the Low Carbon Diet. All these approaches help people engage with situations more as opportunities to build better lives and communities than as problems to be solved.

* ALIGN WITH EVOLVING PROFESSIONS: Encourage, use, and participate in emerging movements among the information, knowledge and communication professions involved with computer technology, journalism, media, public relations, academia, research, group process, etc. As their professions are shaken by changes in technology and systemic challenges, some knowledge professionals are re-visioning their missions beyond objectivity, critique, and technique to focus on serving community well-being, promoting community engagement and capacity, and achieving deeper understanding of the foundational values and dynamics of their work. Notable examples include Journalism that Matters, Computer Professionals for Social Responsibility, community science and research (e.g., the Loka Institute), The Art of Hosting, and explorations of the underlying "pattern language" for various fields. Such pioneers can help create innovative public participation infrastructure to support ongoing community-wide collective intelligence. For example, imagine journalists committed not to stories of conflict, but to building community awareness of and participation in exciting public conversations, community action, and positive possibilities.

* TAP CREATIVE ENERGY: Engage natural existing sources of creative, evocative energy in calling the community into volunteer action, participatory governance, mutual support, visionary activism, and self-organizing activity. Latent sources of often "free" creative energy include youth, artists, writers, musicians, performers, innovators, and entrepreneurs who often just need an invitation and honored role to eagerly make a difference. (Note how Obama inspired and used this latent power in his campaign.) Also invite existing networks of common interest and activity -- religious congregations, schools, clubs, ethnic groups, community groups, neighborhood councils, professional organizations, unions, etc. -- to make a positive difference in the community by helping engage their members in inclusive public participation efforts. Often invitational processes work better by engaging network hubs to recruit participants from their networks than by broadcasting invitations broadly through mass media. Government can even sponsor gatherings of key networkers to explore what THEY would like to do to better their community....

* TRANSFORM UNEMPLOYMENT: Help unemployed people engage in fruitful volunteer activity -- including active support for the functions above -- while co-creating mutual support systems and exploring together entrepreneurial possibilities that make innovative contributions to social transformation. In Journalism that Matters' Open Space gatherings, for example, unemployed journalists have linked up with community bloggers to create new and exciting forms of journalism.


Liked the Happy Planet Index. But you missed out Costa Rica, which I believe has the highest Happiness Index.

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