A holistic approach to the economy is necessary to avoid social, environmental and economic collapse, according to a new report by the Capital Institute Dead fish clog the Rodrigo de Freitas lake in Rio de Janiero, Brazil. Scientists claim that the fish were starved of oxygen because of pollution. A holistic approach would look closely at the environmental impacts – such as a fish die-off – of economic activities.
To avoid social, environmental and economic collapse, the world needs to move beyond the standard choices of capitalism or socialism. That’s the conclusion of a new report released Wednesday by US think tank Capital Institute.
The non-partisan think tank argues that both systems are unsustainable, even if flawlessly executed, and that economists need to look to the “hard science of holism” to debunk outdated views held by both the left and the right.
Jan Smuts, who coined the term “holism” in his 1926 book, Holism and Evolution, defined it as the “tendency in nature to form wholes that are greater than the sum of the parts”. For example, in the case of a plant, the whole organism is more than a collection of leaves, stems and roots. Focusing too closely on each of these parts, the theory argues, could get in the way of understanding the organism as a whole. Viewed through this perspective, the capitalist tendency to isolate an economic process from its antecedents and effects is fundamentally flawed.
The Capital Institute, created by former JP Morgan managing director John Fullerton, says that society’s economic worldview has relied on breaking complex systems down into simpler parts in order to understand and manage them. For example, this traditional economic view might view automobile manufacturing separately from the mineral mining, petroleum production and workers on which it relies. Moreover, this view might also not acknowledge the impact that automobile manufacturing has on the environment, politics and economics of an area. Holism, on the other hand, would view the entire chain of cause and effect that leads to – and away from – automobile manufacturing.
The Capital Institute report, titled Regenerative Capitalism, emphasizes that the world economic system is closely related to, and dependent upon, the environment. “The failure of modern economic theory to acknowledge this reality has had profound consequences, not the least of which is global climate change,” it says.
A long chain of cause and effects
According to the Capital Institute, the consequences of this economic worldview are vast and far reaching, encompassing a host of challenges that range from climate change to political instability.
For example, the current capitalist system has created extreme levels of inequality, the report says. This, in turn, has led to a host of ills, including worker abuse, sexism, economic stagnation and more. It could even be considered partly responsible for the rise of terrorism around the world, the report claims. In other words, this inequality has become a threat to the very system that is creating it. Without radical change, the report warns, “the current mainstream capitalist system is under existential threat”.
What is needed now, the Capital Institute argues, is a new systems-based mindset built around the idea of a regenerative economy, “which recognizes that the proper functioning of complex wholes, like an economy, cannot be understood without the ongoing, dynamic relationships among parts that give rise to greater wholes”.