Some time ago, the think-tank where I serve as Executive Director conceived the idea of a short video that could articulate the basic problem of global economics--the real problem--in a way that a thousand words never could. We called it The Impossible Hamster (www.impossiblehamster.org).
Why a hamster? Hamsters grow very fast. In fact, they double their birth weight every week from birth to puberty. Luckily, they stop growing at puberty. If they did not stop then, when they were one year old, they would weigh nine billion tons and, every day, each would consume the entire grain supply of the world.
That is just one small hamster. But what lies behind the story is a serious lesson in what infinite growth looks like and why it is impossible in a finite world. It is my contention that the hamster has lessons for all of us: it encourages us to take a second look at the assumptions that lie behind our economic objectives, in light of what we now know about the planet. Although human ingenuity and the human spirit have no limits, planetary resources certainly do. These assumptions have implications--not just for economics, but also for organizing business. I want to set out some of those implications here.
My own think-tank, the New Economics Foundation (NEF), has always been interested in the implications of its economic thinking for business. In the 1990s, we pioneered social auditing in the UK. We were one of the first to measure social responsibility and ethical reporting. At a very local level, and through our BigFizz work, we helped to create circa 800 micro-enterprises in deprived communities across the UK--with excellent four-year survival rates.
We founded and launched the Ethical Trade Initiative, an alliance of main street chain stores and, for a number of years, ran the high profile Inner City 100 Awards which celebrated the fastest growing businesses in some of the urban areas of Britain.
I explain this because I want to be clear about our attitude toward business. We believe in enterprise as a vibrant force in human development. We know that the predominant form of business organization, the public limited company (and its variations which focus on maximising returns to shareholders), has helped bring about a massive expansion of material wealth over the last 150 years. But we are also convinced that major change to the structure, incentives, measurement systems, and financing is needed if business is going to continue effectively driving human affairs.
These changes are urgently needed because not all business activity is positive, especially given our limited natural resources. We must move to a position where business is the primary force improving human well-being and enabling us to enhance rather than deplete the natural resources of our planet.
Why Change is Needed
The changes are urgent because humanity now faces four interlinked, systemic crises:
For the first time in human history, we are coming up against planetary environmental limits. Nicholas Stern, author of climate change report The Stern Review, estimates that we are on course for a minimum temperature rise of four degrees centigrade, compared to the pre-industrial limits, with dire consequences for humans and other species. We are also exceeding the safe boundaries in terms of biodiversity and the nitrogen cycle. The 2005 UN Ecosystems Assessment report showed that 15 out of 25 major ecosystem services were either in decline or in major decline, including pollination systems, fresh water, top soil and fish stocks.
Secondly, social inequality is rising rapidly within many countries, with devastating consequences for the cogency of the social fabric. The ratio of CEO pay of the 100 largest public companies in the UK to their average employee rose from 69 times in 1999, to 145 times in 2009. Increasing economic inequality has decreased demand for goods and services and increased personal debt levels. …