The Economy of Francis II

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By Ladislau Dowbor*

It is about rethinking the function of the economy in society. After all, the economy, in principle, should serve for us to live better, and not for us to follow its purposes.

Pope Francis has called for March 2020 a planetary meeting around a new economy, symbolically called “Francisco Economy”, in line with the association with what would be the vision of Saint Francis of Assisi, whose city where he was born will host the meeting. This generated a broad movement on the part of communities of different religions, and increased visibility with the direct participation of characters such as Jeffrey Sachs, Joseph Stiglitz, Amartya Sen,Vandana Shiva, Muhammad Yunus, Kate Raworth,. A basic idea – that the economy should serve society, not the other way around – is finding a deep echo. We live in an era of deep insecurity and the search for new models. The current one doesn't work.

The initiative "Francisco Economy” aims to “bring young people, beyond differences in beliefs or nationality, to an agreement (agreement) in the sense of rethinking the existing economy, and humanizing the economy of tomorrow: making it fairer, more sustainable, ensuring a new pre-eminence for excluded populations” [1].

Overall, it is a question of rethinking the function of the economy in society. After all, the economy, in principle, should serve us to live better, and not to be at its service. It seems that a common sense vision is being reached, a reordering of the arguments. An economy at the service of the common good implies that it is economically viable, but also socially fair and environmentally sustainable. This triple objective defines a new balance and another form of organization.

The challenge is not one of lack of resources. In the world, 85 trillion goods and services are produced annually, which, reasonably distributed, would ensure 15 thousand reais per month per family of four. Brazil is precisely in this world average. What we produce today is largely sufficient for a dignified and comfortable life for everyone. Our problem is not one of production capacity, but of knowing what to produce, for whom and with what environmental impacts. The great challenge is the governance of the system, a technical challenge, but above all an ethical and political one.

The world we face is characterized by growing and dramatic inequality, with 1% of the population owning the most wealth than the remaining 99%, and 26 families with more wealth than the poorest half of the population, 3,8 billion people. In Brazil six families amassed more wealth than the 105 million at the bottom of the pyramid. Inequality has reached ethically, politically and economically unsustainable levels.

Climate change, the liquidation of life in the seas and on land – we lost 52% of vertebrates in just 40 years – the loss of forest cover, widespread chemical contamination, the flood of plastics and so many other destructive processes are leading to an environmental catastrophe widespread. We therefore have to face the double challenge of reducing inequality, therefore democratizing the economy, and reducing the pace of destruction of the natural basis of our survival, evolving towards a sustainable circular economy.

We know what must be done: the 17 sustainable development goals (Agenda 2030) clearly define it. We have the financial resources: in tax havens alone, the 20 trillion dollars resulting from tax evasion, corruption and money laundering represent 200 times the 100 billion that the 2015 Conference in Paris decided to allocate to environmental policies.

We have a large amount of information about every problem on the planet, the dramas are localized and quantified. And we also have the technologies that today allow us to move to other matrices of transport, energy, and the production processes themselves. It is not, therefore, a question of lack of means, but of profound political deformations in how we manage our economies.

Thus, the challenge lies in the decision-making process itself, in how the use of our resources is defined, regulated and guided. The economy has to return to serving the common good. In the preliminary discussions to prepare for Brazilian participation in the event, rather than listing the misfortunes that befall us, we sought to focus on the organizational and governance challenges that would allow us to recover our ways, to stop destroying the planet for the benefit of a minority that accumulates unproductive capital.

The 10 essential points

The essential points that we suggest for discussion, around this project, the “Francisco’s Economy”, are the following:

1 - economic democracy: it is about rescuing corporate governance, transparent information systems, and generating greater balance between the State, corporations and civil society organizations. There is no political democracy without economic democracy.

2 - Participatory democracy: the decision-making processes on how we define our options, how we prioritize the use of our resources, cannot depend only on a vote every two or every four years. With adequate information systems, decentralized management and broad participation of organized civil society, we need to reach another level of rationality in economic and social organization. The new technologies open immense potentials that can be explored.

3 - Taxation of flows financial: essential to ensure information on speculative capital, and so that financial resources can finance both the reduction of inequality and to stimulate sustainable production processes. In reality, tax systems as a whole should serve greater distributional balance and greater productivity of resources.

4 - Basic income universal: within the framework of a general view that some things cannot be lacking for anyone, a simple and direct way, particularly with modern transfer techniques, is to ensure a minimum for each family. It is not a question of costs, as the dynamization of simple consumption at the base of society dynamizes the economy and generates the corresponding return.

5 - Social access policies universal, public and price quotation: access to health, education, culture, security, housing and other basic survival items must be part of absolute priorities. It is not a question of costs, but of investments in people, which boost productivity and free up family resources for other forms of consumption.

6 - local development design: Today, we are essentially urbanized populations, and the essence of policies that ensure the well-being of the community and the sustainable management of natural resources must have roots in each municipality, thus building economic, social and environmental balance at the very foundation of society.

7 - Financial systems as a public service: the money handled by financial systems comes from our savings and taxes, they constitute public resources, and in this sense they must respond to the needs of sustainable development. Public banks, community banks, credit unions and other solutions, such as diversified virtual currencies, are essential for our options to have the corresponding features.

8 - Knowledge economy: knowledge today constitutes the main factor of production. Being immaterial, and indefinitely reproducible, we can generate a society not only duly informed, but with universal and free access to cutting-edge technological advances. We have to review the set of patent policies, copyrights, royalties of various kinds that unnecessarily block access to advances. Knowledge is a factor of production whose use, unlike material goods, does not reduce stock.

9 - Democratization of the media communication: the recent advances of right-wing populism and the erosion of democratic processes show the extent to which the media oligopoly generates unsustainable deformations, climates of sharpening divisions and the deepening of hatred and prejudice. An informed society is absolutely essential for the proper functioning of an economy at the service of the common good.

10 - economics pedagogy: The "economy" it essentially consists of rules of the game agreed by society or imposed by interest groups. Economic democracy depends vitally on a generalized understanding of mechanisms and rules. Obscure and falsely scientific curricula have to be replaced by tools for analyzing the real economic world, in order to train competent managers of an economy focused on the common good.

Economic democracy and political democracy

These axes of analysis refer essentially to the decision-making process, to the governance tools that society must have in order to recover the functionality of economic systems. In this sense, they are applicable both to productive activities such as industry and agriculture, and to social policies such as health and education, and so on.

The general philosophy proposed here consists of the understanding that political democracy without economic democracy does not work: the two universes must recover their coherence. And in the face of deepening social, environmental, political and economic disasters, not only is time pressing – as we are beginning to see – a broad change in attitudes, or at least an awareness.

There are wide paths being traced by researchers and research centers, and it can be said that the theoretical bases of another economy are being built in a very dynamic way. Going beyond the old debates between orthodoxy and heterodoxy in economic theories, a new pragmatism appears, this time based on values, in the sense of seeking what works, regardless of eternal ideological labels. We will see below some samples of the global discussion that is generalized.

mea culpa

In September 2019, 181 of the world's largest corporations signed a “commitment letter”, redefining its objectives, and formally setting aside what was its creed for decades, that they should enrich their shareholders and not worry about the systemic consequences, conveniently described as “externalities”. Negotiated and published on the BRT board (Business Round Table), the text is short, basically five paragraphs, reproduced in the note below according to the original text [2].

In other words, meeting consumer expectations, no doubt, but also investing in the promotion of its employees – it gives rise to words like “diversity and inclusion, dignity and respect” – which generates expectations for those who have information about what it's like to work at Walmart or on Amazon, or on Apple's assembly lines in China. The commitment to deal ethically with suppliers, big or small, would also be a radical innovation.

The fourth point, taking responsibility for the impacts they have on communities and the environment, assuming sustainability as an objective, is obviously essential, but perhaps the most transformative is the fifth, in which the ambition is to continue to generate value for the shareholders, but within the framework of a systemic vision that involves long-term commitments and the effects on communities, when we know that the current culture is to ensure the maximization of returns in the short term, with little concern for the results for society .

Nothing profoundly revolutionary on the surface, simple common sense, but after 40 years in which corporations hid behind the very convenient theories of Milton Friedman - “The business of business is business” – therefore having as its sole duty to enrich the shareholders, this letter of intent impresses. The large conglomerates decide to change course. Or so they declare.

Knowing the corporations, Joseph Stiglitz reacts with moderate optimism: “For the last four decades, the prevailing doctrine in the US has been that corporations must enhance shareholder values ​​– that is, increase earnings and share prices – here and now, no matter what. happen, without worrying about the consequences for workers, customers, suppliers and communities. Thus, the declaration defending conscious capitalism, which was recently signed by almost all members of the Business Roundtable, caused quite an uproar. After all, these are the CEOs of America's most powerful companies, telling Americans that the business world is much more than just balance sheets. And that's quite a game changer, isn't it? ”

This cautious optimism seems appropriate. But the reality is that seeing, at the end of the letter, the signatures of Bezos from Amazon, and from the CEOs of the biggest corporations like Apple, Johnson&Johnson, CityGroup and many others, with a position that profoundly reverses what has been repeated to us for decades, calls the attention. These nearly 200 corporations meeting for a public position that they will have to assume their responsibilities indicates in any case that they are feeling a change in times, a reflection of an awakening of planetary indignation with the chaos that is being generated.

Mea maxima culpa

Even more interesting is the position taken by 130 of the largest banks in the world, which proclaim their purpose to respect six basic principles. They undertake to (a) align their activities with the “Sustainable Development Goals”, including with Paris agreement climate commitments; (b) ensure an open system for evaluating the impacts of funding; (c) encourage sustainable activities by its customers; (d) define social objectives in consultation with the various social actors; (e) ensure responsible internal governance; (f) generate transparency instruments so that the effects of its activities on society can be verified.

Let's remember that the 130 signatory banks represent assets of 47 trillion dollars, when the world GDP, for reference, is 85 trillion. However, seeing the signature of large moneylenders as the main Brazilian banks in the list generates an evident skepticism.

* Ladislau Dowbor He is a professor of postgraduate studies in economics at the Pontifical Catholic University of São Paulo (PUC-SP).

Notes

[1] “Today more than ever, everything is deeply connected and that the safeguarding of the environment cannot be divorced from ensuring justice for the poor and finding answers to the structural problems of the global economy. We need to correct models of growth incapable of guaranteeing respect for the environment, openness to life, concern for the family, social equality, the dignity of workers and the rights of future generations. Sadly, few have heard the appeal to acknowledge the gravity of the problems and, even more, to set in place a new economic model, the fruit of a culture of communion based on fraternity and equality.”

[2]“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

– Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

– Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

– Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

– Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

– Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders. Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

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