In most conversations about the economy, I’m often disheartened to observe the lack of first principle thinking and the many underlying assumptions that shape our understanding of value. To create an economy that serves the vitality of people and planet, it’s important to address these unquestioned assumptions and shed light on the deeper aspects of our financial system.
Value is a complex and elusive notion since it depends on how something is perceived as valuable. Markets, as expressions of collective intelligence, allow actors within the economy to assign value to goods and commodities. This emergent, intersubjective quality of value, based on the cost of production and what individuals are willing to pay for final goods and services, is rooted in our evolutionary psychology which can often create perverse drivers of resource extraction as humans seek to consume goods and services that meet our underlying material and psychological needs. At the core, however, there are two fundamental sources of value: labor and the earth.
Labor represents the creative intelligence and ingenuity of human beings. Through labor, we take raw materials or information and combine them in novel ways, creating goods or services that can be consumed or utilized. This commodification of human creativity transforms labor into value, ranging from food products to technology. Additionally, the earth’s inherent value provides us with naturally occurring resources or processes that are essential for the continuity of Life and are the inputs to the process of labor’s production. These resources range from earth minerals to organic phenomena like the hydrological cycle. Currently, the value ascribed to Earth’s resources is primarily based on their utility in industrial processes, but we benefit from the value created by the Earth in the form of clean air, water, and soil that Earth’s processes create naturally without human input.
In our current economic and social structures, corporations concentrate the capture of both labor-generated surplus value and value derived from the earth's resources. Large corporations effectively syphon the surplus value generated by workers and the Earth, directing it to the owners or shareholders and hoarding the gains derived from the exploitation and extraction of both human and natural capital, thus accumulating wealth and power.
This centralization of power and wealth is an emergent phenomenon resulting from the way our money is created. Money, no longer tied to a resource-backed currency like gold, is now generated through debt. When money is created and lent to a bank, it must be paid back with interest. To generate more money to cover the interest, value must be extracted from labor or the earth. This creates a hierarchical pyramid and feedback loop where those closest to money creation reap the benefits, while the rest of us participate in the system that perpetuates the flow of value upwards, ultimately benefiting the bankers who distribute currency as debt.
This system incentivizes behavior that continuously enriches the bankers, allowing them to reinvest their gains and create more capital, the systemic reality of the old saying “the rich get richer and the poor get poorer.” From this perspective, it becomes clear that our monetary system exerts pressure to extract value from people and the natural world. Although this arrangement has produced benefits like iPhones and an industrial food system, it has also generated existential and cultural crises such as a sense of meaninglessness in work and the destruction of our biosphere’s capacity to regenerate.
To address these challenges and shift toward an economy that supports the vitality of our planet and the well-being of individuals, we can employ two straightforward strategies. Firstly, at the level of labor, we can embrace worker-owned cooperatives. These cooperatives allow for self-directed labor, wherein workers have a say in the organization's leadership and purpose. As shareholders, they also own a portion of the surplus value generated by their own labor. When workers have a say in their organization’s purpose and processes, processes of production are more likely to serve people and planet because worker-owners are more directly responsible for the places they call home. For example, while a multinational corporation can externalize costs by polluting a river with industrial chemical waste, workers who live near and benefit from a clean river might make different choices because those choices directly impact their quality of Life. Additionally, workers are more inclined to maximize for their own quality of Life over pure profit maximization, leading to more dignified labor in which their perspectives and needs are honored.
Secondly, at the ecological and macroeconomic level, we must incorporate the true costs of externalities, ie the cost of extraction itself on the natural world’s self-healing and regenerative capacity, into the final prices of goods. This pricing mechanism would provide funds for the necessary rehabilitation efforts that result from corporations extracting value from the earth without properly replenishing it. Additionally, we need to design circularity into our economies, establishing supply chains that allow value created by the earth to circulate within our industrial processes or to cycle back as nourishment for the regenerative processes of the planet.
Essentially, our current economy and monetary system resemble a straw, relentlessly sucking value out of people and the planet, consolidating it in the hands of a few, akin to a cancer cell draining the vitality of an organism. On the other hand, a worker-owned circular economy operates more like the arteries in our circulatory system or the tributaries in our hydrological cycle.
In this alternative model, energy is distributed equitably, nourishing all the essential life support functions of an ecology or a body. It creates a healthy and regenerative loop, where resources and value are replenished in a balanced flow of energy. Just as our circulatory system ensures that every part of our body receives the necessary nourishment, a worker-owned circular economy strives for fairness and equal distribution of value.
By shifting towards this model, we can break free from the stranglehold of wealth consolidation and extractive practices. We can build an economy that respects the interconnectedness of all life and aims to sustain and regenerate rather than deplete and exploit. This process requires a collective effort to reimagine and reshape our economic systems, but the rewards are immense—both for ourselves and for the planet we call home.
By recognizing the true sources of value, labor, and the earth, we can begin to address the centralization of power and wealth that our current monetary system perpetuates. By implementing these two strategies rooted in first principles, we can fundamentally reshape our economy's purpose and intent. For the thriving of future generations, it’s crucial to move beyond the existing monetary system of debt which fuels extraction, and instead create an economy and monetary system that values the well-being of both humans and the earth. Only by reimagining and redesigning our economic structures can we create a world where human beings engage in meaningful work that supports their well-being and serves ecological thriving. Now is a critical time to rethink and redesign our economic structures to prioritize the well-being of both humans and the planet. Together, we can create an economy that nourishes and regenerates, fostering an economy of meaning, vitality, and harmony.
To read more on the future well-being economy we can create, read my long-form essay, The Emergence of The Well-Being Economy.
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For The Earth,
Benjamin