What is an economy and what is it for? – Environmental Business

Rochester Business Journal by Abigail McHugh-Grifa

March 13, 2023

There’s a famous cartoon by Tom Toro that was published in the New Yorker back in 2012, showing a man in a dirty, ripped suit and three unkempt children sitting around a campfire on a barren landscape. The caption reads, “Yes, the planet was destroyed. But for a beautiful moment in time, we created a lot of value for shareholders.” The implication, of course, is that our relentless and indiscriminate pursuit of financial gain will ultimately lead to the demise of human civilization. Like many great cartoons, it’s both funny and totally not funny at the same time. In this case, it forces us to wrestle with uncomfortable questions about why the profit motive is such a compelling force in our society, and why many humans are seemingly willing to destroy the natural systems on which our lives depend, so long as they make a buck in the process. 

That may sound overly dramatic, but the truth is that we humans are in a big pile of poo right now that we created ourselves, almost entirely through our participation in the modern economy. Most of us didn’t intentionally create this mess, so we don’t need to wallow in guilt and shame, but we would benefit from understanding how we got to this point and what we can do to dig our way out, because at this point in human history, transforming the economy is literally essential for our survival. 

So let’s explore some fundamental questions that can help us reorient ourselves toward a better future: What is an economy, and what is its purpose?

“Eco” comes from the Greek word oikos, which means home. The suffix –nomy comes from the Greek nomos, which means management. Put together, economy means home management, or management of the home. As we all know, homes can be managed well or poorly, and how we define “home” can vary, according to whether we’re talking about the micro or macro level. In the broadest sense, Earth is our shared home, so the responsible management of it should probably be a key goal for our economy, because as environmentalists like to say, “There is no Planet B.” 

How we organize our relationships with the people and places that make up our home may involve money and markets, but these are tools of the economy, not the economy itself. According to Movement Generation’s Strategic Framework for a Just Transition, the basic foundations of an economy are natural resources, human work, culture/worldview, and governance. We combine natural resources and human work to achieve some purpose that aligns with the culture or worldview, which is facilitated, maintained, and/or regulated by the governance structure. Governance is important, because this defines who holds power and how that power is wielded.

Unfortunately, for the past 200 years or so, dominant economic theories mostly ignored some key features of how the economy really works. For example, the unpaid labor that goes into maintaining a household (cooking, cleaning, childcare, etc.) just isn’t accounted for in traditional economic models, because this was considered to be women’s work, and therefore unimportant. The role of society was also ignored, or as Margaret Thatcher put it in the 1980s, “There is no such thing as society. There are individual men and women and there are families.” The connections between those groups were only recognized in terms of their participation in the market, as workers and consumers. Similarly, the Earth’s resources were assumed to be inexhaustible, or at least manageable according to the same supply and demand dynamics as everything else, which meant that planetary boundaries weren’t part of the equation and harm to the environment was written off as “externalities.” This explains how we came to believe that infinite, indiscriminate economic growth was both possible and desirable.

Sadly, the natural resources that fuel our current economy are often acquired in very extractive ways (in terms of how they are grown, mined, and removed from communities). In too many cases, we also have an extractive approach to acquiring human labor, which manifests in things like the failure to pay a living wage, unsafe working conditions, and child labor violations. Though the most extreme forms of coercion and exploitation typically occur in other countries, the U.S. economy is undeniably tied to those practices, thanks to globalization. It is therefore appropriate to acknowledge that our current economy is extractive, or in other words, based on the exploitation of human and natural resources. It’s also worth noting that, in terms of governance, extractive economies are associated with militarism. 

Personally, I don’t feel good about participating in that, so I’ve been trying to figure out what it will take to turn this ship around. Of course it’s complicated, but as a starting point, I believe we need to collectively redefine what we want our economy to accomplish. Profits aren’t inherently bad, but it’s kind of ludicrous to pursue financial gain as the primary goal of our “home management” system, if that means destroying our home in the process. 

To my mind, a more sensible goal would be to equitably meet human needs, within the boundaries of what our planet can provide. I believe that goal is achievable and will lead to happier, healthier lifestyles, but similar to how we manage our individual households (at least when we live with other people and want to support the wellbeing of ALL residents), we’ll need an intentional, strategic, and ideally collaborative approach to (1) prevent things from descending into chaos and (2) support learning and improvement over time, in response to changing conditions. 

Our current economy is no longer serving us well. People are hurting, the planet is hurting, and those two things are clearly connected. Though wealth can provide some degree of buffer over the short term, no one will be immune to the chaos and disruption that we are barreling toward over the longer term. So it’s time for a new approach to managing our shared home that recognizes our interdependence and aims to improve everyone’s living conditions, both now and into the future.