Creating Economic Security Engaging the World More Compassionately AmericInn Conference Center, Ashland, WI April 3, 2008

JERRY HEMBD Northern Center for Community and Economic Development University of Wisconsin-Superior University of Wisconsin-Extension

Outline Economic security and the White House Contemporary economic context or “markets are us” National notes The sustainability imperative Global notes and considerations

“... the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” John Maynard Keynes in The General Theory of Employment, Interest, and Money, 1936.

Positive Economics What is (explanation and prediction) Normative Economics What should be (control and management)

Market Society Social system in which economic life is dominated by a market economy (little or no government “interference”) and motivated/driven by individual self-interest

Command Economy Market Economy Central planning Price system  Institutions differ  The Economic Playing Field WHAT should be produced? HOW should it be produced? FOR WHOM should it be produced? What provision should be made for GROWTH?

A Perfectly Competitive Market Many buyers and sellers A standardized (homogeneous) good or service No barriers to entry or exit Perfect information (about prices and availability of all resources and products) Firms and resources are freely mobile No external costs or benefits

Market Failure Imperfect competition Public goods (nonexclusivity and indivisibility) Externalities Imperfect information Income distribution Intergenerational considerations Institutional failure

Underlying Considerations Supply and demand reflect wants and the response to them – and not needs Markets (when they work properly) produce efficient outcomes but they may not be equitable according to your sense of fairness Market failure brings up the question/issue of role of the government  market intervention

A Social-Welfare Model for the U.S.? The U.S. does not have to accept continued high poverty as the price to pay for a vibrant market economy, since social insurance can be combined with a high- productivity market economy The U.S. does not have to choose between its own poor and the world’s poor. It can help both, at modest cost, and with budgetary funding sources that are easy to identify. Source: Sachs, Jeffrey D. Common Wealth: Economics for a Crowded Planet. New York: The Penguin Press, 2008.

A Social-Welfare Model for the U.S.? The U.S. can learn from the success stories of social-welfare states to foster a greater degree of social harmony and confidence in public institutions The U.S. social insurance system is even more tattered than it looks, because of the increased variability of incomes and risks facing American households The costs of major corrections are small relative to U.S. national income Source: Sachs, Jeffrey D. Common Wealth: Economics for a Crowded Planet. New York: The Penguin Press, 2008.

Confronting the Triple Crisis Climate change Peak oil (The End of the Era of Cheap Energy) Global resource depletion (And species extinction)

Ehrlich-Holdren “IPAT” Equation I = P * A * T I = environmental impact of the economy P = population  growing A = average material standard of living  growing rapidly (consumption) T = throughput (resource consumption, pollution, and ecosystem impacts) per unit of output  technology term to compensate for P and A Original Source: Ehrlich, P., and Holdren, J “Impact of Population Growth.” Science 171:

World Population Since AD 1 Billion People

US Energy Consumption Quadrilion BTU

Growth Trends Summary: 1950 to 2000 Population  more than 2X Economy  7X Food consumption  3X Water use  3X Energy use  4X

The Age of Oil Year Billions of barrels

Natural Capital (Ecosystem) Manmade Capital (Economy) Source: Daly, Herman. Ecological Economics. Island Press, 2004 Finite Global Ecosystem

ECOSYSTEM GOODS AND SERVICE Use values Nonuse values e.g. existence, species preservation, biodiversity, cultural heritage Consumptive use e.g. harvesting, water supply (irrigation, drinking), genetic and medicinal resource Nonconsumptive use Direct e.g. recreation (boat/swim), transportation, aesthetics, birdwatching Indirect e.g. UVB production, habitat support, flood control, pollution control, erosion prevention V A L U E S The figure shows the multiple types of values from ecosystem goods and services that are considered within a total economic valuation (TEV) framework. A Total Economic Valuation Framework

Four Challenges Posed by the Transition to Sustainability We need more accurate models, metaphors, and measures to describe the human enterprise relative to the biosphere. It will require a marked improvement and creativity in the arts of citizenship and governance. The public’s discretion will need to be informed through greatly improved education. It will require learning how to recognize and solve divergent problems, which is to say a higher level of spiritual awareness. Source: David Orr. The Last Refuge: Patriotism, Politics, and the Environment in an Age of Terror. Washington, DC: Island Press, 2004.

Security Perspectives Number of people who died in attacks on Twin Towers, 11 September 2001: 3,000 Number of people who died of hunger on 11 September 2001: 24,000* Number of children killed by diarrhea on 11 September 2001: 6,020* Number of children killed by measles on 11 September 2001: 2,700* Number of malnourished children in developing countries: 149 million Number of people without access to safe drinking water: 1,100 million Number of people without access to adequate sanitation: 2,400 million Note: *Assuming annual deaths were evenly spread across the year Source: New Internationalist 2001

Security Perspectives Number of people living on less than $1 a day: 1,200 million Number of African children under 15 living with HIV: 1.1 million Number of children without access to basic education: 100 million Number of illiterate adults: 875 million Number of women who die each year in pregnancy and childbirth: 515,000 Annual average number of people killed by drought and famine : 73,606 Annual average number of children killed by conflict : 200,000 Annual average number of children made homeless by conflict : 1.2 million Source: New Internationalist 2001

Millennium Development Goals Goal 1. Eradicate extreme poverty and hunger. Goal 2. Achieve universal primary education. Goal 3. Promote gender equality and empower women. Goal 4. Reduce child mortality. Goal 5. Improve maternal health. Goal 6. Combat HIV/AIDS, malaria, and other diseases. Goal 7. Ensure environmental sustainability. Goal 8. Develop a global partnership for development.

Blessed Unrest There are one to two million independent, local citizens’ groups to devoted to environmental, social justice, and indigenous rights issues It has been labeled “The largest social movement in the history of the world” It is not an organized movement It is a natural response to increasing societal and ecological problems

Concluding Remarks We live and work in a market economy There is a role for the public sector in terms of market intervention – and we need to be engaged in shaping this role There is a role for civil society in terms of market intervention and human welfare – and we need to be engaged in moving this movement forward

Spheres of Concern and Influence Sphere of concern Sphere of influence

Some things have to be believed to be seen.

Northern Center for Community and Economic Development Jerry Hembd, Director University of Wisconsin-Superior Belknap & Catlin, PO Box 2000 Superior, Wisconsin Phone: Fax: Website: