The new ’New Deal’: It’s all about stewardship

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Practically all real economic indicators are pointing to a world economy caught not only in a recession but in a depression. This means, that the policies the politicians and centralbankers put in place to overcome the financial crisis have failed. Actually, there was never any real recovery, the policies was just another round of financial trickery. Just another round of ’the wealth effect’ achieved (as always) through blowing up financial bubbles. Further, this means that we haven’t overcome the financial crisis yet, rather, we are about to witness the final and devastating stage of this crisis.

In this final stage of the financial crisis staggering amounts of financial fortunes will be lost, and a large part of the assets that manage to retain their value will change hands. Many analysts are expecting to see ’the greatest wealth transfer in history’. In all likehood, the pension schemes of ordinary people will be among those financial fortunes that just evaporates, and so does all the equity in the privately owned homes and cars. Thus, this last stage of the financial crisis will lead to a final breakdown of trust in the political leadership, which amounts to a breakdown of the social contract, and what happens next is anybody’s guess. We might experience a widespread disintegration of the whole web of society leading to destitution and rampant criminality, or we might collectively wake up to the graveness of the situation and right there and right then make a strong new determination to stand by our society and undertake the task of rebuilding it.

In many ways our situation is comparable to the Wall Street Crash of 1929 and the ensuing Great Depression, though in other respects our situation is very different from that historic precedent. But the Great Depression did comprise of a breakdown of the social contract, a breakdown of trust in society, and in the case of the United States of America, it was through the restoration of the social contract through the New Deal-initiatives under President Roosevelt, that trust in society was restored and the economy recovered.

This article is aiming at exactly the point where the social contract ultimately will be broken during the forthcoming financial collapse, that is during ’the greatest wealth transfer in history’, and the intend is to devise policies that would stop this wealth transfer in its tracks, and instead use the extreme malleability of the situation to institute a new and strong and relevant social contract.

 

Background

For the past forty years or so the question of the sustainability of our ways of living has been looming in the back of the mind of practically every one of us. In the five to ten years prior the question was very strongly brought to the fore by a series of stark examples of how our pollution was devastating the natural world, and there was a series of scientific studies that spelled out the graveness of the question, studies like The Population Bomb (1968) and Limits To Growth (1972), and with the 1973 oil crisis there was a stark realization of our dependency on a steady supply of fossil fuels to sustain our ways of living.

Around forty years ago a substantial part of the population actually showed a willingness to deeply reconsider and revise our ways of living in light of these stark new realizations. Organizations like Worldwatch Institute and Greenpeace were formed, and the belief in the ever beneficial effects of technological progress was called into question not least through the anti-war and anti-nuclear movements and there was a widespread criticism of the actions and operations of large multinational corporations.

The political scene of the seventies was a battleground, in every corner of society. A part of the population was pushing for deep political changes, another part of the population was strongly resisting any major changes, and in between these groupings the majority of the population was waxing and waning, not knowing who or what to believe. But by the end of the seventies the majority of the population did reach a kind of conclusion and decided to go along with the political leaders who professed, that we didn’t really need to change anything at all.

And in the overall scheme that was what we did. Continued our ways of life with some minor tweaks to the regulations on emissions of pollutants and energy consumption. And looking back at these past forty years, not only did we continue our unsustainable practises, we expanded our consumption of resources and our pollution of the natural world. But how was that even possible, if we already had made the unequivocal realization, that there are physical limits to growth build into our current ways of living? Why didn’t we run into some hard barriers with regard to resources and critical degradation of the natural world?

The answer to this question is pretty hard to grasp, but it has to do with how we made investment capital cheap and abundant throughout these forty years. In 1971 Pr. Nixon cancelled the convertability of american dollars into gold, which amounted to a cancellation of the whole monetary structure that was instituted in the wake WWII, and since then all the currencies of the world has in effect been free floating. Within the field of economics the value of one currency could be measured against another, and every currency could be measured against the amount of goods that a given quantity of the currency could buy, nonetheless, the central banks and the politicians were free print lots of money and more and less hand out these money as investment capital or as government financing. Without the backing of this money printing with anything real like productivity growth (i.e. in improvements on real goods or other forms of value creation), this money printing was backed by nothing but debt obligations. And that’s what we have been doing since the beginning of the seventies, expanding our levels of debt at an ever accelerating rate.

It is this huge build-up of debt, this relentless money printing, that has provided the cheap and abundant investment capital, and it is through this cheap and abundant investment capital that we have been able to continue and even accelerate our extraction of ressources and the whole human enterprise at the expense of the whole natural world. And due to the arbitrariness or the unreality of this money printing regime, the people in charge of the scheme soon learned how to make it benefit themselves, which gave rise to huge inequalities in income and wealth distribution within our societies.

Along with the inequalities came the rise of a class of ultra wealthy, who began early on to exert massive political influence. Probably in part due to our common proclivity to respect people of success and our common proclivity to try to achieve a good standing by powerful people, probably in part due to actual favors or outright bribery, this class of ultra wealthy have in many ways succeeded in tweaking the legislation to benefit themselves and their agendas. Thus, crucial parts of our legislation is rigged, abused and corrupted, and when the executive branch enforces these parts of our legislation, it is no longer to the upholding of justice but rather a means of oppression of the ordinary citizenry.

 

The greatest wealth transfer in history

All in all the past forty years of political management has brought us to the ominous circumstances we find ourselves in right at this point. Our current situation might be designated ’Peak Unsustainability’. Since the money printing regime is based upon an ever expanding amount of debt, what we are talking about is actually a Ponzi Scheme, and lots of economic indicators are now pointing to the fact, that we have entered into the unravelling stage of this mother of all Ponzi Schemes. The question is not if but rather when the financial markets will collapse. And what is collapsing at that point is more specifically our collectively held notions how our society is doing and how our economy works. In real terms, that is, with regard to our value creation and resource management and societal cohesion, the collapse has been ongoing for years.

When the financial markets finally collapses, that’s when the last and ultimate stage of ’the greatest wealth transfer in history’ will take place. What the financial analysts are referring to is the mechanism by which such collapses historically have unfolded. That a small group of the richest and most influential manage to position themselves not just to avoid loses but actually to soak up all the wealth that all the other parties are losing. Other analysts hold the belief, that in the wake of the collapse we will have to re-institute a money system based on gold, and through this reinstatement of gold, the value of gold will shoot through the roof, and all those who have been clever enough to invest in gold, will find themselves raised to the level of the ultra wealthy on the other side of the collapse.

In reality, no one knows how the collapse is going to unfold. Because all the previous cycles of boom and bust didn’t coincide with the peak unsustainability circumstances. Yes, the collapse of our financial markets and our money systems is a given, but this collapse might deal such a violent blow to our societies, that the very foundations of our societies are challenged. The foundations of our society being the trust in the good will of other people as well as the trust in leadership, that is, that people who accept leadership positions in society thereby accept to work on the behalf of the common good. If this trust is lost all together, if this most elementary glue of any society is lost, then the whole structure value creation within our societies is in peril, and we probably won’t even be able to feed ourselves not to mention the provision of a whole swathe of other basic necessities.

This is the ultimate scope of the rampant money creation and wealth distribution scheme we have had running for the past forty years: The risk of such a total undermining of the foundations of our society, that it will disintegrate into hunger, violence and lawlessness. It may hit us as one fatal punch in the days or weeks after the financial collapse, or it may take the form of a disintegration of ordinary peoples living conditions at an accelerated pace compared to what we’ve already experienced, which will lead to growing anger and frustration and the likelihood of growing calls for strong political leaders willing to take extreme measures to turn the downward trends around. Both fascism, anarchism and communism might gain renewed following, and should any of these political strategies achieve widespread following, they will probably institute their own version of ’the greatest wealth transfer in history’. And the former leadership, both political and commercial, will be rounded up, and the ensuing people’s courts aren’t likely to be neither orderly nor balanced.

But again, neither fascism nor communism will develop in ways comparable to those of the past, because all the former runs didn’t coincide with the peak unsustainability circumstances. Never before in human history has the planet been so critically depleted. Though it sounds rather odd but the scarcity of capital will reveal the real scarcity of resources and the real inefficiencies of our current systems, and thus it will require a rapid shift to some highly efficient ways of organizing society to provide for everybody with the scarce resources available. Through their extreme top-down organizational models, neither fascism nor communism can muster the necessary degrees of efficiency, and thus these political models are still likely to lapse into hunger, violence and lawlessness.

No matter what, the greatest wealth transfer of history seems to be upon us. Will it be the oligarchs who consolidates their grip on power and property, will it be the gold bugs hitting a jackpot or will it be in the form of a populist swell that up-ends the wealth distribution through a political revolution?

 

The notion of stewardship

Given that the greatest wealth transfer in history is upon us, is there a proper and fair way to direct this transfer of wealth? Since we have arrived at peak unsustainability, and our overwhelming challenge is to change our ways of living, so that the life of humans once again can fit within the planetary framework, there is one term that seems to summon up this profound change of attitude, and this term is stewardship.

Compared to common notions of management stewardship is an all together different way of understanding the relation between one self as manager and the people, land, animals, resources that are the objects of management. In fact these people, this land, these animals, these resources are not objects at all, they are not merely a means to an end, but rather, they are all sovereign expressions of the web of life and rather than considering himself superior to these entities the manager with an attitude of a steward might actually tend to humbly consider himself a servant of these entities to whom he is the manager.

Contained within the attitude of the steward is the willingness to listen, to observe, to cautiously experiment with the overall conditions in order to stimulate thrival and growth. Contained within the attitude of the steward is the recognition, that we are all part of the fabulous and unfathomable web of life, and within life there is such a strong drive just to live and interact and grow, and the most important role for the steward is to create the right attitude and the right conditions for this inherent enterprise and creativity to unfold. And along the same line of thinking, another important ability of the steward is to know when not to get in the way of the unfolding of these natural processes.

This attitude of stewardship is the obvious and logical conclusion to draw from the realizations made back in the sixties regarding the profound unsustainability of our ways of living. And there were people who understood this very well back in the day. Actually, once we collectively realized that our ways of living were depleting the natural systems on which we depend, right there, right then, the attitude of the steward presented itself as the obvious next step for humankind. But we denounced our predicament, we rejected this challenge of fate, we denied what we had seen, and we lulled ourselves into believing, that it was okay just to continue as if nothing had happened. Was this a criminal act? Maybe. At least it was an act of denial, it was an act of dishonesty and thus a kind of psychological trauma, that we all have had to deal with ever since.

The consequence of this collective denial and dishonesty has been this historic period of the past forty years with bad stewardship like never before. This may sound like a somewhat exaggerated statement, afterall we have implemented lots and lots of new regulations to contain the levels of pollution and the depletion of the natural world, the important point, though, is to consider the whole global stream of materials, semi-manufacture and products, and on a global scale the effects of our consumption have been further pollution and further depletion of the natural world. We have had really, really bad stewardship of our fertile land and our water cycles and ocean life, really, really bad stewardship of our societal cohesion and common wealth and values, and really, really bad stewardship of our capital.

Which brings us to the question of leadership. Though the truth might have been, that we collectively chose to enter into a mode of denial, what about our leaders? Was it okay for our leaders, both political and commercial, to hide behind the general populations tendency to deny the needs for change, or did our leaders actually take the driver seat in this flight into denial and dishonesty? Did our leaders actually induce the false narratives into the population, and caught in the grip of doubt as it was, was the population somewhat happy with the new (false) sense of certainty that the leaders presented?

Looking back at the past forty years it seems like the leaders never missed an opportunity to expand their grip on power and acquire further privileges attached to their leadership positions. Actually, the higher up in the societal hierarchy, the more ferociously the privileges seemed to be hoarded. But along with the exorbitant privileges, did the leaders recognize the archetypical obligations, the social contract, that is inherent in any leadership position: That the leader is granted extraordinary privileges in return for his commitment to devote himself to securing the safety and well-being of all those who are under his leadership? Isn’t the political/commercial leaders obliged to confront and act upon new knowledge regarding the safety and well-being of the people to a larger degree than the ordinary man on the floor? Doesn’t knowledge oblige? Doesn’t position oblige? Doesn’t talent and capability oblige?

There is a case to be put be forward, that our leaders actually and knowingly contrived of false narratives, that were ”sold” to the ordinary populace as ”solutions” and ”proper political initiatives”, and under the cover of these false narratives those in power were able to drastically expand their grip on power and privileges. And along this line of thinking, there is a case to be put forward, that the really, really bad stewardship, that have characterized the recent decades, wasn’t the consequence of incompetence and lack of knowledge, but rather, that the really, really bad stewardship was just the one side of the coin, the other side was a grand skimming operation, that worked like magic for a tiny group of insiders. And worked just fine for all those people who provided services to this tiny group of insiders.

 

The new ’New Deal’: Proper stewardship

So, what we should strive for is a profound revision of our attitudes and dealings under the guiding principle of proper stewardship. Of our fertile land, our water cycles, our ocean life, our societal cohesion and our common wealth and values. The question is, since the greatest wealth transfer in history is upon us, can we use the overarching value and goal of proper stewardship as our criteria to direct the greatest wealth transfer in history? The reasoning would follow somewhat along these lines: The necessity of proper stewardship isn’t just dawning upon us here at the point of peak unsustainability, proper stewardship has been the overarching theme for our society since the great revelations of the sixties, it’s just that we have been collectively in denial of this reality.

Once the greatest transfer of wealth in history really gets rolling, the question is, who has a legitimate claim on any given object of wealth, be it ownership of a factory or land or materials or resources in the ground? If our money systems have been abused to the extreme, surely the holdings of money cannot per se be a legitimate claim on real wealth. And if our legislation on some crucial points has become rigged and corrupted, the legality of a claim cannot per se be a legitimate claim on real wealth. Rather, the most convincing and thus most legitimate claim on wealth must be founded in the degree to which this wealth was generate through proper stewardship. In this sense, private property is still recognized as a primary driving force for many people, but private property is, in this line of thinking, still subordinate to the proper stewardship of the resources inherent in the processes and holdings.

To devoted capitalists and libertarians this is probably a repugnant idea, that any principle should be higher than the principle of private property, it’s just that as a society we can no longer accept incidents of grave mismanagement of our resources. But if proper stewardship is exercised, then there won’t be any interference from the ”stewardship police”. Of course this idea requires some delicate outlining to be put into law, but at this point it is paramount, that the incentives to reach for proper stewardship tops all other economic incentives.

Further, what the devoted capitalists and libertarians might overlook in their rejection of the institution of the higher principle of proper stewardship is, that there is a considerable risk of political developments, that will move to abolish private ownership all together. Once the breakdown of the common trust gets rolling in the wake of the financial collapse, all bets are off, and as mentioned above, movements toward radical ideologies like anarchism or totalitarian ideologies like fascism or communism are not that hard to imagine. In light of this, the institution of the higher principle of proper stewardship can be regarded as a kind of salomonic solution.

To summon up, when the collapse of our financial and monetary systems finally sets in, the suggestion here is to take a time-out in the shifting of holdings and properties by letting all objects of wealth pass through an ownership escrow, as a newly instituted branch of the judicial system. While a given property is in ownership escrow, it is about to change hands, but which party is on the receiving end will be assessed upon by the preceding conduct of both the bankrupt party and the parties laying claim on the given property. And if any of the parties laying claim on any given property has been severely engaged in the business of blowing up the bubble finance, in other words, if their ”work” mainly has consisted in financial speculation, their claims on the wealth and property might be strongly reduced or dismissed all together.

Thus, all the people, homeowners and companies who have acted prudently and conscientiously will have a favorable standing in their ownership escrow case, and might actually retain their ownership in spite of their bankruptcy at the financial collapse, while all those who have acted imprudently and unscrupulously, no matter the position of the person or the size of the company, will have a hard time having their claims met.

Speaking of proper stewardship of capital, what we are talking about here, is a notion of discerning between money and capital, where money is considered a rather abstract and fanciful token of wealth in the form of hollowed out currencies and financial assets, whereas capital is considered to be the income and holdings that stem from real work and real engagement in society, the fruits of working as an employee or setting up a business, making products and providing services that meet the needs of real customers.

In the case of a company that have acted imprudently and unscrupulously on the bankruptcy side and an on the other side an investment bank that have acted even more imprudently and unscrupulously, the ownership escrow case might turn the ownership of the company over to the employees of the bankrupt company, if they have somehow managed to act prudently and conscientiously, or as a last resort, the ownership escrow case might turn the ownership of the company over to the municipality in which the company is situated.

And if some react strongly against this principle as a kind of civil forfeiture, lets have a discussion on this point, and lets include into the discussion all the ”private forfeitures” of the past forty years in the form of privatizations of the commons. In the case of the United States of America, as a side remark, we actually have a nation which is based upon the privatization of the commons. There are some wounds to be healed in this regard, and we might even consider to reinstitute the commons on a wider scale.

Thus, this very sketchy draft of a new ’New Deal’ is all about respecting the things that really matters, it’s all about setting up principles and methods that might be considered fair and meaningful by ordinary people, and thereby laying the groundwork for a renewed building of trust and value creation in our societies.

 

 

 

 

(Illustration: Prinzessinnengarten, Berlin)

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