September 14, 2020
2020 has proven to be a year that has drastically changed our planet, society, and economy. Globalization has taken on a new meaning as our current systems, which were inadequately prepared for the pandemic and the compounding extensive battle of racial inequality brewing to the surface, set a pathway for recovery.
The world is now rapidly working on a recovery plan to help stabilize the shock in this moment in our history. As we look back in time to this period, will we ask ourselves if we were properly organized and best prepared for these events? A new economic model and innovation in whole systems view for preparedness might prove to be an effective method for our recovery and planning.
Disease Outbreak, Emergency Readiness and Global Stability
A critical component to the COVID-19 outbreak in the early part of 2020 was our ability to deal and effectively deploy a plan of action that might have enabled us to quickly react and alleviate some of the complex problems that are associated with a global disease outbreak. This is not an easy answer, and comes riddled with uncertainties and demand of predictive modeling that certainly would require large scale coordination, technology, and other valuable global modeling to effectively cope and organize infrastructures and systems. Despite the definite globalization of the world’s economy, we have not the globalized infrastructure or framework that could answer to such order should it collapse from natural causes, market crash or other unforeseeable events. Supply chain, markets, health systems, data, economy, food supply, climate change, water scarcity and other factors showed us what such an order might entail.
The United Nations Charter
After the second world war, the United Nations was established under a Charter in 1945. The goal of the United Nations is to “keep peace, develop friendly relations among nations, to improve the lives of the poor, conquer hunger, disease and illiteracy, encourage respect for each other’s right and freedom’s and to be a center for harmonizing the actions of nations to achieve these goals”.
The United Nations is a center for a great many things that have enabled our global society and economy to progress in ways that weren’t possible before. Despite the differences of many nations in the way they create policy and define diplomacy, the United Nations has been able to define peace and carry out its mission since the original Charter which brought it all together. The United Nations is organized by six principal organs: Security Council, the General Assembly, Economic and Social Council, the Trusteeship Council, the International Court of Justice and the UN Secretariat. Each organ has an important mission and goals to carry out under the United Nations Charter.
The United Nations is comprised of 11 Programmes and Funds, including the UNDP and UNICEF, which provide for sustainable development and humanitarian relief. The UN holds Specialized Agencies including the World Bank, the World Health Organization, the International Monetary Fund – which are considered today’s global infrastructures that shape, manage, plan and develop our global order.
The United Nations, however, is burdened with a complexity that disables its ability to react, model, deploy, and be effectively nimble and proactive when necessary. Moreover, its’ political structure and composition disables its ability to make overarching decisions that are best for the planet without agreements of conflicting government leadership. Its mission is to maintain peace but satisfy current government leadership within that context, making it ineffective when achieving goals that are best for the environment, society, peace, and advancement. Lack of trust in our existing infrastructures in surging, so a thoughtful plan on what can satisfy the existing order while also creating a path for a more sustainable, advanced, and productive new world order is important for global stability and planetary advancement. A globalized order, hyper-localized and global in structure, which complements the United Nation’s mission while also creating new, disruptive, and innovative thinking is certainly in order.
Global Poverty and Hunger in 2020
The World Bank’s goals include” to reduce the number of people living in extreme poverty” which was, according to the World Bank’s figures, 734 million people, or 10% of the world’s population in 2015. The economic value given to extreme poverty is $1.90 a day, though it is largely argued, and considered by Philip Alston, Special Rapporteur on extreme poverty and human rights, a “miserable subsistence” if this monetary value, even adjusted for PPP, is sufficient or adequate, or even qualified as a moral dollar equivalent for what is considered a minimum economic value (World Bank). It is argued by economists such as Philip Alston, that a minimum value of $5.50 a day, with PPP adjustment, would come somewhat closer to a minimum for the extreme poverty line. If there is even a moral argument at all for poverty levels which constitute a bare minimum rate of survival (health, prosperity, education, quality of life indicators not properly evaluated or calculated). And, according to the World Food Programme, more than 250 million people are at risk from extreme hunger as an effect of the COVID-19 pandemic.
Global Climate Change and the Value of Nature
Global climate change has been either ignored, as is under the current US administration’s policy to withdraw from the Paris Climate Agreement, or hugely emphasized, as is throughout the European Commission. New value systems are taking a more important place in our global economy and markets, as asset management companies, such as BlackRock, are responding to investors requests and logical forecasts that consider a sustainability model as important, if not more so, than traditional valuation methods from years past. BlackRock is divesting from companies that do not incorporate sustainability into their model, and investing in more forward-thinking companies, as recently presented at Nasdaq’s 1st European ESG Summit in Oslo early September. Science and data has allowed us to make more informed decisions, giving way to sustainable development goals as increasingly central formulas for values in business, economy and markets.
There are several models and frameworks throughout the world which envelop global consideration of future generations quality of life and wellbeing. Valuation is crucial to move the pendulum and the increase of value in ecosystem services, biosphere, natural, social and human dimensions and hopefully considered outside of the poor indicator of willingness to pay.
Willingness to pay is a luxury and does not account that traditional models are a set of global agreements, and not necessarily based on real life, or hard, indicators. There are a number of factors to consider when arguing for WTP model: Should our planetary systems even be considered “free”, what is the value, then, of anything produced from “free systems”, why would anyone be willing to pay for something that is free, that the free non-market values (externalities) are in fact being expensed by means of companies polluting the air and water and resource exploitation and land degradation (can this be considered a type of taking, and is that the reason it remains non-market, shadow and free?) and how can we ask what someone is willing to pay for something when subsistence or bare survival from resources such as food, water, housing and education are primary to a person’s decision making process. Our planetary values should be considered a rent in markets and would help offset the disbalance of the global economies.
What is the value of our natural world? In 1997, Robert Costanza et al. attempted to give this a value. In The value of the world’s ecosystem services and natural capital, Costanza proposes an evaluation of 17 ecosystem services for 16 biomes, valuing activities “at the margin”. It is notable to mention that military defense works as mentioned “at the margin”. According to Costanza’s methodology, though a partial equilibrium method and not considered by the author as the most superior in contrast to input-output methods, in today’s economy would roughly value our biosphere at around $157.86 US trillion dollars, a 1.8 factor of today’s GDP.
Military Industrial Complex
Human and natural capital figures are also seemingly omitting military spending, which is a critical dimension to consider when analyzing debt, GDP, accounting systems, natural, human and social capital dimensions. This, though, is not widely applied in our current analysis of human and natural capital, though it is my argument that military budget is indeed a critical dimension to natural, human and social capital systems. The United States military budget, the largest in the world, was $686 billion in 2019 (SIPRI). To consider a true measure of complex systems design for value of our planet, military activity, alongside man-made activity, should give us more answers to our global problems.
This is the hypothesis and basis for R&D currently under applied research for the development of an index and platform to consider these various factors at Star Systems and Earth Foundation.
If the global economy is at a –$250 trillion US dollar debt, the world’s biosphere roughly estimated (outside of our markets) at +$157 trillion US dollar, to raise the world’s poor out of bare poverty estimated at roughly +$4.948 billion US dollars. Global military expenditures are roughly $1.917 US Trillion dollars, not accounting for actual impact values within the military budget. All of these factors contribute to what is a disbalance and inaccurate global accounting system.
Through a more accurate accounting system which places the inherent value of life in to an operating system we can begin to divest the military from armament and negative natural and human impact value, and through this index and model I present, value the divestment from “war inducing” activity and value the investments in “peace setting” activity, among some of the factors the military could be valued for, for economic valuation. Through the valuation of these economic values we could possibly achieve our global goals and targets for peace, prosperity an ecologically rich, natural, abundant and advanced society and planet.
The value of government, military and agencies’ impact and corporate impact should be homogenous in order to be most effective. Valuing externalities in all of our systems, for a true holistic model, is critical for our global common collective and to design ourselves into a future thinking model and framework.
Global Debt and Accounting Systems
SEC has recently reported a figure of global debt at around $250 trillion US dollars, or a 320% of the global GDP value. Is it as well argued, whether or not our current economy is correctly valued?
Valuing man-made activity in natural and human and social dimensions, should be considered part of the calculation for proper economic accounting rather than just straight natural and human capital metrics. That is to say the current value of natural and human systems are an effect of our man-made activity, and alone are not properly accounted for considering current value is based on “something else.” Natural and human capital alone would have been accurate as a measure alone only at the beginning of time, before man-made activity affected its value.
The New Economy
Circular, green, and blue economies including industrial ecology and regenerative principles are more widely being considered as we move towards a more sustainable vision for our planet and future.
Soon enough, it will be without reason for development and production to occur without careful design, planning and consideration for long-term effects. We, as a society, are at a tipping point -which makes the decisions we make today incredibly more valuable than ever before. Without a clear vision for the future and what that might look like for future generations, we risk losing more than we bargained for. There is a bright future ahead of us, so long as we are considerate that our actions today are an extension of our future.