The New Economy: Its Workings, Failures & Its Prospects Presentation to:

1. The New Economy: Its Workings, Failures & Its Prospects Presentation to: Johannesburg Summer School National Bahai Centre 18 December 2012 Iraj Abedian

2. Outline • The Historic Context of the Current Crisis • The Root Causes of the Current Crisis • Systemic Implications • Concluding remarks

3. The Historic Context of the Current Crisis • 1850s: birth of materialistic vs spiritual paradigms • 1860-1980s: The victory of materialistic approaches • 1980s: the collapse of communism • 1990s: the dominance of capitalism • 2007: the collapse of capitalism (as we know it) • 2008 to Date: Chaos & confusion and the search for a new paradigm

4. The Economy in Action

5. The Root Causes of the Current Crisis • Cause One:simultaneous failure of “markets” and “the State”. • Cause Two:Considerable dilution of ethical/moral value system under rapid globalisation of capital markets (dominance of materialistic enterprise!) The rise of ‘the ethical gap’!

6. The Rising Ethical Gap &Socio-economic Impact The Ethical Gap: Parallel and inconsistent set of ‘formal’ and ‘informal’ value systems • Within the Public Sector with considerable impact on social welfare; • In the Private Sector with huge effects on resource use and efficiency; • Within the Broader Social Groupings (labour unions, religious institutions, media, etc) with the loss of personal and community welfare.

7. The Root Causes of the Current Crisis • Cause One:simultaneous failure of “markets” and “the State”. • Cause Two:Considerable dilution of ethical/moral value system under rapid globalisation of capital markets (dominance of materialistic enterprise!) The rise of ‘the ethical gap’! • Cause Three:substantial value destruction via four main channels (core activities of the materialistic enterprise!): • Conventional wars; • War on terror and sabotage; • Corruption; and , • Institutional inefficiencies & dysfunctionality. • Note: combined they add up to over 20% of global GDP!

8. Magnitude of USA Government Bailout Spend • As at the end of 2008, the US federal government pledged more money to bail out the financial services industry: (as well as other segments of the economy) than • it spent on the Louisiana Purchase (1803), • the New Deal, the Marshall Plan (1940s/50s), • the Korean War, the Race to the Moon(1960s/70s), • the Vietnam War(1960s/70s), • the Savings and Loan Crisis (1980s/1990s), • Operation Iraqi Freedom (1980s), and • NASA’s lifetime budget • combined.

9. The Root Causes of the Current Crisis • Cause One:simultaneous failure of “markets” and “the State”. • Cause Two:Considerable dilution of ethical/moral value system under rapid globalisation of capital markets (dominance of materialistic enterprise!) The rise of ‘the ethical gap’! • Cause Three:substantial value destruction via four main channels (core activities!), roughly over 20% of global GDP! • Cause Four:Rising global gap between the “haves” and ‘have-nots” leading to social instability. This has both individual and collective drivers.

10. Salient Short-Term Implications • For the Economy: • Global growth contours have shifted down to 3% levels from 6.4%! • The global economic structure is shifting towards Asia. • Over the next decade, focus on domestic economies will lead to vastly different regional growth patterns. • For Governance: • Declining credibility of political leadership • Social and political contestation & revolt! • Pressure for interest groups capture. • For the society at large: • Growing uncertainty • Personal and communal Welfare loss

11. Systemic Implications Globally, there is an evident failure of ‘nationalistic model of governance’- there is a growing recognition that a ‘global system of governance’ is needed. Operationally, this means a system based on the principle that: “the world is one country, mankind its citizens”. Whilst the ‘economic problem’ is largely solved with regard to ‘production’, it is by and large unresolved as regards ‘distribution’. The ‘distribution problem’ is essentially a moral and ethical issue!

12. Systemic Implications Globally, there is an evident failure of ‘nationalistic model of governance’- there is a growing recognition that a ‘global system of governance’ is needed. Operationally, this means a system based on the principle that: “the world is one country, mankind its citizens”. Whilst the ‘economic problem’ is largely solved with regard to ‘production’, it is by and large unresolved as regards ‘distribution’. The ‘distribution problem’ is essentially a moral and ethical issue! Global economic system faces a serious and growing currency crisis: it needs a new reserve currency!

13. Concluding remarks • The prevailing crisis has spurred the quest for a “new social system” ! • The existing ‘personal and national value systems’ worldwide are facing growing threats of contradiction, obsolescence, and social revolt. • The next stage in the evolving and ever-advancing social order is bound to be built upon a globally integrative value and moral system. • What does it all mean for the Bahai Community? • The faster we build the Global World Order, the sooner the existing order will collapse and human misery will end. • The more the “materialistic enterprise” fails , the harder we need to work to build the “spiritual enterprise” as defined by the House. • The more we integrate the global Bahai community, the more we pave the way to learn how to govern broader socio-economic and political issues.

14. Concluding remarks (II) • Some of its key guiding principles are: • The oneness of human kind • The supremacy of the ethical and spiritual dimensions of life • The indispensability of justice as the agent of social sustainability • The equality of rights of men and women • The need for a world governance system • The re-defining of the ‘economic problem’ as a ‘moral/ethical problem’

15. Quotations From Bahai Writings on Economics True, there are certain guiding principles in Bahá'í Sacred Writings on the subject of economics, but these do by no means cover the whole field of theoretical and applied economics, and are mostly intended to guide further Bahá'í economic writers and technicians to evolve an economic system which would function in full conformity with the spirit and the exact provisions of the Cause on this and similar subjects. The International House of Justice will have, in consultation with economic experts, to assist in the formulation and evolution of the Bahá'í economic system of the future. One thing, however, is certain that the Cause neither accepts the theories of the Capitalistic economics in full, nor can it agree with the Marxists and Communists in their repudiation of the principle of private ownership and of the vital sacred rights of the individual.“ (From a letter written on behalf of Shoghi Effendi to an individual believer, June 10, 1930: Ibid) (Compilations, Lights of Guidance, p. 548)

16. Quotations From Bahai Writings on Economics "... By the statement 'the economic solution is divine in nature' is meant that religion alone can, in the last resort, bring in man's nature such a fundamental change as to enable him to adjust the economic relationships of society. It is only in this way that man can control the economic forces that threaten to disrupt the foundations of his existence, and thus assert his mastery over the forces of nature.“ (Compilations, Lights of Guidance, p. 550) "The inordinate disparity between rich and poor, a source of acute suffering, keeps the world in a state of instability, virtually on the brink of war. Few societies have dealt effectively with this situation. The solution calls for the combined application of spiritual, moral and practical approaches. A fresh look at the problem is required, entailing consultation with experts from a wide spectrum of disciplines, devoid of economic and ideological polemics, and involving the people directly affected in the decisions that must urgently be made. It is an issue that is bound up not only with the necessity for eliminating extremes of wealth and poverty but also with those spiritual verities the understanding of which can produce a new universal attitude. Fostering such an attitude is itself a major part of the solution.“ (The Universal House of Justice: The Promise of World Peace, pp. 10-11, Haifa, 1985)

17. Quotations From Bahai Writings on Economics "Social inequality is the inevitable outcome of the natural inequality of man. Human beings are different in ability and should, therefore, be different in their social and economic standing. Extremes of wealth and poverty should, however, be abolished... "The Master has definitely stated that wages should be unequal, simply because that men are unequal in their ability and hence should receive wages that would correspond to their varying capacities and resources.” (Shoghi Effendi, Directives from the Guardian, p. 20) we have to study the economic teachings in the light of modern problems more thoroughly so that we may advocate what the Founders of the Faith say and not what we conjecture from Their Writings. There is great difference between sounding a great general principle and finding its application to actual prevailing conditions. (Shoghi Effendi, Directives from the Guardian, p. 21)

18. Thank you for your attention abedian@pan-african.co.za Tel: 011 883 8036/7 Fax: 011 883 8038