System description – where are the disconnects? #2

Three overwhelming global disasters are facing us – climate change, the Coronavirus pandemic, and unknown, transformative socio- economic changes in the Coronavirus aftermath.  Some of these socio-economic changes, like the reduction in air travel, if sustained, will have positive effects in support of climate change mitigation and adaptation. Time to take a step back and look at what is not working before making any changes.

Other socio-economic effects we see emerging are increases in awareness in the understanding of the importance of social functions – like universal health care and social insurance. Indeed, the Coronavirus may have us rediscovering other values, clearly seeing social dysfunctions that were previously covered by the general hustle and bustle of daily life.

This essay looks at the current economic system as a whole, where most of its constituent parts are the invention of man. If man invented it and it is not working, the good news is that man can fix it. Maybe now is the time!

Interestingly, when you create systems of even a few interacting parts all intereacting with each other, you get a complex system. The behaviour of complex systems is intrinsically difficult to model due to the dependencies, competitions, relationships, or other types of interactions between their parts or between a given system and its environment. Systems thinking takes a holistic approach and focuses on the way a system’s constituent parts interrelate. The systems thinking approach contrasts with traditional analysis, which studies systems by breaking them down into their separate elements.

In this case we take a helicopter view of our society as a system. By stepping back and looking holistically we may be able to better understand how to move forward after Covid-19.

The diagram above shows the 21 flows – of material and services (blue), of work (red) and money (green). See the full description here.

In the last article we focussed on the extraction of materials ( flow 3, 11) to firms and defined disconnect.

In this article we turn our attention to the relationships between firms and citizens.

So how should the relationship between firms and citizens be? Firms provide good jobs, which are part of the machinery of providing goods and services to citizens which they buy with their wages.

Let’s face it: (2) (17) and (1) are improvement areas.

The good job

Whatever happened to good jobs? It was the good job that, back in the early 70s, persuaded Swedish women to leave their kids in daycare and go to work in order to drive equality. Fast forward to the late 80s and 90s, women as young as 30 are going through burnout, and whilst some of them reach the heights of careers, the release of the book in 2018 by David Graeber, Bullshit jobs, starts to sum up the situation.

The good firm

And the good firm? During the same period fossil fuel companies did everything they could to create doubt about global warming. The structure of the firm – the need to make money on assets like oil in the ground is a powerful force. Indeed, the struggle to keep the incomings and outgoings balanced is one that would test the character of anyone. The very nature of the firm – private ownership – the need to balance outgoings and ingoings means companies sitting on fossil assets will task their managers with squeezing every last drop of profit out of it. For when the profits run dry, bankruptcy comes in.

The same thinking is the thinking that meant that stockpiling things like respirators, face masks, even hospital beds makes no monetary sense so no-one does it. Running public services like a firm was never a good idea from the beginning, just a management fad.

Come Covid and a weak market the firm will just simply run out of air speed and stall – headed for bankruptcy. For the owners this might mean a hole in their investment money but real lives – those of the employees and the businesses the bankrupted firm supported – are in disaster. The negative risk of business is born by working people.

In a tide that floats all boats – the smallest ones close to the shore always get stranded when the tide recedes

Why trickle-down doesn’t work

In summary, leaving provision of goods and services up to private companies (or government services run like private companies) that need the accounts to balance at the end of the year or at least to be able to pay debt back creates a system that cannot handle hard knocks. The pandemic has shown that. And the poorest always suffer the most. And relying on the good firm/good job to contribute to society is also setting us up for some tough times. As the boom and bust of business cycles goes on wealth built up in companies is cast aside as are employees.

We need a better way. In later posts I will suggest a few “hacks” to the present system that are in the adjacent possible.

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