Ethics & The Challenge of Economic Sustainability

Submitted by John Ikerd

The recent global financial crisis has raised widespread concern for the sustainability of the global economy and much has been written concerning the negative impacts of economic development on natural ecosystems and civil societies. Unfortunately, few viable alternatives to the prevailing economic paradigms have been suggested for consideration. Those that have been are typically little more than suggestions for fine tuning capitalist or socialist economies.

In his new book The Essentials of Economic Sustainability, John Ikerd addresses the basic principles and concepts essential to economic sustainability. Some of these concepts are capitalist, some are socialistic, and others are general principles validated by philosophy or common sense. What results is a synthesis: something that is neither capitalist nor socialist but fundamentally different. He explains in a new series on Talkback. 

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As we are finally beginning to realize, the productive capacities of nature and society are both finite in quantity and fragile in character if stretched to their limits. If we fail to protect, renew, and regenerate the health and productivity of natural ecosystems and human societies, it will be impossible to sustain our economies.

Basic Rules of Economies

Things have economic value only if they are functional or useful to people. All things that are of use to people ultimately are derived from nature by way of society. This is no other possible source. Economies are not capable of creating anything of value; they simply facilitate the process of extracting economic value from natural and human resources. How can we meet the economic needs of the present without diminishing economic opportunities for the future? This is the essential question of economic sustainability.

Economies are not absolutely necessary. The only alternative to an economy, however, is self-sufficiency. Once an individual decides to barter with someone else to get something they otherwise would have had to obtain from nature themselves, they have created an economic relationship. 

Families, communities, and societies are not absolutely necessary. However, the only alternative to social relationships is individual isolation. Once an individual decides to relate to another person for purposes other than getting something from nature, a social relationship is formed. Economic and social relationships are both essential for economic sustainability.

Sustaining Economic & Social Relationships

Economic relationships are different from social relationships. An economic relationship is individual, impersonal, and instrumental. Economic value is individual in that it accrues to individuals and not to families, communities, or societies as wholes. An economy is nothing more or less than a collection of individual economic enterprises and organizations. An economic relationship is instrumental because it is a means to a further end, specifically, to something of greater economic value. Finally, an economic relationship is impersonal because if we can’t buy, sell, or trade something, if it can’t be exchanged among individuals, it has no economic value.

Social relationships are also instrumental in that they depend on reciprocity or expectations of receiving something in return. Unlike economic relationships, the expectations from social relationship may not be specific. Regardless, if we expect to have a friend we must be a friend.

The value of social relationships is most clearly not economic because social relationships are inherently personal in nature. A social relationship with one person is fundamentally different from a social relationship with another person, even if both are friends, family members, or neighbors. Social relationships are unique or person-specific and thus cannot be exchanged or traded to another person. Thus, social value is also interpersonal rather than purely individual.

Social Values To Ethical Values

Social values naturally evolve into ethical values. This aspect of social values is essential for sustainability. Ethic values are a particular culture’s interpretation of morality, meaning a code of conduct that a person applies to all people of all times. Some cultural values may not be moral, but they reflect a given societies interpretation of morality. Cultural knowledge evolves over time from a society’s collective experiences from personal social relationships.

As social relationships become less personal, people begin to understand the personal values they receive as individuals arise not just from their personal connections but from all of the interconnectedness within their families, communities, societies, and humanity as a whole. This is the process by which personal social values evolve to impersonal ethical values.

Ethical relationships are communal, non-instrumental, and impersonal.

Actions that are purely ethical in nature are not an instrument or means of acquiring some further ends. The ethical act is its own reward; the benefits are immediate. Ethical relationships produce nothing of economic value to exchange or traded to anyone else. Ethical relationships are clearly non-economic.

Unlike social relationships, purely ethical relationships show no preference for specific individuals or persons – they are not personally discriminatory. Ethical relationships are communal in that what is ethically right or wrong in a relationship with one person is right or wrong in relationships other people, including all other people of both present and future generations. 

Why Stewardship Matters

The social and ethical values that sustain positive relationships within families, communities, and societies evolve into ethical commitments of responsibility, equity, and justice for those of future generations.  Since ethical values are impersonal, they can also be extended to relationships with non-persons – to earth, air, water, forests, lakes, streams, rocks, or other species. Stewardship of nature is an ethic that evolves out of direct human relationships with nature. Concerns for the whole of society and the future of humanity are neither economic nor purely social in nature but are fundamentally ethical.

At first thought, these distinctions among economic, social, and ethical relationships and values may seem academic or trivial; but they are not. The entire economics profession is based on the assumptions that people attempt to maximize their individual, impersonal, instrumental economic self-interests. Most people do not make purely economic decisions but the large publicly-traded corporations that now dominate the global economy do, as is explained in The Essentials of Economic Sustainability.

Certainly, some social and ethical relationships also have economic value but other values are purely social and ethical. Ironically, the values most critical to economic sustainability are not economic values but instead are the purely social and ethical values.

Economies Guided Solely By Economic Incentives Are Not Sustainable

Economies guided solely by economic incentives are not now and cannot be sustainable, regardless of economists' claims to the contrary. There is no economic incentive to do anything for the sole benefit of society in general and certainly not for the benefit of future generations.

If all investment decisions are preconditioned on receiving something of economic value in return, the investments necessary to protect, renew, and regenerate the natural and human resources essential for economic sustainability will not be made. The ecological health and productivity of nature and society can be sustained only by people expressing their social and ethical values through their individual and collective choices and actions. This is the challenge of economic sustainability.

Next: The hierarchy of economic sustainability