Pic: Weld Angel, by Matt Newton, http://www.matthewnewton.com.au/
Our environmental problems and our current economic problems both stem from breaking contracts. In the case of the environment, the contract is with nature; in the case of economics, the contract is with society.
This similarity is worth exploring because the tumult of the 20th century provides insights into who we are, how we behave, and what we might do to mend these contracts.
At the end of two world wars in 1945, a new world economic era began.
The bloodshed and chaos became the cooperation and sacrifice needed to rebuild a shattered world. Business, labour and government all entered into a social contract, an implicit agreement that all would work together to lift the prosperity and security of society as a whole. This social contract was never formalized but everyone understood that business and workers alike would share in the profits of renewed economic activity, government would legislate the fair distribution of wealth, and everyone would benefit as services and infrastructure permeated the community and kept people healthy, educated and safe. The result was nearly three decades of growth, stability and security for business, labourers and society.
Then something went wrong. Perhaps it was the fading memory of the war years coupled with the corrupting power of affluence. But creeping greed relaxed the regulations and constraints that kept business in compliance with the social contract. A marker date for this transformation - a symptom as much as a cause - was Aug. 15, 1971, when the United States abandoned the gold standard, the formal exchange rate that had stabilized currency markets, controlled inflation, guaranteed employment, and kept economies from slipping into unsupported debt.
In an illuminating analysis by Larry Elliott, “Why the System’s Ready to Blow” (The Guardian Weekly, Aug. 19/11), he describes the loss of a moral anchor that once regulated the social conduct of business.