economics article


  • The emergence of markets and a relatively distinct economy are certainly not something “natural”,
  • markets do not appear whenever they are not “suppressed” by “uneconomic” cultural values (Polanyi, 1975).
  • The “great transformation” represents a shift from human cultures based on symbolization to desymbolized cultures
  • desymbolized cultures are dominated by the necessity of the individual’s pursuit of economic self-interest organized by the Market.
  • Since this made no sense to the traditional cultures still present in the industrializing societies of Western Europe, these cultures had to be transformed into a kind of superstructure,
  • This superstructure unsuccessfully symbolized the economy on its own terms, thereby distorting and desymbolizing its meaning for human life and society (Vanderburg, 2005).
  • Until then, what we now call the economy of a society was enfolded in the living of individual and collective human life, and hence was symbolized and evolved in terms of that life.
  • When this was increasingly no longer the case, it opened up the question of what money and the economy really mean in terms of their relationship to human life and society.

  • Before exploring what we mean when we talk about matters such as..
    • the making,
    • spending or
    • investing of money, or
    • whether an economy is sound or not,
  • we must examine the broader reality in which these actions are embedded.
  • We will first examine the fact that what makes sense for a corporation, a national economy, the global economy, and free trade, does not necessarily make sense for human life and society.
  • We will then consider how our lives fit into all of this.
  1. What Makes Sense in economic terms is not compatible with what make sense for human life and society
  2. How do our lives fit into this disconnect

  • The Economies of Nations
  • Daly and Cobb (1994)
  • They have shown that one of our most talked-about economic indicators, the GDP, makes no sense in relation to human life, society and the biosphere.

Car Accident Example

  • For example, if we all did more destructive things, such as getting involved in car accidents, drinking to excess, getting divorces, etc, the GDP would rise.
  • If we all started eating better, working in healthier workplaces, living less auto-oriented lifestyles, etc., the GDP would go down.
  • Similarly, this indicator does not distinguish between economies that produce goods and services in a sustainable relationship with the biosphere from economies that do so unsustainably by living on borrowed time.
  • The picture of the economy portrayed by politicians and economists, in part by invoking the GDP, would change completely if the costs incurred in the production of wealth were subtracted from the gross wealth in order to arrive at net wealth.
  • This would provide us with a measure that makes sense.
  • Since the Second World War, the costs incurred in the production of wealth have risen sharply as a consequence of the previously-mentioned knowledge infrastructures by which societies evolve their ways of life.
  • In addition to institutionalizing an end-of-pipe approach to the undesired or illegal consequences of the decisions made by specialists, these knowledge infrastructures have two additional limitations.


  • Another limitation of these knowledge infrastructures stems from the fact that genuine solutions to the many difficult situations we face cannot be expected from the relevant disciplines or specialties unless it is a question of optimization.
  • Even then, these solutions will exacerbate the previously-mentioned problems.


  • According to Galbraith (1978), economists have not realized that highly specialized knowledge is now the prime factor of production,
  • largely determining the yield from the other factors (land, labour and capital).
  • Hence, they are unable to recognize one of the most important reasons for the failure of Keynesian economic policies (Vanderburg, 2005).
  • Initially, governments sought to compensate for the undermining of human life, society and the biosphere by adding technologies and services.
  • The magnitude of the problems soon made this unsustainable because of ballooning deficits.
  • Perplexed by the situation, a kind of economic fundamentalism took hold, which advocated going back to the “good old days” of the rule of the Market.
  • Economics, being ahistorical, must have had a mental block against the fact that the “good old days” were actually not good at all.
  • Attempting to fit a living and evolving society into a Market mechanism caused endless strains,
  • without considering these strains the course of events in the industrializing world in much of the 19th and the first half of the 20th centuries is incomprehensible (Polanyi, 1975; Vanderburg, 2005).
  • It should come as no surprise, therefore, that even when the most conservative attempts are made to calculate the net wealth available to a society by deducting costs from gross wealth production, it turns out that national economies, like large corporations, have been wealth extractors.

Daly and Cobb

  • For example, Daly and Cobb’s (1994) calculations of an index of sustainable economic welfare (ISEW) on a per capita basis
  • showed an increase of on average 0.21% from 1951-70, 1.57% during the 60s, 0.21% during the 70s and -0.43% for the 80s.
  • This index showed more improvement than did two others.
  • Cobb et al. (1995) calculated an index that is a little closer to the way the economy affects most Americans.
  • Their General Progress Indicator (GPI) shows an upward curve for two decades, and then begins to decline around 1970, to a total drop of 45%.
  • A nation’s economy became a wealth extractor because the costs of economic growth outstripped the benefits.
  • The real situation is almost certainly more serious because the above knowledge infrastructures, on the basis of which contemporary ways of life evolve, comprise a greater diversity of activities than the ones taken into account in the above cited calculations.
  • There is no question that accurate calculations are almost impossible to make, but there is little doubt that they would correspond much more closely than the GDP to the meaning of economic growth in the lives of most people.
  • The US leads in the kind of technical development based on the most advanced intellectual and professional division of labour and the knowledge infrastructures built up with it.
  • Since other countries are following the same path, their situation is likely to be the same or moving in that direction: producing their Gross National Product (GNP) by “mining” human life, society and the biosphere.

The International Economy

  • To obtain a picture of what is happening, it is useful to compare daily currency turnover in international financial markets with the currency required to finance world trade and foreign direct investment.


  • The latter “economic” component represents less than 3% of the former (Altvater, 2002; Lietaer, 2001 p.301-331).
  • Even if we deduct a significant percentage to account for the laundering of money derived from the trade of illegal goods and services (drugs, arms, sex and racketeering), there remains a portion, close to 70%, that corresponds essentially to speculation.
  • We all know that the financial sector’s primary activity is the constant growth of a global speculative bubble, but few people appear to appreciate its size and the enormous potential for a global economic meltdown this implies.
  • When a crisis of public confidence occurs, governments have to borrow large sums of money in order to restore it, thereby maintaining this speculative bubble at great cost to their own people.
  • Even though governments have the collective power to track capital flows around the world thanks to information technology, they have refused until now to adopt the obvious remedy of the Tobin tax, which would greatly reduce the speculative bubble.
  • It is a testimony to the cloud of speculators and the lack of a political will on the part of the government to defend the public good.

Free Trade

  • Free trade is supposed to benefit all parties as a result of the so-called comparative advantages they bring.
  • What free trade proponents fail to mention is that such advantages occur only when there is no international mobility of capital.
  • In that case, investments withdrawn from uneconomic activities flow to other sectors of a nation’s economy to create alternative employment, thereby protecting a society from unemployment and underemployment.
  • The invention of mutually advantageous free trade came during a time when the international mobility of capital was minimal.
  • As is the case for so many economic theories, the assumptions on which the theory of free trade was based were invalidated by the developments of the 20th century, particularly following the Second World War.
  • This begs the question: What is free trade in the present circumstances?
  • Freedom is granted to flows of goods, technical services and people with an advanced education,
  • and it is withdrawn from communities who cannot object to these flows if they produce unacceptable harm to human life, society, or local ecosystems
  • (according to their democratically established standards and regulations).
  • Free trade makes the world safe for indefinitely expanding the global network made up of flows of commodities, allowing democracy only insofar as it does not interfere.
  • It also permits an almost limitless expansion of the speculative bubble associated with the larger component of global currency flows.
  • In sum, free trade is forced trade for people and communities.

Putting People into the Picture

  • In order to understand what all this means for our lives, we must put people into the picture.

How a Bank Works

  • What happens when we deposit money into a bank, buy shares, contribute to our pensions and use paper money in general?
  • Daly (1996, p. 171-190), referring to Frederick Soddy, points out that such deposits in effect result in banks printing money.
  • Except for a small portion, banks are permitted to lend such deposits to third parties.
  • Such lending has no common denominator with people lending money to others, because they in effect are giving up the use of these funds in return for a payment of interest or for a personal favour.
  • Banks, on the contrary, give up nothing because they do not own the money they lend.
  • If bank loans are not repaid, the depositors have not lost their money, having given no permission for these loans.
  • The money supply has essentially been increased by permitting banks to borrow against a very small portion of deposits kept in reserve.
  • The full implications of this will become evident shortly.

How Investment Works

  • When people buy shares in a corporation, what do they really own?
  • Their money does not flow to the corporations in which they are investing, to be added to their operating capital, resulting in the direct or indirect expansion of the company’s productive capacities.
  • The funds invested in the purchased shares flow to the previous owners of these shares, and these shares are bought in the confidence that someday other people will be willing to offer more money for them.
  • As such, these investments contribute to a speculative bubble that has only the most tenuous link to economic reality.
  • All investment schemes, including mutual funds, attract more and more money to bid up the prices of shares well beyond what they represent.
  • Instead of reflecting the ability of corporations to deliver goods and services, it becomes simply a matter of supply and demand, until an “adjustment” occurs when people begin to recognize the lack of reality in the stock markets.
  • In the meantime, all this puts even greater pressures on CEOs and national governments to increase sales and exports, which results in even further wealth extraction.


  • When people make contributions to their pension funds, they directly and indirectly stimulate wealth extraction, accelerate the coming of the next “adjustment” and possibly a complete financial meltdown.
  • In other words, people help to ensure that the world in which they will be retiring will be less financially and economically sound, even if these market “adjustments” do not take back a significant portion of the value of their pensions.
  • Few people have the required background to work out the implications of the distinction between productive investments, which increase genuine wealth, and extractive investments that actually decrease it.
  • The situation has become so absurd that corporations can often make higher profits by participating in the speculative bubble than by producing the goods and services that sustain a way of life.
  • Also, when there is a meltdown in public confidence, governments usually have to borrow enormous sums, which is how we all subsidize the speculative bubble at the expense of real wealth creation.
  • During the last 200 years, the link between money and economic activities has been progressively transformed (Polanyi, 1975).
  • Daly (1996) has argued that we have created a system capable of making money without any intervening productive activities.
  • The significance of paper money for human life and society may be explored by imagining that the real economy could be separated from the extracted economy and observing what happens at the interface.
  • The real economy involves exchanges of people’s productive and creative capacities for earned incomes, as well as exchanges of portions of these incomes for expanding and improving this production, which depends on exchanges with the biosphere.
  • The extractive economy includes: costs that corporations externalize to human life, society and the biosphere, government subsidies to these corporations as well as loans required to restore confidence in their currencies, and the international speculative bubble.
  • This latter component has increasingly become a financial world in itself. Because of information that flows across the imagined boundary, corporations are obliged to make enormous amounts of money in order to increase the value of their shares;
  • and this can be accomplished only by externalizing as many costs as possible.
  • Similarly, governments are compelled to implement monetary, fiscal and trade policies that maintain the confidence of international speculators and thus reinforce and amplify the extractive component of their national economies.
  • The making of money with money in the global speculative bubble increases the claim of this virtual wealth against the real wealth of a society.
  • Hence, any investment in this bubble is extractive.
  • Individual recipients of their newly-made money are able to exchange it for real wealth as long as most of the others reinvest it in the bubble.
  • If all the money created within the bubble were used by their owners to claim real wealth, it could not be done because all the assets are already owned by others.
  • As Daly (1996) explains, the money created within the speculative bubble in essence becomes a national debt owned by the individual but owed by the community.
  • In his discussion of Soddy’s contribution to economics he explains that money is transformed from an exchange medium into an interest-bearing debt as long as the bulk of that debt is not liquidated. (What does that mean?)

The Economy in Society

  • During the last two centuries, we have witnessed an increasingly accelerating transformation of the role of money and the economy in human life and society.
  • Their extractive components have grown to the point that our present financial and economic systems have nothing in common with what was referred to as capitalism in the 19th and first half of the 20th centuries.
  • In essence, this transformation has created anti-money and an anti-economy because of their destructive effects on real wealth and real economies.
  • The money emperor is wearing new clothes, but his courtiers and subjects are hallucinating these clothes in the form of a new ideology and an economic pseudoscience.
  • Following Margaret Thatcher and Ronald Reagan, there has been a growing paralysis that has spread across the entire political spectrum as a result of accepting the notion that there is no alternative.
  • The growing global prostration before the new money emperor is an integral part of the patterns of socio-cultural evolution (Vanderburg, 2005),
  • whose essential features are derived from the following constraints.

1. Dependence on the throughput of Matter and Energy

  • First, every human activity depends on a throughput of matter and energy which it can neither create nor destroy, according to the laws of thermodynamics.
  • Hence, human life depends on exchanges of matter and energy with other human beings and the biosphere,
  • with the result that the way of life of any society is constrained by networks of flows of matter and energy suspended in correspondingly larger networks representing these flows within the biosphere (Vanderburg, 2005).
  • The dynamic equilibrium of these two networks was disturbed when the introduction of the technical division of labour, followed by mechanization, increased the throughput of certain activities, thereby straining the connections with others via these two networks.
  • These strains were eliminated by a further introduction of the technical division of labour and mechanization, but this in turn introduced further strains with their adjacent activities, and so on.
  • A chain-reaction-like process linked all these efforts of mechanization together in order to restore a new dynamic equilibrium based on an ever-growing throughput of matter and energy, which is characteristic of an industrial economy.
  • As a result of industrialization, the networks of flows of matter and energy increasingly overlapped and became indissociable from flows of labour and capital, eventually to constitute the technology-based connectedness of industrial societies.

2. Adjustments to Cultural Based Connectedness

  • The second constraint may be referred to as the culture-based connectedness of human life and society (Vanderburg, 2005).
  • Each human experience is symbolized by neural and synaptic changes in the organization of the brain-mind, which represents all previously-symbolized experiences and hence a person’s life lived in a community by means of a culturally unique way of life.
  • The members of this community can thus live lives that are individually unique but also typical of their time, place and culture.
  • The significance of this culture-based connectedness in a person’s life becomes obvious when someone loses their short-term memory,
  • making it impossible for the organization of the brain-mind to connect each moment of existence to previous ones and hence to this person’s life.
  • Since the first constraint is “hard” compared to the second constraint,
  • industrialization required a reversal of the hierarchy in which culture-based connectedness guided the technology-based connectedness present in all pre-industrial, traditional societies.
  • Making sense of this led to economic, social, political, legal, moral and religious adjustments that were so similar across industrializing societies that they may be regarded as “soft” constraints on their evolving culture-based connectedness.
  • All this was legitimized by the myths of the Western European industrializing societies in the 19th and early 20th centuries.
  • There were certain unquestionable realities in the lives of the members of these societies.
  • Every year machines became faster and produced a greater output.
  • Every year there were more factories full of these machines,
  • and every year the collective output of these factories was increased.
  • Everything in human experience appeared to indicate that soon everyone’s material needs would be satisfied,
  • following which all this ingenuity could turn to making social and even spiritual improvements.
  • This myth of progress, like the traditional gods of the past, had no limits.
  • It turned Christianity on its head by implying that you must live by bread alone and everything else will be granted unto you.
  • Everyone could participate in this progress through hard work, which by implication could accomplish everything.
  • All this would bring unlimited material, social and spiritual happiness. In other words, these myths reversed the traditional relationship between the culture-based connectedness and the technology-based connectedness of human life and society.
  • It was the technology-based connectedness and its economic organization by the Market that became paramount.
  • For the members of these industrializing societies, everything made sense thanks to the myths of progress, work and happiness.
  • With the separation of knowing and doing from experience and culture and the creation of the kinds of knowledge infrastructures outlined above,
  • the technology-based connectedness was transformed into a technique-based connectedness constituted of the most efficient, productive, and profitable flows of matter, energy, labour and capital (Vanderburg, 2005).
  • Any constraints on the globalization of this technique-based connectedness by an already greatly weakened culture-based connectedness of human life and society were effectively paralyzed by free trade.
  • All this was now justified by new myths intuited and worked out in the form of an ideology, which implied that there was no alternative.
  • Nor was an alternative required, because the wealth produced by this economic growth would trickle down to eventually rescue everyone from the problems that plagued their lives.
  • It was the triumph of financial and economic non-sense.
  • Non-sense is distinguished from nonsense by the former making no reference to, and lying outside of, the domain of sense.
  • The dominance of technique-based connectedness over culture-based connectedness involved a further desymbolization of cultures by which individual and collective human lives made sense of and live in the world.
  • As part of this development, financial techniques did what all other techniques accomplish, namely, take elements of human life, society and the biosphere in order to transform them to make them as efficient as possible without any reference to the sense this makes.
  • All real-world processes and entities are represented by financial flows and integrated into business and financial models.
  • The financial performance of these models is optimized by varying its parameters and correlating them with the performance judged in terms of making money from money.
  • This is followed by reorganizing a portion of the world represented by the model in order to achieve the previously-simulated optimal performance,
  • in a completely abstract manner separated from experience and culture.
  • Financial techniques seek to make as much money as possible without any reference to human life, society and the biosphere, thereby helping to build a technical order of non-sense, which I have described elsewhere (Vanderburg, 2005).
  • As is the case for all ideologies, the deeper reality is very different.
  • Today we live as if science is omnipotent in the domain of knowing, technique in the domain of doing, and the state in the domain of the political organization of human life and society.
  • That this is the case can readily be established by asking anyone to clearly spell out what they perceive to be the limits of science, technique and the state.
  • Almost everyone finds this extremely difficult, even though the idea that these human creations are omnipotent, like the traditional gods, appears absurd as well.
  • However, if individually and collectively we do not know when to use other approaches to knowing, doing and organizing, then we behave in a manner so well described by Abraham Maslow when he said that if your only tool is a hammer, you tend to treat everything as if it were a nail.
  • It is our scientific knowing, technical doing and political organizing that drive the expansion of the global technique-based connectedness;
  • and we keep behaving as if there is no alternative even though we have declared our ways of life to be unsustainable.
  • (This has always been one of the primary roles of myths in human life and society).
  • In addition, our gigantic enterprise of wealth extraction is creating parallel human and social crises.
  • Surely we must find another way.
  • Perhaps there is no better place to start than to ensure that money and the economy make sense for human life, society and the biosphere.
  • To accomplish this requires an exploration of modern economics and the policies based on it, which will be undertaken in Part 2.

The Next Step

  • As a consequence of technique-based connectedness dominating culture-based connectedness (Vanderburg, 2005), no social science was able to take on a greater importance and achieve a greater autonomy from all the others than modern economics.
  • In this first part, I have shown that this is no guarantee of its objectivity or of the validity of its theories. On the contrary, the application of these theories has invalidated them by producing the opposite results to those predicted. Instead of producing greater wealth, there is evidence to suggest that money is now related to debt and that economies have become uneconomic. Modern economics has been transformed from a social science into a technique: manipulating an economy in order to make it more efficient with little or no regard for the consequences for human life, society and the biosphere. This makes no sense. As we will show in the second part, a number of important assumptions underlying these theories have been invalidated. Modern economic activities have become very differently embedded into everything else during the second half of the 20th century. Possibly more than any other social science, economics has become the victim of the limitations of discipline-based scholarship, which all but ignores how everything relates to everything else in human life and the world. We are a symbolic species, hence our cultures have always been the real prime factor of production. In Part 2, we will show how the desymbolization of these cultures creates a new factor of production that changes everything, including money and the economy.

Acknowledgement: The author wishes to thank Shawn Meikle, who assisted with the research on which this paper is based.

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Can the University Escape from the Labyrinth of Technology? Part 1: Rethinking the Intellectual and Professional Division of Labour and Its Knowledge Infrastructure, Bulletin of Science, Technology and Society, 26 (3), 171-177.

Can the University Escape from the Labyrinth of Technology? Part 2: Intellectual Map Making and the Tension between Breadth and Depth, Bulletin of Science, Technology and Society, 26(3), 178-188.

Can the University Escape from the Labyrinth of Technology? Part 3: A Strategy for Transforming the Profession, Bulletin of Science, Technology and Society, 26(3), 189-203.

Can the University Escape from the Labyrinth of Technology? Part 4: Extending the Strategy to Medicine, the Social Sciences and the University, Bulletin of Science, Technology and Society, 26(3), 204-216.

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