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Imagine being an executive in a business that is experiencing one of the limits described in Stead & Stead (1994). Write one short paragraph starting a memo or speech on how to make a strategic shift so that you will become more sustainable. Can Humankind Change the Economic Myth? 15 Can Humankind Change the Economic Myth? Paradigm Shifts Necessary for Ecologically Sustainable Business W. Edward Stead and Jean Garner Stead East Tennessee State University, Johnson City, Tennessee, USA Historians have not referred to the past 250 years as the “Industrial Revolution” for nothing. Joseph Campbell (1988) points out that myths reflect the underlying paradigms that guide the thoughts and actions of the people of a particular culture. Espousing society’s myths is a primary function of all of its institutions, be they political, religious, educational or economic. Campbell (1988) says that you can tell the dominant myth of a given society by examining the heights of its buildings. The multi-storey seats of economic activity that define the skylines of our cities today demonstrate that humankind’s most dominant current myth is economic wealth. However, the myth of economic wealth has now come face to face with ecological sustainability. Father Thomas Berry (1988) says, “The mythic drive (for economic wealth) continues to control our world, even though much is known about the earth, its limited resources, the interdependence of life systems, and the delicate balance of the ecosystems …” (p. 76) This is echoed by Smith and Hawken founder, Paul Hawken (1993), who says, “Corporations, because they are the dominant institution on the planet, must squarely face the social and environmental problems that afflict humankind” (p. 54). Modifying myths means making paradigm shifts, changing the fundamental assumptions and values from which the world is viewed (Kuhn, 1962). Lewis Mumford (1956) points out that such fundamental shifts are rare, occurring only a few times in all human history. Nevertheless, if the myth of economic wealth is to remain viable in the face of the ecological challenges it faces, business organizations will have to experience paradigm shifts which encourage them to view themselves as part of a larger, interconnected, social and ecological network governed by biological and physical processes. This means that business organizations in the twenty-first century will be faced with changing the fundamental assumptions and values which underlie their relationships with the larger ecosystem. Journal of Organizational Change Management, Vol. 7 No. 4, 1994, pp. 15-31. © MCB University Press, 0953-4814 JOCM 7,4 16 The purposes of this article are: (1) to underscore the magnitude of the organizational change efforts necessary for achieving a truly sustainable relationship between business activity and the planet; and (2) to delve more deeply into some of the theoretical frameworks that support the ecologically-sensitive paradigms which need to underlie humankind’s economic myth in the future. In pursuing these purposes, we hope to demonstrate that managing in a sustainable way will eventually require that firms engage in fundamental change efforts which reach to the heart of defining “How much economic activity is enough?” Changing the Economic Myth Is No Easy Matter Changing the underlying assumptions which constitute paradigms that organizations use to view their world is anything but simple. According to Mumford (1956), such changes mean adopting new metaphysical and ideological foundations on which the assumptions are based. Kuhn (1962) points out that paradigm shifts must be pursued on faith in the face of convincing empirical evidence which supports the old paradigm; they must be communicated in ways which are typically incoherent to old paradigm thinkers; and they require that people be willing to look at what they do from the periphery where objective observation is possible. Research by Post and Altman (1992) supports the point that organizations wishing to adopt ecologically-sensitive management practices will require fundamental change processes. In their investigation of three firms, they found the organization with the highest level of environmental performance was the one that had successfully integrated ecological performance into its strategic planning, had instituted concern for the ecosystem at the operational level, regularly scanned the ecological expectations of its customers, used a team approach in managing ecological issues, and modified its performance measurement systems to account for nature. They point out that achieving this “innovative phase” of environmental management generally requires secondand third-order, double-loop change efforts which involve the adoption of new philosophies, new values, new structures, and new operating principles – in short, new ecologically-sensitive paradigms. They say “… internal paradigm shifts and transformational change are necessary as companies attempt to adjust to the rapidly changing world of green politics and markets” (Post and Altman, 1992, p. 13). Further, as humankind progresses through the twenty-first century, business organizations will probably have to pass through two progressively difficult stages of change in order to achieve true ecological sustainability. The first stage, which we call the “profit stage”, is based on the idea that ecological concern is good for business and, thus, fits somewhat comfortably into the Can Humankind Change the Economic Myth? 17 current myth of economic wealth. Real change can occur, but within basically the same system of ideas. Firms can ask themselves, “How can we improve our wealth by being environmentally sensitive?” The profit stage defines the state of most of the ecological change efforts occurring in business organizations today. This stage has emerged as businesses have made efforts to respond to the increasingly loud cries that change is necessary from several corners of society. There are now vast numbers of green consumers jamming the marketplaces demanding products that are more environmentally friendly. There are also cries for ecological responsibility rising out of the investment markets, where investors are seeking quality investment opportunities in environmentally-friendly companies, technologies and industries. Add these voices for change to the chorus of regulatory requirements and legal actions in the name of clean air, clean water, the rights of other species, and the spiritual value of the land, and it becomes clear that a global social network has emerged which supports doing business with a serious environmental flair (Stead and Stead, 1992). There has been no shortage of organizations recognizing these social demands for environmentally-responsible business and responding to them in economically beneficial ways. Strategies designed to enhance revenues and/or reduce costs by improving environmental performance are pervasive among organizations in some of the world’s most polluting industries (Stead et al., forthcoming). Firms like 3M, Dow, Monsanto, and AT&T have instituted very successful environmental management systems within the framework of total quality environmental management (TQEM). The Body Shop, the Scott Bader Commonwealth, Ben & Jerry’s Ice-Cream, Tom’s of Maine, Patagonia, Smith and Hawken, Seventh Generation, and many others have proved that organizations can reap significant economic wealth by offering ecologically-sensitive products and services which spring from strong green corporate philosophies. However, it is important to stop here and question whether or not a worldwide sustainable economic system can be neatly achieved within the framework of increasing profits and economic growth. Many, including Paul Hawken, believe that the answer to this question is a resounding no. Hawken (1993) says: If every company on the planet were to adopt the environmental and social practices of the best companies – of, say, The Body Shop, Patagonia, and Ben & Jerry’s – the world would still be moving towards environmental degradation and collapse … Today there is a contradiction inherent in the premiss of the socially responsible corporation: to wit, that a company can make the world better, can grow, and can increase profits by meeting social and environmental needs. It is a have-your-cake-and-eat-it fantasy that cannot come true … (p. 55) Thus a second stage of societal and organizational change will probably be required for truly sustainable business: the “survival stage”. In this stage firms will have to be willing to ask themselves: “How much economic wealth can the earth afford us to earn?” It is in this stage that the paradigm shifts will become even more crucial and change efforts even more difficult. As Willis Harman (1988) says: JOCM 7,4 18 (There is a) growing suspicion that, without some sort of fundamental change, modern industrial society (will be) unable to resolve the socio-political and ecological dilemmas that beset us … The problems seem more and more intertwined, and the trade-offs progressively less and less favourable. The change required is not simply a shift from one form of industrial society to another, but rather a major change in the basic assumptions underlying … industrial society (p. 107). In short, long-term survival of the myth of economic wealth is tied to society finding answers to the question: “How much is enough?” Because business “is all pervasive in modern society (reflecting), any major change in any portion of it” (Harman, 1988, p. 130), organizations must take a central role in society’s search for reasonable answers to this question. Finding these answers will require that organizations adopt very different scientific, economic, and management paradigms within which to operate. Again quoting Hawken (1993): “There must be an integration of economic, biologic, and human systems in order to create a sustainable and interdependent method of commerce that supports and furthers our existence” (p. 55). What Paradigm Shifts Are Necessary for a New Economic Myth? The shifts necessary for an environmentally-sensitive economic myth involve three basic paradigms, one nested within the next. By nature, ecological issues are, first and foremost, scientific issues. Thus any myth which adequately informs business managers about the relationship between nature and economic activities must be encompassed within a scientific paradigm which adequately explains the biological and physical limits of the planet. Within such a scientific paradigm can fit a more realistic economics paradigm allowing for economic principles which more adequately weigh the ecological, as well as the monetary, costs and benefits of business activity. Finally, within a more ecologically-sensitive economics paradigm, a management paradigm can emerge which informs managers that the earth is the ultimate stakeholder, and, as such, must be accounted for in the organization’s values, visions, strategies, structures and processes. The Scientific Paradigm Since business activity is practised within the biological and physical confines of Mother Earth, it would seem reasonable to assume that a myth of economic wealth which will account for the natural environment should be founded on sound scientific frameworks which will help organizations define the carrying capacity of the planet. Unfortunately, such scientific frameworks cannot he found within the mechanical, Newtonian concepts that have dominated human thought processes for the past 250 years (Harman, 1988; Mumford, 1956). Business must turn to more holistic scientific models which can account for the interconnectedness between organizations and the natural environment Can Humankind Change the Economic Myth? 19 (Harman, 1988). Three interrelated scientific theories useful in this regard are systems theory, Gaia theory and thermodynamics. Systems Theory Systems theory is one of the most powerful and integrative theories for explaining the relationship between humankind and nature. Having emerged during the 1920s and 1930s, it has served to provide a strong framework for transcending the boundaries that have historically separated various scientific and social fields (Boulding, 1956; Sheldrake, 1991). Essentially, living systems exhibit characteristics of life: they exchange information, matter and energy with their environments in order to maintain a dynamic equilibrium and counteract uncertainty, destruction, etc. They are morphogenetic in nature, meaning that they can renew, reproduce, and/or regenerate themselves. Living systems are complex, composed of interdependent subsystems which themselves process information, matter and energy. They are also irreducible, meaning their survival is threatened if any of the subsystems break down, grow out of control, etc. Living systems are synergistic, displaying properties which cannot be anticipated by summing the effects of the component subsystems. They develop control mechanisms which must become more complex as environmental forces became more complex. Finally, living systems are purposive, serving some larger role, and sometimes purposeful, defining that larger role for themselves (Lovelock, 1979, 1988; Sheldrake, 1991; Van Gigch, 1978). The component subsystems of living systems exist in nested hierarchies, each subsystem contained within a larger system (Boulding, 1956; Schumacher, 1977; Sheldrake, 1991; Van Gigch, 1978). Kenneth Boulding (1956) says that the existence of nested living-systems hierarchies means that there are “systems of systems” (p. 202). From this perspective, we can see that there is a hierarchy of nested living systems associated with economic activity. Individuals form work groups, work groups form the foundations of business organizations, and business organizations together with their consumers represent the economic system. The economic, political, religious, educational and social systems together constitute societies, and these societies exist within the confines of the supranational system called earth. Because of this supranational position, the earth cannot be defined simply as the sum of the individuals, organizations, economies and societies that comprise it. Rather, it is a qualitatively distinct entity which supersedes and transcends any of its economic subsystems, thus constituting the “system of systems” (Boulding, 1956, p. 202) in which economic activity takes place. Therefore the economic system must function within the biological and physical limits of the planet. These limits are largely defined by the planet’s morphogenetic processes, which operate on an evolutionary time-scale. The earth can and will renew itself, as it has been doing for some 4.5 billion years. It simply cannot accomplish this feat in human time-frames. For example, the planet will renew the topsoil and the petroleum that humankind is so rapidly JOCM 7,4 20 depleting in its economic activities; unfortunately, it will take hundreds of thousands of years to accomplish this regeneration, regardless of the economic consequences. Gaia Theory The basic contention of Gaia theory is that the earth is a living superorganism which can be accurately understood only from an interdisciplinary geologicalphysiological perspective ( Lovelock, 1979, 1988, 1991). Although livingsystems processes such as self-regulation, homeostasis, and morphogenesis form many of the foundations of Gaia theory, Gaia theory goes beyond systems theory in hypothesizing that the earth is a living organism which has evolved from purposive (and possibly purposeful) interactions between the planet’s biological and physical processes. With roots in the ideas of nineteenth-century scientists such as James Hutton and H.T. Huxley (Kirchner, 1991; Lovelock, 1988, 1991), the development of modern Gaia theory is generally attributed to two scientists – James Lovelock and Lynn Margulis. Lovelock explores Gaia theory from a macro perspective, studying how chemical, atmospheric and climatic processes vary as the diversity of planetary life varies. His research shows that species diversity holds the key to the ecological balance necessary to support life. His computer models of “Daisyworld” demonstrate that fluctuations in the weather become more severe as diversity declines (Lovelock, 1988). He says, “Sparse life on a planet would be as unstable as half an animal” (Lovelock, 1991, p. 10). Margulis examines Gaia theory from a micro perspective. Referring to herself as the “unofficial spokesperson for the silent majority of life on earth, the microbes” (Margulis and Hinkle, 1991, p. 11), Margulis points out that, through symbiotic processes, the planet has become a single living organism composed of coevolving biological and physical processes which cannot be separated in any meaningful sense (Joseph, 1990; Margulis and Hinkle, 1991). Although Gaia theory is often referred to by its original designation, the Gaia hypothesis, Lovelock (1988) makes it clear that research support for the idea has moved it well beyond the hypothetical stage. Kirchner (1991) identifies five Gaia hypotheses, ranging from the least extreme to the most extreme: (1) biological forces have a substantial influence over the physical world; (2) the relationship between the earth’s biological and physical forces is one of mutual influence; (3) long-term stability of the earth’s physical processes is dependent on biological processes; (4) biological processes are teleologic, controlling the physical environment for a purpose; and (5) maintaining a biologically-optimal physical environment is Gaia’s purpose. Can Humankind Change the Economic Myth? 21 Kirchner (1991) points out that testing the less extreme hypotheses has been and will continue to be fruitful, but that testing the more extreme hypotheses will be quite difficult, if not impossible. Others point out that the scope of Gaia theory is so vast that, like Newtonian physics and Darwinian evolution, it will take centuries of research to explore (Kirchner, 1991). However, Lovelock (1991) counters that evolutionary science leaves room for only one reasonable conclusion concerning the purposive/purposeful dimensions of Gaia: “Living organisms must regulate their planet; otherwise the ineluctable forces of physical and chemical evolution would render it uninhabitable” (p. 10). Rooting a scientific paradigm about the relationship between business activity and the natural environment in Gaia theory provides a holistic planetary perspective. Further, it makes it clear that humans’ environmental sensitivity need not be altruistic. Although environmental debates are often couched in terms of “business needs to clean up its act in order to help save the planet”, Gaia theory helps us to understand that the planet can take care of itself; it is humankind’s way of life that is threatened. Lovelock (1979) says, “It may be that the white-hot rash of our technology will, in the end, prove destructive for our own species, but the evidence for accepting that industrial activities … may endanger the life of Gaia as a whole is very weak indeed” (pp. 107-08). Thermodynamics Living systems survive by exchanging energy, wastes and information with their environment. This process is subject to the laws of thermodynamics – the conservation law and the entropy law. These laws explain the dynamics of energy transformation and waste generation in the universe (Ehrlich et al., 1977). The conservation law says that there is a constant amount of energy in the universe. Thus energy cannot be created or destroyed, only transformed from one state to another. The entropy law says that, every time energy is transformed, it will lose some of its order and usefulness. As this occurs, the degraded energy becomes waste. Basically, an economy functions by using knowledge and energy to convert materials from their natural states into usable products or services for consumption by human beings. Because of the role of energy in the economy, the interactions among these variables are governed by thermodynamic laws. Problems arise because energy transformation in the economy occurs at highentropy rates as energy is used to power production, distribution, and consumption cycles. These high-entropy rates are not in balance with the lowentropy energy transformation rates found in nature. The predictable results of this imbalance include the rapid resource depletion and waste generation currently occurring on the planet (Boulding, 1966; Capra, 1983; Daly, 1991; Georgescu-Roegen, 1971). Several scholars have focused their attentions on the relationship between economic activity and thermodynamics. In his classic work, The Entropy Law JOCM 7,4 22 and the Economic Process, economist/physicist Nicholas Georgescu-Roegen (1971) eloquently demonstrates that: “The entropy law emerges as the most economic in nature of all natural laws” (p. 3). Economist Herman Daly (1991) says: “To deny the relevance of the entropy law to economics is to deny the relevance of the difference between a lump of coal and a pile of ashes” (p. 199). Physicist Fritjof Capra (1983) points out that the dismissal of the natural environment in classical economic models means that the thermodynamic characteristics of the planet are unaccounted for in economic activity. He says: “Unlimited expansion in a finite environment can lead only to disaster” (p. 213). Theologian Thomas Berry (1988) says: “In the natural world there exists an amazing richness … There is a minimum of entropy … The difficulty comes when the industrial mode of our economy disrupts the natural processes … In such a situation the productivity of the natural world and its life systems is diminished” (p. 71). However, the news does not have to be so bleak. Although, eventually, life on the planet will succumb to entropy as the sun cools and dies, the timing of the process is by no means a certainty (Georgescu-Roegen, 1971). It does not have to happen in the next century, as many predict, if humankind will focus its efforts on the one variable in the formula of economic activity which defies the entropic processes of the universe – human knowledge. Systems which stress the need for relevant education and encourage the continuous, free expansion of knowledge and information can literally create order out of chaos, beauty out of degradation (Boulding, 1966; Ornstein and Ehrlich, 1990; Wheatley, 1992). Thus thermodynamics teaches that energy transformation is a linear process which produces disorder and wastes, but it also teaches that humankind can use its ever-expanding knowledge to intervene effectively in this process, either speeding it up or slowing it down. Together, systems theory, Gaia theory and thermodynamics present a framework for viewing the earth as a living, holistic entity with a myriad interconnected subsystems that must function within the evolutionary time scales of the ecosystem. These theories make it clear that humans must find ways to balance the economic subsystem with the earth’s evolutionary entropic and morphogenetic processes, or the planet will use its own mechanisms to restore that balance. Therefore these three theories represent an overarching scientific paradigm for defining and operating within the carrying capacity of the planet, providing a solid theoretical base for such concepts as industrial ecosystem, industrial ecology, total environmental quality, and industrial metabolism (Ayres, 1989; Frosch, 1992; Frosch and Gallopoulos, 1989; Sharfman and Ellington, 1993). In other words, they help to define “what is enough”. The Economics Paradigm Like all disciplines, traditional economics operates on simplifying assumptions. Three of these assumptions are: Can Humankind Change the Economic Myth? 23 (1) the economy can grow forever; (2) the natural resources and energy necessary for economic activity will always be there; and (3) individual self-interest provides the best mechanism for the fair allocation of resources (Stead and Stead, 1992). These three assumptions are possible in current economic thought because traditional economic theory considers the economic system to be a closed circular-flow of goods and services between business organizations and households which is virtually independent of the planet where these activities take place. Yet the previously described scientific theories demonstrate that the economic subsystem can survive only so long as it operates within the entropic and morphogenetic limits of the earth. Factors considered external to the closed circular-flow economic system, such as the value of resources in nature, the aesthetic value of the earth, and the values of the greater communities and societies where economic activities take place, will have to emerge as legitimate economic variables (Daly, 1977, 1991; Daly and Cobb, 1989; Etzioni, 1988, 1993; Henderson, 1991; Schumacher, 1973). Otherwise, humankind faces reduced natural resources and beauty, the potential for violence born of greed and envy, and meaningless work for many citizens (Schumacher, 1973). Two related theories which open the economic system to the greater social and ecological systems are steady-state economics and communitarianism. Steady-State Economics Herman Daly argues in Steady-State Economics (1977, 1991) that the economy is a subsystem of the larger social system and ecosystem powered and maintained by throughputs of energy and materials from the environment. He says: Studying economics in terms of the circular flow without considering the throughput of energy and resources is like studying physiology in terms of the circulatory system without ever mentioning the digestive tract (Daly, 1991, p. 196). As mentioned above, both Daly (1977, 1991) and Georgescu-Roegen (1971) implore that, if economic theory were rooted in the entropy law, then businesses would recognize that unlimited economic growth on a finite planet is physically impossible. Since the throughput of matter and energy is ignored in current economic theory, the issue of the optimum scale of economic activity as it relates to the earth’s carrying capacity is never considered (Daly, 1991; Daly and Cobb, 1989). Thus economics must be opened to entropic throughput; this means the unlimited growth assumption must be replaced by the assumption of “enoughness” (Daly, 1977, 1991; Schumacher, 1973). Based on this assumption, Daly (1977, 1991) proposes a sustainable, steady-state economy which exists as JOCM 7,4Imagine being an executive in a business that is experiencing one of the limits described in Stead & Stead (1994). Write one short paragraph starting a memo or speech on how to make a strategic shift so that you will become more sustainable. Can Humankind Change the Economic Myth? 15 Can Humankind Change the Economic Myth? Paradigm Shifts Necessary for Ecologically Sustainable Business W. Edward Stead and Jean Garner Stead East Tennessee State University, Johnson City, Tennessee, USA Historians have not referred to the past 250 years as the “Industrial Revolution” for nothing. Joseph Campbell (1988) points out that myths reflect the underlying paradigms that guide the thoughts and actions of the people of a particular culture. Espousing society’s myths is a primary function of all of its institutions, be they political, religious, educational or economic. Campbell (1988) says that you can tell the dominant myth of a given society by examining the heights of its buildings. The multi-storey seats of economic activity that define the skylines of our cities today demonstrate that humankind’s most dominant current myth is economic wealth. However, the myth of economic wealth has now come face to face with ecological sustainability. Father Thomas Berry (1988) says, “The mythic drive (for economic wealth) continues to control our world, even though much is known about the earth, its limited resources, the interdependence of life systems, and the delicate balance of the ecosystems …” (p. 76) This is echoed by Smith and Hawken founder, Paul Hawken (1993), who says, “Corporations, because they are the dominant institution on the planet, must squarely face the social and environmental problems that afflict humankind” (p. 54). Modifying myths means making paradigm shifts, changing the fundamental assumptions and values from which the world is viewed (Kuhn, 1962). Lewis Mumford (1956) points out that such fundamental shifts are rare, occurring only a few times in all human history. Nevertheless, if the myth of economic wealth is to remain viable in the face of the ecological challenges it faces, business organizations will have to experience paradigm shifts which encourage them to view themselves as part of a larger, interconnected, social and ecological network governed by biological and physical processes. This means that business organizations in the twenty-first century will be faced with changing the fundamental assumptions and values which underlie their relationships with the larger ecosystem. Journal of Organizational Change Management, Vol. 7 No. 4, 1994, pp. 15-31. © MCB University Press, 0953-4814 JOCM 7,4 16 The purposes of this article are: (1) to underscore the magnitude of the organizational change efforts necessary for achieving a truly sustainable relationship between business activity and the planet; and (2) to delve more deeply into some of the theoretical frameworks that support the ecologically-sensitive paradigms which need to underlie humankind’s economic myth in the future. In pursuing these purposes, we hope to demonstrate that managing in a sustainable way will eventually require that firms engage in fundamental change efforts which reach to the heart of defining “How much economic activity is enough?” Changing the Economic Myth Is No Easy Matter Changing the underlying assumptions which constitute paradigms that organizations use to view their world is anything but simple. According to Mumford (1956), such changes mean adopting new metaphysical and ideological foundations on which the assumptions are based. Kuhn (1962) points out that paradigm shifts must be pursued on faith in the face of convincing empirical evidence which supports the old paradigm; they must be communicated in ways which are typically incoherent to old paradigm thinkers; and they require that people be willing to look at what they do from the periphery where objective observation is possible. Research by Post and Altman (1992) supports the point that organizations wishing to adopt ecologically-sensitive management practices will require fundamental change processes. In their investigation of three firms, they found the organization with the highest level of environmental performance was the one that had successfully integrated ecological performance into its strategic planning, had instituted concern for the ecosystem at the operational level, regularly scanned the ecological expectations of its customers, used a team approach in managing ecological issues, and modified its performance measurement systems to account for nature. They point out that achieving this “innovative phase” of environmental management generally requires secondand third-order, double-loop change efforts which involve the adoption of new philosophies, new values, new structures, and new operating principles – in short, new ecologically-sensitive paradigms. They say “… internal paradigm shifts and transformational change are necessary as companies attempt to adjust to the rapidly changing world of green politics and markets” (Post and Altman, 1992, p. 13). Further, as humankind progresses through the twenty-first century, business organizations will probably have to pass through two progressively difficult stages of change in order to achieve true ecological sustainability. The first stage, which we call the “profit stage”, is based on the idea that ecological concern is good for business and, thus, fits somewhat comfortably into the Can Humankind Change the Economic Myth? 17 current myth of economic wealth. Real change can occur, but within basically the same system of ideas. Firms can ask themselves, “How can we improve our wealth by being environmentally sensitive?” The profit stage defines the state of most of the ecological change efforts occurring in business organizations today. This stage has emerged as businesses have made efforts to respond to the increasingly loud cries that change is necessary from several corners of society. There are now vast numbers of green consumers jamming the marketplaces demanding products that are more environmentally friendly. There are also cries for ecological responsibility rising out of the investment markets, where investors are seeking quality investment opportunities in environmentally-friendly companies, technologies and industries. Add these voices for change to the chorus of regulatory requirements and legal actions in the name of clean air, clean water, the rights of other species, and the spiritual value of the land, and it becomes clear that a global social network has emerged which supports doing business with a serious environmental flair (Stead and Stead, 1992). There has been no shortage of organizations recognizing these social demands for environmentally-responsible business and responding to them in economically beneficial ways. Strategies designed to enhance revenues and/or reduce costs by improving environmental performance are pervasive among organizations in some of the world’s most polluting industries (Stead et al., forthcoming). Firms like 3M, Dow, Monsanto, and AT&T have instituted very successful environmental management systems within the framework of total quality environmental management (TQEM). The Body Shop, the Scott Bader Commonwealth, Ben & Jerry’s Ice-Cream, Tom’s of Maine, Patagonia, Smith and Hawken, Seventh Generation, and many others have proved that organizations can reap significant economic wealth by offering ecologically-sensitive products and services which spring from strong green corporate philosophies. However, it is important to stop here and question whether or not a worldwide sustainable economic system can be neatly achieved within the framework of increasing profits and economic growth. Many, including Paul Hawken, believe that the answer to this question is a resounding no. Hawken (1993) says: If every company on the planet were to adopt the environmental and social practices of the best companies – of, say, The Body Shop, Patagonia, and Ben & Jerry’s – the world would still be moving towards environmental degradation and collapse … Today there is a contradiction inherent in the premiss of the socially responsible corporation: to wit, that a company can make the world better, can grow, and can increase profits by meeting social and environmental needs. It is a have-your-cake-and-eat-it fantasy that cannot come true … (p. 55) Thus a second stage of societal and organizational change will probably be required for truly sustainable business: the “survival stage”. In this stage firms will have to be willing to ask themselves: “How much economic wealth can the earth afford us to earn?” It is in this stage that the paradigm shifts will become even more crucial and change efforts even more difficult. As Willis Harman (1988) says: JOCM 7,4 18 (There is a) growing suspicion that, without some sort of fundamental change, modern industrial society (will be) unable to resolve the socio-political and ecological dilemmas that beset us … The problems seem more and more intertwined, and the trade-offs progressively less and less favourable. The change required is not simply a shift from one form of industrial society to another, but rather a major change in the basic assumptions underlying … industrial society (p. 107). In short, long-term survival of the myth of economic wealth is tied to society finding answers to the question: “How much is enough?” Because business “is all pervasive in modern society (reflecting), any major change in any portion of it” (Harman, 1988, p. 130), organizations must take a central role in society’s search for reasonable answers to this question. Finding these answers will require that organizations adopt very different scientific, economic, and management paradigms within which to operate. Again quoting Hawken (1993): “There must be an integration of economic, biologic, and human systems in order to create a sustainable and interdependent method of commerce that supports and furthers our existence” (p. 55). What Paradigm Shifts Are Necessary for a New Economic Myth? The shifts necessary for an environmentally-sensitive economic myth involve three basic paradigms, one nested within the next. By nature, ecological issues are, first and foremost, scientific issues. Thus any myth which adequately informs business managers about the relationship between nature and economic activities must be encompassed within a scientific paradigm which adequately explains the biological and physical limits of the planet. Within such a scientific paradigm can fit a more realistic economics paradigm allowing for economic principles which more adequately weigh the ecological, as well as the monetary, costs and benefits of business activity. Finally, within a more ecologically-sensitive economics paradigm, a management paradigm can emerge which informs managers that the earth is the ultimate stakeholder, and, as such, must be accounted for in the organization’s values, visions, strategies, structures and processes. The Scientific Paradigm Since business activity is practised within the biological and physical confines of Mother Earth, it would seem reasonable to assume that a myth of economic wealth which will account for the natural environment should be founded on sound scientific frameworks which will help organizations define the carrying capacity of the planet. Unfortunately, such scientific frameworks cannot he found within the mechanical, Newtonian concepts that have dominated human thought processes for the past 250 years (Harman, 1988; Mumford, 1956). Business must turn to more holistic scientific models which can account for the interconnectedness between organizations and the natural environment Can Humankind Change the Economic Myth? 19 (Harman, 1988). Three interrelated scientific theories useful in this regard are systems theory, Gaia theory and thermodynamics. Systems Theory Systems theory is one of the most powerful and integrative theories for explaining the relationship between humankind and nature. Having emerged during the 1920s and 1930s, it has served to provide a strong framework for transcending the boundaries that have historically separated various scientific and social fields (Boulding, 1956; Sheldrake, 1991). Essentially, living systems exhibit characteristics of life: they exchange information, matter and energy with their environments in order to maintain a dynamic equilibrium and counteract uncertainty, destruction, etc. They are morphogenetic in nature, meaning that they can renew, reproduce, and/or regenerate themselves. Living systems are complex, composed of interdependent subsystems which themselves process information, matter and energy. They are also irreducible, meaning their survival is threatened if any of the subsystems break down, grow out of control, etc. Living systems are synergistic, displaying properties which cannot be anticipated by summing the effects of the component subsystems. They develop control mechanisms which must become more complex as environmental forces became more complex. Finally, living systems are purposive, serving some larger role, and sometimes purposeful, defining that larger role for themselves (Lovelock, 1979, 1988; Sheldrake, 1991; Van Gigch, 1978). The component subsystems of living systems exist in nested hierarchies, each subsystem contained within a larger system (Boulding, 1956; Schumacher, 1977; Sheldrake, 1991; Van Gigch, 1978). Kenneth Boulding (1956) says that the existence of nested living-systems hierarchies means that there are “systems of systems” (p. 202). From this perspective, we can see that there is a hierarchy of nested living systems associated with economic activity. Individuals form work groups, work groups form the foundations of business organizations, and business organizations together with their consumers represent the economic system. The economic, political, religious, educational and social systems together constitute societies, and these societies exist within the confines of the supranational system called earth. Because of this supranational position, the earth cannot be defined simply as the sum of the individuals, organizations, economies and societies that comprise it. Rather, it is a qualitatively distinct entity which supersedes and transcends any of its economic subsystems, thus constituting the “system of systems” (Boulding, 1956, p. 202) in which economic activity takes place. Therefore the economic system must function within the biological and physical limits of the planet. These limits are largely defined by the planet’s morphogenetic processes, which operate on an evolutionary time-scale. The earth can and will renew itself, as it has been doing for some 4.5 billion years. It simply cannot accomplish this feat in human time-frames. For example, the planet will renew the topsoil and the petroleum that humankind is so rapidly JOCM 7,4 20 depleting in its economic activities; unfortunately, it will take hundreds of thousands of years to accomplish this regeneration, regardless of the economic consequences. Gaia Theory The basic contention of Gaia theory is that the earth is a living superorganism which can be accurately understood only from an interdisciplinary geologicalphysiological perspective ( Lovelock, 1979, 1988, 1991). Although livingsystems processes such as self-regulation, homeostasis, and morphogenesis form many of the foundations of Gaia theory, Gaia theory goes beyond systems theory in hypothesizing that the earth is a living organism which has evolved from purposive (and possibly purposeful) interactions between the planet’s biological and physical processes. With roots in the ideas of nineteenth-century scientists such as James Hutton and H.T. Huxley (Kirchner, 1991; Lovelock, 1988, 1991), the development of modern Gaia theory is generally attributed to two scientists – James Lovelock and Lynn Margulis. Lovelock explores Gaia theory from a macro perspective, studying how chemical, atmospheric and climatic processes vary as the diversity of planetary life varies. His research shows that species diversity holds the key to the ecological balance necessary to support life. His computer models of “Daisyworld” demonstrate that fluctuations in the weather become more severe as diversity declines (Lovelock, 1988). He says, “Sparse life on a planet would be as unstable as half an animal” (Lovelock, 1991, p. 10). Margulis examines Gaia theory from a micro perspective. Referring to herself as the “unofficial spokesperson for the silent majority of life on earth, the microbes” (Margulis and Hinkle, 1991, p. 11), Margulis points out that, through symbiotic processes, the planet has become a single living organism composed of coevolving biological and physical processes which cannot be separated in any meaningful sense (Joseph, 1990; Margulis and Hinkle, 1991). Although Gaia theory is often referred to by its original designation, the Gaia hypothesis, Lovelock (1988) makes it clear that research support for the idea has moved it well beyond the hypothetical stage. Kirchner (1991) identifies five Gaia hypotheses, ranging from the least extreme to the most extreme: (1) biological forces have a substantial influence over the physical world; (2) the relationship between the earth’s biological and physical forces is one of mutual influence; (3) long-term stability of the earth’s physical processes is dependent on biological processes; (4) biological processes are teleologic, controlling the physical environment for a purpose; and (5) maintaining a biologically-optimal physical environment is Gaia’s purpose. Can Humankind Change the Economic Myth? 21 Kirchner (1991) points out that testing the less extreme hypotheses has been and will continue to be fruitful, but that testing the more extreme hypotheses will be quite difficult, if not impossible. Others point out that the scope of Gaia theory is so vast that, like Newtonian physics and Darwinian evolution, it will take centuries of research to explore (Kirchner, 1991). However, Lovelock (1991) counters that evolutionary science leaves room for only one reasonable conclusion concerning the purposive/purposeful dimensions of Gaia: “Living organisms must regulate their planet; otherwise the ineluctable forces of physical and chemical evolution would render it uninhabitable” (p. 10). Rooting a scientific paradigm about the relationship between business activity and the natural environment in Gaia theory provides a holistic planetary perspective. Further, it makes it clear that humans’ environmental sensitivity need not be altruistic. Although environmental debates are often couched in terms of “business needs to clean up its act in order to help save the planet”, Gaia theory helps us to understand that the planet can take care of itself; it is humankind’s way of life that is threatened. Lovelock (1979) says, “It may be that the white-hot rash of our technology will, in the end, prove destructive for our own species, but the evidence for accepting that industrial activities … may endanger the life of Gaia as a whole is very weak indeed” (pp. 107-08). Thermodynamics Living systems survive by exchanging energy, wastes and information with their environment. This process is subject to the laws of thermodynamics – the conservation law and the entropy law. These laws explain the dynamics of energy transformation and waste generation in the universe (Ehrlich et al., 1977). The conservation law says that there is a constant amount of energy in the universe. Thus energy cannot be created or destroyed, only transformed from one state to another. The entropy law says that, every time energy is transformed, it will lose some of its order and usefulness. As this occurs, the degraded energy becomes waste. Basically, an economy functions by using knowledge and energy to convert materials from their natural states into usable products or services for consumption by human beings. Because of the role of energy in the economy, the interactions among these variables are governed by thermodynamic laws. Problems arise because energy transformation in the economy occurs at highentropy rates as energy is used to power production, distribution, and consumption cycles. These high-entropy rates are not in balance with the lowentropy energy transformation rates found in nature. The predictable results of this imbalance include the rapid resource depletion and waste generation currently occurring on the planet (Boulding, 1966; Capra, 1983; Daly, 1991; Georgescu-Roegen, 1971). Several scholars have focused their attentions on the relationship between economic activity and thermodynamics. In his classic work, The Entropy Law JOCM 7,4 22 and the Economic Process, economist/physicist Nicholas Georgescu-Roegen (1971) eloquently demonstrates that: “The entropy law emerges as the most economic in nature of all natural laws” (p. 3). Economist Herman Daly (1991) says: “To deny the relevance of the entropy law to economics is to deny the relevance of the difference between a lump of coal and a pile of ashes” (p. 199). Physicist Fritjof Capra (1983) points out that the dismissal of the natural environment in classical economic models means that the thermodynamic characteristics of the planet are unaccounted for in economic activity. He says: “Unlimited expansion in a finite environment can lead only to disaster” (p. 213). Theologian Thomas Berry (1988) says: “In the natural world there exists an amazing richness … There is a minimum of entropy … The difficulty comes when the industrial mode of our economy disrupts the natural processes … In such a situation the productivity of the natural world and its life systems is diminished” (p. 71). However, the news does not have to be so bleak. Although, eventually, life on the planet will succumb to entropy as the sun cools and dies, the timing of the process is by no means a certainty (Georgescu-Roegen, 1971). It does not have to happen in the next century, as many predict, if humankind will focus its efforts on the one variable in the formula of economic activity which defies the entropic processes of the universe – human knowledge. Systems which stress the need for relevant education and encourage the continuous, free expansion of knowledge and information can literally create order out of chaos, beauty out of degradation (Boulding, 1966; Ornstein and Ehrlich, 1990; Wheatley, 1992). Thus thermodynamics teaches that energy transformation is a linear process which produces disorder and wastes, but it also teaches that humankind can use its ever-expanding knowledge to intervene effectively in this process, either speeding it up or slowing it down. Together, systems theory, Gaia theory and thermodynamics present a framework for viewing the earth as a living, holistic entity with a myriad interconnected subsystems that must function within the evolutionary time scales of the ecosystem. These theories make it clear that humans must find ways to balance the economic subsystem with the earth’s evolutionary entropic and morphogenetic processes, or the planet will use its own mechanisms to restore that balance. Therefore these three theories represent an overarching scientific paradigm for defining and operating within the carrying capacity of the planet, providing a solid theoretical base for such concepts as industrial ecosystem, industrial ecology, total environmental quality, and industrial metabolism (Ayres, 1989; Frosch, 1992; Frosch and Gallopoulos, 1989; Sharfman and Ellington, 1993). In other words, they help to define “what is enough”. The Economics Paradigm Like all disciplines, traditional economics operates on simplifying assumptions. Three of these assumptions are: Can Humankind Change the Economic Myth? 23 (1) the economy can grow forever; (2) the natural resources and energy necessary for economic activity will always be there; and (3) individual self-interest provides the best mechanism for the fair allocation of resources (Stead and Stead, 1992). These three assumptions are possible in current economic thought because traditional economic theory considers the economic system to be a closed circular-flow of goods and services between business organizations and households which is virtually independent of the planet where these activities take place. Yet the previously described scientific theories demonstrate that the economic subsystem can survive only so long as it operates within the entropic and morphogenetic limits of the earth. Factors considered external to the closed circular-flow economic system, such as the value of resources in nature, the aesthetic value of the earth, and the values of the greater communities and societies where economic activities take place, will have to emerge as legitimate economic variables (Daly, 1977, 1991; Daly and Cobb, 1989; Etzioni, 1988, 1993; Henderson, 1991; Schumacher, 1973). Otherwise, humankind faces reduced natural resources and beauty, the potential for violence born of greed and envy, and meaningless work for many citizens (Schumacher, 1973). Two related theories which open the economic system to the greater social and ecological systems are steady-state economics and communitarianism. Steady-State Economics Herman Daly argues in Steady-State Economics (1977, 1991) that the economy is a subsystem of the larger social system and ecosystem powered and maintained by throughputs of energy and materials from the environment. He says: Studying economics in terms of the circular flow without considering the throughput of energy and resources is like studying physiology in terms of the circulatory system without ever mentioning the digestive tract (Daly, 1991, p. 196). As mentioned above, both Daly (1977, 1991) and Georgescu-Roegen (1971) implore that, if economic theory were rooted in the entropy law, then businesses would recognize that unlimited economic growth on a finite planet is physically impossible. Since the throughput of matter and energy is ignored in current economic theory, the issue of the optimum scale of economic activity as it relates to the earth’s carrying capacity is never considered (Daly, 1991; Daly and Cobb, 1989). Thus economics must be opened to entropic throughput; this means the unlimited growth assumption must be replaced by the assumption of “enoughness” (Daly, 1977, 1991; Schumacher, 1973). Based on this assumption, Daly (1977, 1991) proposes a sustainable, steady-state economy which exists as JOCM 7,4

Imagine being an executive in a business that is experiencing one of the limits described in Stead & Stead (1994). Write one short paragraph starting a memo or speech on how to make a strategic shift so that you will become more sustainable.
Can Humankind
Change the
Economic Myth?
15
Can Humankind Change the
Economic Myth? Paradigm
Shifts Necessary for
Ecologically Sustainable
Business
W. Edward Stead and Jean Garner Stead
East Tennessee State University, Johnson City, Tennessee, USA
Historians have not referred to the past 250 years as the “Industrial Revolution”
for nothing. Joseph Campbell (1988) points out that myths reflect the underlying
paradigms that guide the thoughts and actions of the people of a particular
culture. Espousing society’s myths is a primary function of all of its institutions,
be they political, religious, educational or economic. Campbell (1988) says that
you can tell the dominant myth of a given society by examining the heights of
its buildings. The multi-storey seats of economic activity that define the
skylines of our cities today demonstrate that humankind’s most dominant
current myth is economic wealth.
However, the myth of economic wealth has now come face to face with
ecological sustainability. Father Thomas Berry (1988) says, “The mythic drive
(for economic wealth) continues to control our world, even though much is
known about the earth, its limited resources, the interdependence of life
systems, and the delicate balance of the ecosystems …” (p. 76) This is echoed
by Smith and Hawken founder, Paul Hawken (1993), who says, “Corporations,
because they are the dominant institution on the planet, must squarely face
the social and environmental problems that afflict humankind” (p. 54).
Modifying myths means making paradigm shifts, changing the
fundamental assumptions and values from which the world is viewed (Kuhn,
1962). Lewis Mumford (1956) points out that such fundamental shifts are rare,
occurring only a few times in all human history. Nevertheless, if the myth of
economic wealth is to remain viable in the face of the ecological challenges it
faces, business organizations will have to experience paradigm shifts which
encourage them to view themselves as part of a larger, interconnected, social
and ecological network governed by biological and physical processes. This
means that business organizations in the twenty-first century will be faced
with changing the fundamental assumptions and values which underlie their
relationships with the larger ecosystem.
Journal of Organizational Change
Management, Vol. 7 No. 4, 1994,
pp. 15-31. © MCB University Press,
0953-4814
JOCM
7,4
16
The purposes of this article are:
(1) to underscore the magnitude of the organizational change efforts
necessary for achieving a truly sustainable relationship between
business activity and the planet; and
(2) to delve more deeply into some of the theoretical frameworks that
support the ecologically-sensitive paradigms which need to underlie
humankind’s economic myth in the future.
In pursuing these purposes, we hope to demonstrate that managing in a
sustainable way will eventually require that firms engage in fundamental
change efforts which reach to the heart of defining “How much economic
activity is enough?”
Changing the Economic Myth Is No Easy Matter
Changing the underlying assumptions which constitute paradigms that
organizations use to view their world is anything but simple. According to
Mumford (1956), such changes mean adopting new metaphysical and
ideological foundations on which the assumptions are based. Kuhn (1962)
points out that paradigm shifts must be pursued on faith in the face of
convincing empirical evidence which supports the old paradigm; they must be
communicated in ways which are typically incoherent to old paradigm thinkers;
and they require that people be willing to look at what they do from the
periphery where objective observation is possible.
Research by Post and Altman (1992) supports the point that organizations
wishing to adopt ecologically-sensitive management practices will require
fundamental change processes. In their investigation of three firms, they found
the organization with the highest level of environmental performance was the
one that had successfully integrated ecological performance into its strategic
planning, had instituted concern for the ecosystem at the operational level,
regularly scanned the ecological expectations of its customers, used a team
approach in managing ecological issues, and modified its performance
measurement systems to account for nature. They point out that achieving this
“innovative phase” of environmental management generally requires secondand
third-order, double-loop change efforts which involve the adoption of new
philosophies, new values, new structures, and new operating principles – in
short, new ecologically-sensitive paradigms. They say “… internal paradigm
shifts and transformational change are necessary as companies attempt to
adjust to the rapidly changing world of green politics and markets” (Post and
Altman, 1992, p. 13).
Further, as humankind progresses through the twenty-first century, business
organizations will probably have to pass through two progressively difficult
stages of change in order to achieve true ecological sustainability. The first
stage, which we call the “profit stage”, is based on the idea that ecological
concern is good for business and, thus, fits somewhat comfortably into the
Can Humankind
Change the
Economic Myth?
17
current myth of economic wealth. Real change can occur, but within basically
the same system of ideas. Firms can ask themselves, “How can we improve our
wealth by being environmentally sensitive?”
The profit stage defines the state of most of the ecological change efforts
occurring in business organizations today. This stage has emerged as
businesses have made efforts to respond to the increasingly loud cries that
change is necessary from several corners of society. There are now vast
numbers of green consumers jamming the marketplaces demanding products
that are more environmentally friendly. There are also cries for ecological
responsibility rising out of the investment markets, where investors are seeking
quality investment opportunities in environmentally-friendly companies,
technologies and industries. Add these voices for change to the chorus of
regulatory requirements and legal actions in the name of clean air, clean water,
the rights of other species, and the spiritual value of the land, and it becomes
clear that a global social network has emerged which supports doing business
with a serious environmental flair (Stead and Stead, 1992).
There has been no shortage of organizations recognizing these social
demands for environmentally-responsible business and responding to them in
economically beneficial ways. Strategies designed to enhance revenues and/or
reduce costs by improving environmental performance are pervasive among
organizations in some of the world’s most polluting industries (Stead et al.,
forthcoming). Firms like 3M, Dow, Monsanto, and AT&T have instituted very
successful environmental management systems within the framework of total
quality environmental management (TQEM). The Body Shop, the Scott Bader
Commonwealth, Ben & Jerry’s Ice-Cream, Tom’s of Maine, Patagonia, Smith and
Hawken, Seventh Generation, and many others have proved that organizations
can reap significant economic wealth by offering ecologically-sensitive products
and services which spring from strong green corporate philosophies.
However, it is important to stop here and question whether or not a
worldwide sustainable economic system can be neatly achieved within the
framework of increasing profits and economic growth. Many, including Paul
Hawken, believe that the answer to this question is a resounding no. Hawken
(1993) says:
If every company on the planet were to adopt the environmental and social practices of the
best companies – of, say, The Body Shop, Patagonia, and Ben & Jerry’s – the world would still
be moving towards environmental degradation and collapse … Today there is a contradiction
inherent in the premiss of the socially responsible corporation: to wit, that a company can
make the world better, can grow, and can increase profits by meeting social and environmental
needs. It is a have-your-cake-and-eat-it fantasy that cannot come true … (p. 55)
Thus a second stage of societal and organizational change will probably be
required for truly sustainable business: the “survival stage”. In this stage firms
will have to be willing to ask themselves: “How much economic wealth can the
earth afford us to earn?” It is in this stage that the paradigm shifts will become
even more crucial and change efforts even more difficult. As Willis Harman
(1988) says:
JOCM
7,4
18
(There is a) growing suspicion that, without some sort of fundamental change, modern
industrial society (will be) unable to resolve the socio-political and ecological dilemmas that
beset us … The problems seem more and more intertwined, and the trade-offs progressively less
and less favourable. The change required is not simply a shift from one form of industrial
society to another, but rather a major change in the basic assumptions underlying … industrial
society (p. 107).
In short, long-term survival of the myth of economic wealth is tied to society
finding answers to the question: “How much is enough?” Because business “is
all pervasive in modern society (reflecting), any major change in any portion of
it” (Harman, 1988, p. 130), organizations must take a central role in society’s
search for reasonable answers to this question. Finding these answers will
require that organizations adopt very different scientific, economic, and
management paradigms within which to operate. Again quoting Hawken
(1993): “There must be an integration of economic, biologic, and human
systems in order to create a sustainable and interdependent method of
commerce that supports and furthers our existence” (p. 55).
What Paradigm Shifts Are Necessary for a New Economic Myth?
The shifts necessary for an environmentally-sensitive economic myth involve
three basic paradigms, one nested within the next. By nature, ecological issues
are, first and foremost, scientific issues. Thus any myth which adequately
informs business managers about the relationship between nature and
economic activities must be encompassed within a scientific paradigm which
adequately explains the biological and physical limits of the planet. Within such
a scientific paradigm can fit a more realistic economics paradigm allowing for
economic principles which more adequately weigh the ecological, as well as the
monetary, costs and benefits of business activity. Finally, within a more
ecologically-sensitive economics paradigm, a management paradigm can
emerge which informs managers that the earth is the ultimate stakeholder, and,
as such, must be accounted for in the organization’s values, visions, strategies,
structures and processes.
The Scientific Paradigm
Since business activity is practised within the biological and physical confines
of Mother Earth, it would seem reasonable to assume that a myth of economic
wealth which will account for the natural environment should be founded on
sound scientific frameworks which will help organizations define the carrying
capacity of the planet. Unfortunately, such scientific frameworks cannot he
found within the mechanical, Newtonian concepts that have dominated human
thought processes for the past 250 years (Harman, 1988; Mumford, 1956).
Business must turn to more holistic scientific models which can account for the
interconnectedness between organizations and the natural environment
Can Humankind
Change the
Economic Myth?
19
(Harman, 1988). Three interrelated scientific theories useful in this regard are
systems theory, Gaia theory and thermodynamics.
Systems Theory
Systems theory is one of the most powerful and integrative theories for
explaining the relationship between humankind and nature. Having emerged
during the 1920s and 1930s, it has served to provide a strong framework for
transcending the boundaries that have historically separated various scientific
and social fields (Boulding, 1956; Sheldrake, 1991).
Essentially, living systems exhibit characteristics of life: they exchange
information, matter and energy with their environments in order to maintain a
dynamic equilibrium and counteract uncertainty, destruction, etc. They are
morphogenetic in nature, meaning that they can renew, reproduce, and/or
regenerate themselves. Living systems are complex, composed of
interdependent subsystems which themselves process information, matter and
energy. They are also irreducible, meaning their survival is threatened if any of
the subsystems break down, grow out of control, etc. Living systems are
synergistic, displaying properties which cannot be anticipated by summing the
effects of the component subsystems. They develop control mechanisms which
must become more complex as environmental forces became more complex.
Finally, living systems are purposive, serving some larger role, and sometimes
purposeful, defining that larger role for themselves (Lovelock, 1979, 1988;
Sheldrake, 1991; Van Gigch, 1978).
The component subsystems of living systems exist in nested hierarchies,
each subsystem contained within a larger system (Boulding, 1956; Schumacher,
1977; Sheldrake, 1991; Van Gigch, 1978). Kenneth Boulding (1956) says that the
existence of nested living-systems hierarchies means that there are “systems of
systems” (p. 202). From this perspective, we can see that there is a hierarchy of
nested living systems associated with economic activity. Individuals form work
groups, work groups form the foundations of business organizations, and
business organizations together with their consumers represent the economic
system. The economic, political, religious, educational and social systems
together constitute societies, and these societies exist within the confines of the
supranational system called earth. Because of this supranational position, the
earth cannot be defined simply as the sum of the individuals, organizations,
economies and societies that comprise it. Rather, it is a qualitatively distinct
entity which supersedes and transcends any of its economic subsystems, thus
constituting the “system of systems” (Boulding, 1956, p. 202) in which economic
activity takes place.
Therefore the economic system must function within the biological and
physical limits of the planet. These limits are largely defined by the planet’s
morphogenetic processes, which operate on an evolutionary time-scale. The
earth can and will renew itself, as it has been doing for some 4.5 billion years. It
simply cannot accomplish this feat in human time-frames. For example, the
planet will renew the topsoil and the petroleum that humankind is so rapidly
JOCM
7,4
20
depleting in its economic activities; unfortunately, it will take hundreds of
thousands of years to accomplish this regeneration, regardless of the economic
consequences.
Gaia Theory
The basic contention of Gaia theory is that the earth is a living superorganism
which can be accurately understood only from an interdisciplinary geologicalphysiological
perspective ( Lovelock, 1979, 1988, 1991). Although livingsystems
processes such as self-regulation, homeostasis, and morphogenesis
form many of the foundations of Gaia theory, Gaia theory goes beyond systems
theory in hypothesizing that the earth is a living organism which has evolved
from purposive (and possibly purposeful) interactions between the planet’s
biological and physical processes.
With roots in the ideas of nineteenth-century scientists such as James Hutton
and H.T. Huxley (Kirchner, 1991; Lovelock, 1988, 1991), the development of
modern Gaia theory is generally attributed to two scientists – James Lovelock
and Lynn Margulis. Lovelock explores Gaia theory from a macro perspective,
studying how chemical, atmospheric and climatic processes vary as the
diversity of planetary life varies. His research shows that species diversity
holds the key to the ecological balance necessary to support life. His computer
models of “Daisyworld” demonstrate that fluctuations in the weather become
more severe as diversity declines (Lovelock, 1988). He says, “Sparse life on a
planet would be as unstable as half an animal” (Lovelock, 1991, p. 10). Margulis
examines Gaia theory from a micro perspective. Referring to herself as the
“unofficial spokesperson for the silent majority of life on earth, the microbes”
(Margulis and Hinkle, 1991, p. 11), Margulis points out that, through symbiotic
processes, the planet has become a single living organism composed of
coevolving biological and physical processes which cannot be separated in any
meaningful sense (Joseph, 1990; Margulis and Hinkle, 1991).
Although Gaia theory is often referred to by its original designation, the Gaia
hypothesis, Lovelock (1988) makes it clear that research support for the idea
has moved it well beyond the hypothetical stage. Kirchner (1991) identifies five
Gaia hypotheses, ranging from the least extreme to the most extreme:
(1) biological forces have a substantial influence over the physical world;
(2) the relationship between the earth’s biological and physical forces is one
of mutual influence;
(3) long-term stability of the earth’s physical processes is dependent on
biological processes;
(4) biological processes are teleologic, controlling the physical environment
for a purpose; and
(5) maintaining a biologically-optimal physical environment is Gaia’s
purpose.
Can Humankind
Change the
Economic Myth?
21
Kirchner (1991) points out that testing the less extreme hypotheses has been
and will continue to be fruitful, but that testing the more extreme hypotheses
will be quite difficult, if not impossible. Others point out that the scope of Gaia
theory is so vast that, like Newtonian physics and Darwinian evolution, it will
take centuries of research to explore (Kirchner, 1991). However, Lovelock (1991)
counters that evolutionary science leaves room for only one reasonable
conclusion concerning the purposive/purposeful dimensions of Gaia: “Living
organisms must regulate their planet; otherwise the ineluctable forces of
physical and chemical evolution would render it uninhabitable” (p. 10).
Rooting a scientific paradigm about the relationship between business
activity and the natural environment in Gaia theory provides a holistic
planetary perspective. Further, it makes it clear that humans’ environmental
sensitivity need not be altruistic. Although environmental debates are often
couched in terms of “business needs to clean up its act in order to help save the
planet”, Gaia theory helps us to understand that the planet can take care of
itself; it is humankind’s way of life that is threatened. Lovelock (1979) says, “It
may be that the white-hot rash of our technology will, in the end, prove
destructive for our own species, but the evidence for accepting that industrial
activities … may endanger the life of Gaia as a whole is very weak indeed” (pp.
107-08).
Thermodynamics
Living systems survive by exchanging energy, wastes and information with
their environment. This process is subject to the laws of thermodynamics – the
conservation law and the entropy law. These laws explain the dynamics of
energy transformation and waste generation in the universe (Ehrlich et al.,
1977). The conservation law says that there is a constant amount of energy in
the universe. Thus energy cannot be created or destroyed, only transformed
from one state to another. The entropy law says that, every time energy is
transformed, it will lose some of its order and usefulness. As this occurs, the
degraded energy becomes waste.
Basically, an economy functions by using knowledge and energy to convert
materials from their natural states into usable products or services for
consumption by human beings. Because of the role of energy in the economy,
the interactions among these variables are governed by thermodynamic laws.
Problems arise because energy transformation in the economy occurs at highentropy
rates as energy is used to power production, distribution, and
consumption cycles. These high-entropy rates are not in balance with the lowentropy
energy transformation rates found in nature. The predictable results of
this imbalance include the rapid resource depletion and waste generation
currently occurring on the planet (Boulding, 1966; Capra, 1983; Daly, 1991;
Georgescu-Roegen, 1971).
Several scholars have focused their attentions on the relationship between
economic activity and thermodynamics. In his classic work, The Entropy Law
JOCM
7,4
22
and the Economic Process, economist/physicist Nicholas Georgescu-Roegen
(1971) eloquently demonstrates that: “The entropy law emerges as the most
economic in nature of all natural laws” (p. 3). Economist Herman Daly (1991)
says: “To deny the relevance of the entropy law to economics is to deny the
relevance of the difference between a lump of coal and a pile of ashes” (p. 199).
Physicist Fritjof Capra (1983) points out that the dismissal of the natural
environment in classical economic models means that the thermodynamic
characteristics of the planet are unaccounted for in economic activity. He says:
“Unlimited expansion in a finite environment can lead only to disaster” (p. 213).
Theologian Thomas Berry (1988) says: “In the natural world there exists an
amazing richness … There is a minimum of entropy … The difficulty comes
when the industrial mode of our economy disrupts the natural processes … In
such a situation the productivity of the natural world and its life systems is
diminished” (p. 71).
However, the news does not have to be so bleak. Although, eventually, life on
the planet will succumb to entropy as the sun cools and dies, the timing of the
process is by no means a certainty (Georgescu-Roegen, 1971). It does not have to
happen in the next century, as many predict, if humankind will focus its efforts
on the one variable in the formula of economic activity which defies the entropic
processes of the universe – human knowledge. Systems which stress the need
for relevant education and encourage the continuous, free expansion of
knowledge and information can literally create order out of chaos, beauty out of
degradation (Boulding, 1966; Ornstein and Ehrlich, 1990; Wheatley, 1992). Thus
thermodynamics teaches that energy transformation is a linear process which
produces disorder and wastes, but it also teaches that humankind can use its
ever-expanding knowledge to intervene effectively in this process, either
speeding it up or slowing it down.
Together, systems theory, Gaia theory and thermodynamics present a
framework for viewing the earth as a living, holistic entity with a myriad
interconnected subsystems that must function within the evolutionary time
scales of the ecosystem. These theories make it clear that humans must find
ways to balance the economic subsystem with the earth’s evolutionary entropic
and morphogenetic processes, or the planet will use its own mechanisms to
restore that balance. Therefore these three theories represent an overarching
scientific paradigm for defining and operating within the carrying capacity of
the planet, providing a solid theoretical base for such concepts as industrial
ecosystem, industrial ecology, total environmental quality, and industrial
metabolism (Ayres, 1989; Frosch, 1992; Frosch and Gallopoulos, 1989; Sharfman
and Ellington, 1993). In other words, they help to define “what is enough”.
The Economics Paradigm
Like all disciplines, traditional economics operates on simplifying assumptions.
Three of these assumptions are:
Can Humankind
Change the
Economic Myth?
23
(1) the economy can grow forever;
(2) the natural resources and energy necessary for economic activity will
always be there; and
(3) individual self-interest provides the best mechanism for the fair
allocation of resources (Stead and Stead, 1992).
These three assumptions are possible in current economic thought because
traditional economic theory considers the economic system to be a closed
circular-flow of goods and services between business organizations and
households which is virtually independent of the planet where these activities
take place.
Yet the previously described scientific theories demonstrate that the
economic subsystem can survive only so long as it operates within the entropic
and morphogenetic limits of the earth. Factors considered external to the closed
circular-flow economic system, such as the value of resources in nature, the
aesthetic value of the earth, and the values of the greater communities and
societies where economic activities take place, will have to emerge as legitimate
economic variables (Daly, 1977, 1991; Daly and Cobb, 1989; Etzioni, 1988, 1993;
Henderson, 1991; Schumacher, 1973). Otherwise, humankind faces reduced
natural resources and beauty, the potential for violence born of greed and envy,
and meaningless work for many citizens (Schumacher, 1973). Two related
theories which open the economic system to the greater social and ecological
systems are steady-state economics and communitarianism.
Steady-State Economics
Herman Daly argues in Steady-State Economics (1977, 1991) that the economy
is a subsystem of the larger social system and ecosystem powered and
maintained by throughputs of energy and materials from the environment. He
says:
Studying economics in terms of the circular flow without considering the throughput of
energy and resources is like studying physiology in terms of the circulatory system without
ever mentioning the digestive tract (Daly, 1991, p. 196).
As mentioned above, both Daly (1977, 1991) and Georgescu-Roegen (1971)
implore that, if economic theory were rooted in the entropy law, then businesses
would recognize that unlimited economic growth on a finite planet is physically
impossible.
Since the throughput of matter and energy is ignored in current economic
theory, the issue of the optimum scale of economic activity as it relates to the
earth’s carrying capacity is never considered (Daly, 1991; Daly and Cobb, 1989).
Thus economics must be opened to entropic throughput; this means the
unlimited growth assumption must be replaced by the assumption of
“enoughness” (Daly, 1977, 1991; Schumacher, 1973). Based on this assumption,
Daly (1977, 1991) proposes a sustainable, steady-state economy which exists as
JOCM
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