Social Justice
“The West is being challenged to deliver not just growth, but inclusive growth, which, most critically, involves greater social justice.”
Mohamed A. El-Erian,
CEO of PIMCO, and author of When Markets Collide [79]
The global social unrest of 2011 presented a serious challenge. On the one hand, the demand to have a decent living standard for all is understandable. On the other hand, governments cannot break their budgets if they are to maintain functional economies. In days when virtually the entire world is in a deep economic crisis whose end is nowhere in sight, when many countries are in danger of imminent insolvency, it is irresponsible to increase budgets, which are already in deep deficit. Yet, people are demanding social justice, and rightly so. So what should governments do?
First, it is important to keep in mind that, as Einstein said, “The significant problems we face cannot be solved at the same level of thinking that was used when we created them.” [80]
Boaz Schwartz, CEO of the Deutsche Bank delegation in Israel, said in a special panel summoned by the Israeli financial newspaper, Globes, “We mustn’t underestimate the intense social emotions we are seeing. These emotions will have vast repercussions in the coming years. We must prepare for a world of social concepts, of equal sharing of revenue, and different pricing... Countries that will fail to adjust themselves accordingly will find themselves in a tough spot; their economies will suffer.” [81]
We should also keep in mind that the economy reflects the nature of our relations with each other, which is then “translated” into monetary relations. The division of resources in society and the socioeconomic ideology at its foundation derive from the values of society and from the relations among its members. This is why economy is not a law of Nature or a hard science such as physics or chemistry.
This is why Joseph Stiglitz, winner of the Nobel Prize in economy, said at the beginning of his lecture at the 2011 Lindau Nobel Laureate Meeting in Economic Sciences: “The test of any science is prediction. And if you can’t predict something as important as a global financial crisis or the magnitude of the one that we are going through, obviously something’s wrong with your model.” [82]
Likewise, the governor of the Bank of Israel and former first deputy director of the International Monetary Fund (IMF), Stanley Fischer, said in a video interview with CNBC’s Senior Economics Reporter, Steve Liesman, “We’re in very difficult territory. This is not where the textbooks five years ago would have expected us to be. ...You're operating under extreme conditions and the textbooks aren't quite sure what to do in those cases.” [83]
When we move toward the social, communicational, and educational changes described in the previous chapter, we will be able to construct a new, inclusive concept of economics, one that is founded on social concern and is in sync with the laws of the new world. The decision-making processes and their execution, the structure of the socioeconomic system, the links between decision-makers and those who carry out those decisions will be done with a sense of mutual guarantee.
In other words, the right order of operations to guarantee our sustainable well-being begins with an explanation of the need for mutual guarantee, for education for living in the new world. The social and economic systems will be redefined and reconstructed based on that need. In the meantime, until those definitions are provided and the reconstruction executed, we should conduct round-table type discussions, where all participants are of equal status, and together agree on the type of assistance those who are less affluent require for basic sustenance.
We will elaborate on how to achieve that agreement through round-table discussions in a moment, but first it is important to note that such a division of funds will not be sufficient in and of itself for securing our well-being. The concern for others’ well-being dictates that we endow all people with a minimal ability to conduct respectable living. These funds, along with training in personal finance (home economics), will enable us to proceed with society’s healing process.
[79] Mohamed A. El-Erian, “The Anatomy of Global Economic Uncertainty,” Project Syndicate (November 18, 2011), http://www.project-syndicate.org/commentary/elerian11/English
[80] Albert Einstein, Alice Calaprice and Freeman Dyson, The Ultimate Quotable Einstein (USA, Princeton University Press, October 11, 2010), 476
[81] Efrat Peretz, “We Must Prepare for a World of Equal Revenue Sharing,” trans. Chaim Ratz, Globes (October 18, 2011), http://www.globes.co.il/news/article.aspx?QUID=1057,U1319062129813&did=1000691044
[82] Dr. Joseph E. Stiglitz, “Imagining an Economics that Works: Crisis, Contagion and the Need for a New Paradigm,” The New Palgrave Dictionary of Economics Online (min 1:36), http://www.dictionaryofeconomics.com/resources/news_lindau_meeting
[83] “Fischer on Fed's Toolbox,” CNBC Video (August 25, 2011)