The Great Depression of the 1930s and the failure to resolve it with the paradigms of classical economics led economist John Maynard Keynes (1883-1946) to develop the Keynesian model. This model asserts that to assure economic growth, there must be active government intervention in the financial markets.
Eight decades later, the Keynesian model has proven itself a failure. It has not resolved today’s global economic crisis, which began as a financial crisis and evolved into a worldwide crisis of the real economy, reflected in unemployment, salary cuts, and social disorders. The failure of the old, familiar financial models led Nobel Prize Laureate, Joseph Stiglitz, to declare, “In a way, not only there is a crisis in our economy, there ought to be a crisis in economics.” [30]
However, for a new economic paradigm to succeed, it must take into account the new conditions that have arisen in human society during the 21st century. The world has become a global village in which interdependence and mutual influence among its parts are growing. We have become a global-integral system, comprised of interconnected elements, obliged to be tied to one another, thus affecting one another and affecting the future generations—for the most part, adversely.
Thus, according to a report [31] by the Sustainable Europe Research Institute (SERI), “Humans today extract and use around 50% more natural resources than only 30 years ago, at about 60 billion tons of raw materials a year. ...Given current trends of growth, our extraction of natural resources could increase to 100 billion tons by 2030.”
Another adverse effect of globalization is a concentration of power and wealth. According to a press release by Credit Suisse [32], “Less than 1% of the world’s adult population ... own 38.5% of global household wealth.” This taps into the core arguments of the Occupy Movement that has emerged in the Fall of 2011 in numerous cities across the U.S. and around the world.
Much has been said about the repercussions of globalization. Thomas Friedman, author of the World Is Flat: A brief history of the twenty-first century, introduced in his October 11, 2011 The New York Times column [33] two theories that represent both ends of the debate over the impact of globalization. The first theory is that of Australian environmentalist, Paul Gilding, author of The Great Disruption. Gilding said, “I look at the world as an integrated system, so I don’t see these protests, or the debt crisis, or inequality, or the economy, or the climate going weird, in isolation—I see our system in the painful process of breaking down,” which is what he means by “The Great Disruption,” said Gilding. “Our system of economic growth, of ineffective democracy, of overloading planet earth—our system—is eating itself alive.”
An opposing theory is that of John Hagel III, who sees the current situation as the beginning of a “big shift,” stemming from a combination of globalization and the Information Revolution. According to Hagel, today is the beginning of a time of thriving for humanity, albeit today we feel it as pressing, due to our continued use of inefficient institutions and practices.
At the end of the day, according to Hagel, we are in the midst of a vast global flow of ideas, innovations, and opportunities for profit through collaboration. Hagel believes that the great task ahead “…calls on us to learn faster by working together and to pull out of ourselves more of our true potential, both individually and collectively.” Whether we lean toward one theory or the other, both show us that the crisis has arrived just in time to be a wake-up call.
Indeed, we are called upon to adjust the economic and social systems to the requirements of today’s global-integral system. However, to realize our potential, we need to make a fundamental shift in the thought processes and financial conduct that led us into the crisis. Just as the Great Depression of the 1930s led Keynes to form a more suitable economic paradigm for his era, we must change our current paradigms and adapt them to the reality of a global and integral world if we wish to emerge stronger from the current crisis. The crisis enables us to see that in today’s world, the old paradigms have become dysfunctional, and the best example is the capitalistic paradigm.