Greening the Knowledge Economy: A Critique of Neoliberalism

I was convinced from the outset that the global system based on commodity production could not perpetuate itself indefinitely. Since the end of Fordism and the beginning of the information revolution, the system has been working with growing effectiveness towards the destruction of the foundations of its survival.
-Andre Gorz, 1983, “The Roads to Paradise”

What this age demands more than ever is an understanding not simply of systems in natural, social and geopolitical environments and their interrelations, but also the logic of large-scale system-events, their emergence and collapse, and their impacts for humanity. In the economic and political realm, as social scientists, we need to know more about the logic of large-scale events governing system failures, such as the collapse of the Soviet system in 1989 and the collapse of the neoliberal global financial system in 2008. The social sciences have not been good at predicting or analyzing these kinds of events, which demand a better interface between social and natural sciences and their mediation and understanding through new mathematical and computational theories of complex systems, of complexity and chaos, and of the difficulties with formal mathematical modeling and simulation. Complexity theory is a broad term used for a research approach to problems in diverse disciplines (physics, chemistry, molecular biology, meteorology, economics, sociology, psychology and neuroscience) based on nonlinear, nondeterministic systems evolution. Cybernetic, catastrophe, chaos and complexity are forms of thinking that historically have attempted to theorize these phenomena.

I try to demonstrate the need for understanding the importance of philosophical thinking in order to build a case for understanding the concept of environment as a suitable perspective in order to trace the complex ecologies comprising knowledge societies and economies. The argument is made that the most sustainable and “productive” interface in advanced postindustrial societies in the 21st century will be that between the knowledge economy and the “green economy” – what I refer to as the “greening of the knowledge economy.”

In his address on the US economy at Georgetown University in April of 2009, President Obama pronounced five pillars of the new foundations for recovering the American dream: new rules for Wall Street and greater regulation of finance capitalism with less emphasis on manipulation of numbers and more emphasis on making; investment in education at all levels and the preparation of students for the 21st century; the promotion and investment in clean-green energy technologies designed to utilize renewable resources and promote energy efficiencies while reducing the dependency on Middle East oil; reform of the health care system (Medicare, Medicaid) to reduce inflated costs and providing a system of universal provision; reduction of the deficit and creating a sustainable economic future for America.

For Obama’s administration, these five pillars are the basis of long-term economic sustainability, signaling a deliberate move away from the speculative bubble of an unregulated neoliberal finance capitalism which led to the worst global recession since the end of World War II and a historic number of foreclosures and job losses.

Had these policy ideas been honored and acted upon, they may have actually promoted sustainability and greater democratization. The big problem is that the pronouncements of the Obama administration (the five pillars) do not seem to be an actual policy statement powered by an intention to act. The Obama administration has enabled the continuation of casino capitalism and enacted “reforms” that are barely cosmetic in nature, with Obama continuing to fund his candidacy from the financial sector. His treasury secretary has steadfastly avoided regulating; his attorney general avoided prosecuting the most egregious and criminal-on-its-face behavior by the banks. In the area of the environment, fracking and deepwater oil exploration continue apace with administration complicity.

The so-called “financialization of capitalism” led to the rise of speculative finance culture which benefited hedge fund and Wall Street financiers at the expense of the rest of the population, causing credit and finance imbalances and system crises. The spectacular growth of finance capital based itself upon the selling of financial derivatives, credit-default swaps and securitized risk products. Managed hedge funds that were packaged and sold on resulted in overvalued assets and a labyrinthine maze where it was no longer possible to fathom who owned the risk any longer. This new speculative finance culture collapsed distinctions between commercial and investment banking (beginning with the rescinding of the 1933 Glass-Steagall Act in 1994) and gave way to excessive profits, massive fraud and a crisis of markets and financial institutions. It also imperiled the architecture and ecology of the whole global economy – leading George Soros to call it the “era of the destruction of capital.” Some $30 trillion was wiped off equity assets; a further $30 trillion was wiped off the books through lost production, the subprime mortgage market and bailout attempts to ring-fence other toxic assets. Together, the financial crisis, global climate change and broader ecological challenges demand a new model of how America and the world pursue economic prosperity with a greater emphasis on long-term sustainability, state-centric policies and greater regulation aimed at reinvestment in public infrastructure as well as education, health and renewable energy forms.

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The neoliberal era had encouraged a form of socioeconomic evolution of the wage-laboring “man” of industrial capitalism into the global, postindustrial “smart investor” with a balanced investment portfolio. The Obama administration promised to place the emphasis once again on an economic identity based on “making” rather than “speculating,” on diligence, hard work and community rebuilding rather than becoming a landlord with a portfolio of investment properties, able to retire early and live off investment returns. Again, this policy idea has not been achieved as the backslide to neoliberalism in the finance sector has encouraged large-scale fraud and historic levels of profit for Wall Street banks. For Middle America and for the UK middle class – the so-called Anglo-American model of capitalism – the dream of easy returns from smart investment and continuous monitoring of stock markets has evaporated. By contrast, the ecological agenda emphasizes an age of renewed collective responsibility based on ecological, market and social sustainability. The efficient market thesis has been replaced by an acknowledgement of market failure essential to both ecological economics and to the “sign” economy (or knowledge economy), which calls for symbolic analysis and manipulation and is often touted as being based on “clean” information technologies.

The postmodern critique of neoliberalism is not merely a negative account of neoclassical assumptions or simply an updating of economics according to the debates of the 1980s and after. It also constitutes a positive moment that provides important directions for the future. I have called these directions “greening the knowledge economy,” by which I mean a constellation after the “second industrial divide” of a synergistic relation between two mega-trends, imperatives and forces that, acting upon one another, become a significant trajectory for postindustrial economies. The tradition of economics of information and knowledge now is a well-documented field that coalesces with other disciplines to define the discourse of the knowledge economy (Peters and Besley, 2006). This discourse both predates and postdates neoliberalism, although it has also been given a neoliberal reading by world policy agencies, such as the World Bank, based on a version of human capital theory with investment in key competencies and neoliberal restructuring of education based on principles of deregulation, privatization and the introduction of student loans.

The neoliberal reading is also sometimes associated with the growth of sign economies and financialization of the global economy.[1] Yet the neoliberal reading is only one reading, and it does not analyze or identify the notion of knowledge as a global public good that demands government intervention designed to protect and enhance the public domain. The neoliberal reading does not take into account or try to explain the fundamental differences between the traditional industrial economy and the knowledge economy, except by reference to pure rationality assumptions that do not sit well or apply within networked environments or merging distributive knowledge and learning ecologies. In these “ecological” environments, none of the elements of homo economicus focusing on individuality, rationality and self-interest obviously apply.

The neoliberal reading does not understand how knowledge or information as commodities behave differently from other commodities. Neither does it recognize the parallel discourse of the “knowledge society” which begins in the sociological literature on postindustrialism in the early 1960s that is often directed at concerns about new forms of stratification, universal access to knowledge, and the role and significance of knowledge workers and institutions. Third, the neoliberal reading is stuck temporally in the 1990s and does not take account of the movement toward various forms of the open economy signified in the learning economy, the open science economy (Peters, 2009) or even the creative economy (Peters et al, 2009, UN 2010).

Perhaps most importantly, the neoliberal reading does not recognize the way in which conceptions of the green economy now offer new strategic and policy directions in ways that reinforce and interact dynamically with the knowledge economy. Green capitalism based on green energy policies is in part a response to the problem of global climate change, but also, I would argue, an ecological understanding of the global financial crisis and the undesirable network effects of financialization of the global economy, and opens the possibility for a new wave of growth based on clean-green technologies for a low-carbon economy and forms of economic sustainability based on renewable resources.

Brian Milani, in his “Designing the Green Economy: The Postindustrial Alternative to Corporate Globalization” (2000) argues that the ecological economy is an authentic postindustrialism based on principles of regeneration and sustainability aimed at quality of life, community rebuilding and environmental renewal. The green economy is based on the recognition of the ecological principles of self-organization, protection of diversity and the enhancement of network flows. Neoclassical economics based on rationalistic and reductionist assumptions does not have the conceptual or philosophical resources to recognize the significance of natural assets, their relational contexts, and their renewable and dynamic environments that presupposed elements of the ecosystem: throughput, distributive development, feedback and scale. Founded on the work of Kenneth E. Boulding, Nicholas Georgescu-Roegen’s bioeconomics and Hermann Daly, ecological economics addresses the interdependence of human economies and natural ecosystems, and has strong connections with both green economics and ecology with a focus on networks.

Ecopolitics must come to terms with the scramble for resources that increasingly dominates the competitive motivations and long-range resource planning of the major industrial world powers. There are a myriad of new threats to the environment that have been successfully spelled out by eco-philosophers and that have already begun to impact upon the world in all their facets. First, there is the depletion of non-renewable resources – in particular, oil, gas, timber and minerals. Second, and in related fashion, is the crisis of energy itself, upon which the rapidly industrializing countries and the developed world depend. Third, the rise of China and India, with their prodigious appetites, which will match the United States within a few decades in rapacious demand for more of everything that triggers resource scrambles and the heavy investment in resource-rich regions such as Africa. Fourth, global climate change will have the greatest impact upon the world’s poorest countries, multiplying the risk of conflict and resource wars. With these trends and possible scenarios, only a better understanding of the environment can save us and the planet. A better understanding of the earth’s environmental system is essential if scientists working in concert with communities, ecology groups across the board, green politicians, policymakers and business leaders are to promote green exchange and to ascertain whether green capitalism strategies that aim at long-term sustainability are possible.

The energy crisis may be a blessing in disguise for the United States. Jeremy Rifkin (2002) envisions a new economy powered by hydrogen that will fundamentally change the nature of our market, political and social institutions as we approach the end of the fossil-fuel era, with inescapable consequences for industrial society. New hydrogen fuel-cells are now being pioneered – which, together with the design principles of smart information technologies, can provide new distributed forms of energy use. While Thomas Friedman (2008) has also argued the crisis can lead to reinvestment in infrastructure and alternative energy sources in the cause of nation-building, his work and intentions have been called into question.[2] Education has a fundamental role to play in the new energy economy, both in terms of changing worldviews and the promotion of a green economy, and also in terms of research and development’s contribution to energy efficiency, battery storage and new forms of renewable energy.

At this stage of the world’s development, with space travel, planetary exploration, satellite communications systems in space and scientific probing of the beginnings of the universe, the concept of environment itself needs radical extension to the solar system and universe. Increasingly, although it is still in the early days, the earth needs to be thought of not only as Gaia – as an organic living system – but also as part of a larger, more broadly embracing environmental interstellar system. The notion that the environment is a dynamic concept, of which we are a part, is the central understanding of a greening of the market. Sustainable prosperity becomes possible with a shift to knowledge and creative economies based on services and clean, efficient technologies, although the ecological society depends on a broad consensus over questions regarding the nature of the market and the economic system: What are the conflicts between the market and ecological economics? (Daly & Farley, 2004) Does sustainability imply “limits,” and to what extent? (Greenwood, 2007) Can Green Capitalism 2.0 solve the looming biocrisis within the constraints of a green mixed economy? “Natural capital,” the self-renewing ecosystem on which all wealth depends, is the basis of the green economy – capitalist or socialist – and we need to develop democratic and participatory means by which to encourage and pursue it. This is one of the great tasks facing education at all levels in the 21st century.

References

Baudrillard, Jean (1981) “For a Critique of the Political Economy of the Sign.” New York, Telos.

Friedman, Thomas (2008), “Hot, Flat and Crowded: Why We Need a Green Revolution – and How It Can Renew America.” London: Farrar, Straus and Giroux.

Greenwood, Dan (2007), “The Halfway House: Democracy, Complexity, and the Limits to Markets in Green Political Economy,” Environmental Politics 16(1): 73–91.

Hermann E. Daly, and Joshua Farley (2004), “Ecological Economics: Principles and Applications.” New York: Island Press.

Milani, Brian (2000) “Designing the Green Economy: The Postindustrial Alternative to Corporate Globalization.” Boulder, Rowman & Littlefield.

Peters, M. A. (2009) “Open Education and Open Science Economy.” In “Yearbook of the National Society for the Study of Education,” Volume 108, Issue 2, pages 203–225.

Peters, M. A., & Besley, Tina (A.C.) (2006), “Building Knowledge Cultures: Education and Development in the Age of Knowledge Capitalism.” Boulder, NY: Lanham; Oxford: Rowman and Littlefield.

Peters, M.A., Murphy, P. & Marginson, S. (2009) “Creativity and the Global Knowledge Economy.” New York, Peter Lang.

Rifkin, Jeremy (2002) “Hydrogen Economy. The Creation of the World-Wide Energy Web and the Redistribution of Power on Earth.” New York, Putnam.

United Nations (2010) “The Creative Economy Report.”

Endnotes

1. The notion of the sign economy goes back to Baudrillard’s (1981) For a Critique of the Political Economy of the Sign which among other things looks at sign exchange and sumptuary value at the art auction. More recently, Scott Lash and John Urry (1994) wrote Economies of Signs and Space where they analyze “flows” through time and space and argue that today’s economies are increasingly ones of signs – information, symbols, images, desire – and of space, where reflexivity is necessary for understanding new class relationships.

2. See the interview with Belén Fernández and Aaron Leonard “Revealed: Corporation-Courting Imperialist Thomas Friedman” in Truthout.