[RC] The Value of Systems Thinking

[Avesland at aol.com]

The Value of  Systems Thinking
                                    By:     Billy  Rojas
 
America's foreign debt now amounts to 25%  of Gross Domestic Product.
This stands in stark contrast to the net  income non-debt performances of
other advanced industrial economies such  as Germany. While we can 
argue that the American system is superior  to the economies of other
nations with a certain amount of  justification, we can no longer make a
case based upon sustainability. We cannot  afford to spend more than we 
earn, a policy that is only feasible for  short term emergencies. But huge
trade imbalances have been intrinsic to  the US economy now for over
30 years. And neither Democrats nor  Republicans show any willingness
to correct the problem.
 
This is pointed out in an article by  William Greider published in the July 
20,
2005 issue of the Portland Oregonian newspaper.
 
Greider says that free trade ideology is  dysfunctional; there is no way to
disagree with his conclusion. We are  giving away the store, piecemeal.
We have given away so much now that  ownership could pass to others
in not too many years. If this sounds  alarmist perhaps we can take
comfort in the fact that there seems to be  no immediate danger. No-one
suggests that a crisis will happen next  year or even in the next 5 years.
But there is no doubt at all that one will  happen in not too  many years
if we continue to accumulate foreign debt  at astronomical rates.
 
We are deceived by rhetorical flourishes.  Supposedly the global market
is a "free trade" system. Actually, noted  Greider, it is a  system of deals
and agreements; the global economy is a  managed trade regime. There
has never been a free trade market in the  history of economics, moreover,
because no-one wants any such thing. Far  too insecure and unpredictable.
Far better to create systems that serve  national or multinational interests.
Far better, in other words, to rig the  market. And far better for politicians
to rhapsodize about "free markets" than to  admit the truth.
 
American economic policy is irrational.  Nothing -or damned little- is done
to stop job losses overseas. Nothing is  done to slow the spread of
outsourcing to foreign nations. And more  and more companies ship
their manufacturing facilities to  countries like Mexico, China. and Malaysia.
 
What this does is to exert terrific  downward pressures on wages in the 
United States.And no Administration in  memory has done anything at all
about this situation. Domestic  consequences of a grossly mismanaged
economy simply are not taken into account.  Why not ? Because of 
two factors :
 
(1) The "True Believer"  Syndrome
When cold, hard facts conflict with a  deeply held ideology the truth
is denied in order to sustain the fiction  that the ideology is valid. In 
this case
the problem is free trade ideology   -with the complicating factor of
libertarian cheerleading for laissez faire  politics as well as economics.
People may not vote for the Libertarian  Party but they may believe in
at least some of libertarian principles as  if they were logically sound.
However, said Greider, there is no denying  that free trade ideology is
utopian. It describes an economic world  that has never existed and can 
never exist in  reality.  But  this illusion has strong supporters since
it justifies bottom  line thinking  in  major corporations. "All is well," is 
the
theme that characterizes this mindset. And  all is well no matter how badly
the situation may become. Free trade  ideology is a system of self delusion.
 
(2) Big Money. Candidates do not get  elected without substantial amounts
of cash. This means , for the most part,  money from business interests. And
businessmen and women have a vested  interest in the current (non-) system.
It rationalizes sending production  overseas, it offers a justification for 
out-
sourcing, and it allows layoffs and  payroll shrinkage. The result is that
American multinationals do become more  profitable. That the country
is being brought to its knees is not a  concern.
 
Where do we turn for a way out of the  impasse ? There is no easy solution
to this matrix of problems, each connected  to another. However, there may
at least be an available insight that  permits us to look for a way out.
 
Reference is to a theory of Ernest  Prabhakar to the effect that it is not
necessary to conceive of economic  motivation as intrinsically selfish.
 
To be sure, enlightened self interest will  always be part of any economic
system. For that matter unenlightened self interest may be more pervasive.
Greed will always operate  at some  level. But we do not need to accept
the traditional wisdom derived from Adam  Smith that base motives are the
sum and substance of  economics.
 
In other words, laissez faire economics  assumes the worst about human nature
and as a consequence it gets exactly  that.  And our market economy has a
laissez faire foundation. This is hardly  debatable.
 
Nor is it arguable that laissez faire  breeds "morality free" economics. 
Ethical
values are an "add on." Perhaps they serve  a useful purpose for the sake of
public relations , but otherwise they are  a luxury. The more morality in the
system the less profitable it  is.
 
But can we have a system of economics in  which morality is intrinsic to the
market ? The jury will be out on this  question for the indefinite future but,
because of . Prabhakar's  vision we  can at least see the possibility.
 
In his writings for RadicalCentrism.org he  makes a number of points worth
citing here . These statements are not  direct quotes but may express
his meaning in more approachable ways  than his usual theoretical constructs :
 
For value to exist in any product or  service it must be created. Therefore
the prime motivator in business is the  creative impulse. This can take 
innumerable forms, form the most noble to  the most crass, but in all
cases there is a desire to "make something  out of nothing," so to speak.
It all starts with an idea. Value is then  created from that idea.
 
Marketing is the next step in the process.  A product  -it can also be a
service, but for the sake of simplicity  let us only use the example of 
products- must be recognized as having  value. Thus a market needs to 
be identified or created. But is there  ever such a process as merely
identifying a market ? Unlikely, except  for established goods, an 
observation that essentially begs the  question. In other words, all
new markets must also be  created.
 
A market comes to exist when some people  create value for others.
That is, a business creates value for  potential customers and the
customers , through purchases,  provide value for the business. Yet
simple monetary transaction is not the sum  and substance of the
relationship. Products change lives.  Profits also change lives. 
Therefore both the business an its  customers create opportunities
for each other. With opportunities may go  problems, however.
Indeed, we can anticipate some kinds of problems no matter
how successful a product may become. We  know this because
of the implications of systems thinking.  Introduce any change into a
system and you generate imbalances, hence,  new problems. Thus
marketing implies mutual responsibilities  on the part of both
purchasers and producers.
 
Customers . for instance, are always  testing the worth of products.
They do so by comparison, sometimes  directly, sometimes by means
of information sources like Consumer  Reports.
 
At any rate, business seeks  -or should seek-  non-zero sum  "games" in
which win / win outcomes are normative. 
 
A successful product makes use of both what is most noble in  human
nature and what is egocentric, selfish, and even worse. The point that  is
made, indirectly but made nonetheless, is that we are not limited to  our
crass interests. We can and do make worthwhile use of our purchases,
uses that benefit others as well as ourselves.
 
What matters economically, said Prabhakar, here quoting directly from  an
e-mail dated July 19, 2005, is  "whether I am creating value for  others such
that I am rewarded." That is, business is reciprocal by its nature. It has  
the
interests of the community it serves at heart.. But this quality of  business
is obscured, perhaps hopelessly, by laissez faire ideology which  makes
selfish motivation the sine qua non of economics.
 
The proof of Prabhakar's contention is that companies which put value
creation  first tend to thrive. They fabricate products that, to use  this
one example, are "built to last." Consumers recognize the value in  such
goods and reward the business with their purchases. Companies that
put profits ahead of other considerations and that are stingy with 
creating value eventually, if not in short order, suffer the  consequences.
People expect value for their money.
 
Barnathy said something similar in his paper about Systems Inquiry.  There
is no evolution , hence no survival, without creativity. We must create  our
future  -one day at a time-  by means of ingenuity and forever  seeking to
stretch our horizons. Creative activity is more than adaptation,  moreover,
it is rewarding in its own right. It brings joy into our lives.
 
All of this said, all of these truths expressed, we still are FAR from the  
goal
of reconceptualizing economics. But here is an Archimedean point with 
which to start.
 
Archimedes' lever is sales, a view that Pabhakar and myself share  explicitly.
As Prabhakar put it, to bring a product into being you must sell it at  every
level in a business organization. Think of it as a story. This "story,"  said
Prabhakar on July 20, "has to be sold across the entire value chain :
Engineering, operations, marketing, sales, management, etc." So it  must
be with respect to any new economic theory. We cannot expect that a
new concept will sell itself. There is work to be done.
 
Can this fresh insight eventually be made use of to solve the kinds  of
problems that Greider talked about ?
 
The possibility would exist if we had better economic indicators. But  as
things are innumerable costs are hidden from view because of laissez
faire ideology. The despoilation of nature, for instance, is regarded
as essentially free, a costless process even when entire mountain  ranges
are destroyed to extract cheap coal, or when topsoil to a depth  of
about 12 feet has been eroded from Iowa farmland in the past hundred 
years. In other words we need a system of economic accounting that
gives us true costs of doing business. Such a system should also  calculate
the social costs of business practices. These may be either positive  or
negative, with no visible effect on the bottom line. We would be much
better off if we knew, even in rough approximation, just where the
overall economic system is gaining or losing in terms of society at  large.
 
That is for the future, hopefully the near future, but at least we can  begin
to rethink the problem now, in a new way, with realistic expectation  that
we can re-invent the economic system before it is too late.
 
-------------- next part --------------
An HTML attachment was scrubbed...
URL: /pipermail/centroids_radicalcentrism.com/attachments/20050721/8857a9e5/attachment-0001.html