EUROPEAN PAPERS ON THE NEW WELFARE

From Limits to Growth to Limitless Growth

6. Managing Uncertainty & Human Security
But the subject that has most deeply occupied Giarini and constitutes his most original and potentially important contribution is one which by its very nature defies clear delineation and measurement – the problem of uncertainty. The most tangible result of the publication of The Limits to Growth was to challenge projections regarding the future progress of industrial economy. It created doubt and over subsequent decades that doubt has continued to grow, further fueled by every subsequent crisis. His experience managing big-budget industrial research projects at Battelle had taught him the importance of managing uncertainty. His op­­erating the world’s largest insurance industry think tank taught him the difficulty of costing and pricing future events. This led him to the perception that uncertainty was central to all economic activity, indeed to life itself. After all, when we speak of human welfare and well-being, we really refer to human security – personal health and safety, assured access to basic needs, protection of our basic rights and property, employment opportunities, job security and retirement. The fundamental objective of every economic system is to provide security to every citizen.
But he also perceived that eliminating uncertainty represented only one side of the coin. For at the same time, insecurity and uncertainty are sources of human creativity and unbound­ed potential for wealth creation. His writings bring out both the creative and de­structive aspects of uncertainty. Uncertainty is something we seek to minimise insecurity. Uncertainty is the ultimate, ever-present reality of social life from which new economic and business potentials continuously emerge. Uncertainty is an indefinable something out of which both problems and opportunities, crises and creativity emerge. People tend to perceive uncertainty as a risk, rarely as an opportunity. Uncertainty spurred the invention of limited liability corporations, without which the remarkable economic achievements of the past two centuries would have been unthinkable. Uncertainty brought down the international financial markets and wrought the catastrophe at Fukushima.

6.1 Insuring Security
Uncertainty also has given birth to the $4+ trillion global insurance industry. But the positive contribution of insurance to human security and human welfare is incalculably greater. Insurance is an ingenious mechanism that converts uncertainty into a positive business opportunity and a precious source of human security. Insurance makes possible the entire modern health care infrastructure of the Western world, without which a bare few could afford the protection and expertise it provides now to hundreds of millions. As a result, health care is one of the world’s fastest growing industries, accounting for more than ten percent of the economy of most developed nations. A 2009 report from the US President’s Council of Economic Advisors states that extending medical insurance to uninsured Americans would boost net economic welfare by $100 billion annually. By 2007, health care insurance in Korea reached 96% of the population, whereas in India it hovers around 5 percent today, so the untapped scope is enormous. Life insurance penetration is still less than ten percent even in developed countries, but with five percent penetration India has shown that even countries with far lower national income can achieve disproportionately higher coverage.
The contribution of all types of insurance to the growth and sustenance of real estate, transportation, financial services, personal income security and countless other activities may be less perceptible but is of great significance. This accounts for the strong correlation between development of the insurance industry and overall rates of economic growth in both developed and developing countries worldwide. Over the past decade, China, which is a top ranked country in terms of both agricultural production and farm output, has put in place the world’s second largest crop insurance program to further boost crop production.
There are limits to insurability of risks that can be covered commercially by the private sector, where only the entire society through government can act effectively, but the underlying principle remains valid. Collective action to promote individual security has immense potential for raising welfare and well-being by creating complementarity between public and private risk coverage. Thus, the principle of insurance can very beneficially be extended to life-long education, employment, entrepreneurship, self-employment and other activities that can open up unparalleled vistas for wholesome growth and human welfare. Low levels of education are strongly correlated with low earnings and high levels of unemployment globally. A program that ensures better earning employment opportunities for those who complete specific types and levels of higher education would be a powerful means to close the skill gap, raise productive capacity and reduce unemployment.

6.2 Transforming Contradictions into Complements
Uncertainty and security are not contradictory or mutually exclusive concepts. They are really complements and the interaction between them represents a virtually unlimited source for wealth creation. Humanity creates structured arrangements to enhance security. In doing so, it imposes limits on the infinite possibilities of nature. The very creation of these structures imposes limits on what is possible, including limits on original thinking, creativity, invention, innovation and freedom of action. It defines specific roles, rules, laws, hierarchical structures, ways of life in order to create a field of certainty and security. In the process it tends to mistake the structured field for the whole reality, to focus so intently on the limited field that it loses sight of the limitless possibilities and the progressive evolu­tionary process that is unfolding. Society develops when it gives up this defensive posture of self-preservation with relation to the unknown and uncertain and explores how best that unchartered territory can be tapped and harnessed for its advancement. Adventurers risked their lives in search of sea routes to India. Pioneers gave up the security of the Old World for freedom from the stifling limitations of religious and social structure to found a New World. Entrepreneurs risk their capital to prove the profitability of new types of businesses. Inventors seek to transcend and improve upon the limits of nature by growing their own food, creating new objects, substances and energy sources. Original thinkers challenge the limits of established dogma and belief, venturing into the unknown in quest of wider and greater truth. Humanity’s entire historical experience confirms that present limits – limits in knowledge, power and accomplishment – inevitably give way before wider potentials. Uncertainty and the non-monetarised wider society, of which monetary economic activity constitutes a small portion, are the creative and unlimited source of humanity’s future evolution.

6.3 Transcending the Dichotomy
It is at this point the problem of wealth and welfare transcends economics and becomes one of governance, human values and moral philosophy. Here the economist becomes the humanist and world federalist. As humanity expands exploration of the unknown and uncertain, comforts and conveniences increase, but we also discover that problems and threats increase as well. In search of security, humanity created 70,000 nuclear weapons, computer­ised stock exchanges whose gyrations no human being can control, installed industrial robots that displace human workers and render them unemployed, while exhausting our resources and polluting the environment.
Our human mode of development seems to always confront us with this dichotomy that the quest for greater good seems to inevitably lead to greater evil. Problems and crises arise because of our ignorant egoistic attitudes, such as the possessiveness of the rich who refuse to pay taxes and reject any responsibility for the welfare of the rest of the society or the assertiveness of the speculators who insist on their right to destabilise financial markets in search of greater profit. Humanity strives continuously to organise opportunities out of uncertainty, but does so mainly from the perspective of narrow self-interest, rather than for the benefit of humanity as a whole. We overexploit groundwater for personal gain without regard for the future. Our laws protect and empower some at the expense of others, accord rights and status to some by excluding others. These structures are the essential mechanism for organising life out of uncertainty. They are the essential means of development at one stage, but they later become the greatest obstacles, because they become rigid and fixed, base themselves on ideas and values that refuse to evolve with the changing times, like the resurrected American Tea Party pretending this is still 1776. The unregulated market structure that once so effectively released social energy through freedom now prevents that energy from expanding by more equitable distribution of the benefits. Instead it generates negative intensities – problems and conflicts that eventually lead to the destruction of those structures that refuse to evolve, as in the French Revolution, the Crash of 1929, and the two great world wars involving sovereign nation states.
The complexity of modern life compels us to transcend the dichotomy between certainty and uncertainty. When we do so we perceive that risk can by a change of view be convert­­ed into opportunity. Insurance is a social organisation that creatively relates certainty with uncertainty. Today it protects against unforeseen loss. But it has the potential to evolve into something even greater. It can in the next stage help build the society, bringing more of the uncertain areas under the protection of certainty. Uncertainty viewed from the perspective and for the benefit of all beings – without the restricting beliefs and values of the structure of narrow self-interest by which the world is now governed – can create a wider base for economics capable of generating unlimited wealth and well-being without crises. Such a change is conceivable. With the spread of education and emergence of an intelligentsia, the narrow vested interests of monarchy and aristocracy have progressively given way to a structure that is far more encompassing and more productive of human welfare and well-being. The spread of education among the once ignorant masses was formerly inconceivable. Now it is recognised as desirable and necessary. Such a change in perception regarding uncertainty in economics is possible too.


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