Complementary Economics and Sustainable Economies

& The Five Basic Principles of Complementary Economics

Copyright © 2003 by Arthur Warmoth & Skaggs Island Foundation
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Complementary Economics
and Sustainable Economies

Arthur Warmoth, Ph.D.
Sonoma State University
Skaggs Island Foundation

"Complementary economics" deals with those areas of economics that are ignored or inadequately understood by conventional economics (and economists), which is essentially the economics of markets, of manufacturing and trade. Conventional economics pays insufficient attention to the question of the nature of money as such. Furthermore, it ignores or provides a distorted image of a large arena of economic activity that cannot be traded in markets. This economic arena is sometimes referred to as public goods and services. However, there is no widely accepted term to refer to these collectively consumed goods and services, as well as our collectively held assets. Recently some commentators have begun to refer to this economic arena as "the commons."

The creation of sustainable economies requires creating economic theory that deals with the economics of public goods and assets as fully and robustly as price-auction market economics deals with the economics of private production and trade. The key elements of complementary economics are:

1. Complementary currencies (Bernard Lietaer, Thomas H. Greco, Jr.)

2. Investment in sustainable bioregional and city-regional economies,

2.1. Stakeholder ownership, microinvestment (Jeff Gates, Grameen Bank)

2.2. Ecological Economics, "Natural Capitalism") (Paul Hawken, Amory and L. Hunter Lovins; Lester Brown)

3. Economics of the Commons: A comprehensive systems model of the social and ecological commons that will support the mobilization of regional human and natural resources to solve social problems, and will provide sustainable models for funding social and environmental services by integrating philanthropy, tax reform, and the management of the government services and nonprofit sectors. (Jonathan Rowe)

These three elements offer progressively more complicated stages in a strategy to address our current economic and fiscal crisis by creating recession-resistant regional economies. From a public policy perspective, the most fundamental conclusion of complementary economics is the need to shift the basis of our public and personal planning for economic security from unsustainable growth based on the control and exploitation of energy and other natural resources to sustainable regional economies based on the optimal utilization of human resources.

There is nothing wrong with growth as such. However, sustainable growth is not possible if it is based primarily on the exploitation of natural resources. Furthermore, it is not possible within the institutional architecture of contemporary global capitalism. Trickle down effects will never be adequate (particularly in the context of the political trend away from progressive taxation), and the expectation of compound interest creates unsustainable expectations for fiscal performance on the part of corporations and financial services institutions.

Sustainable regional economies do not preclude the importance of global trade in manufactured goods and natural resources. Adam Smith's theory of the differential productivity of regions and nations is valid within the domain of trade goods, and all regions are not equally endowed with natural resources. However, most of our chronically unsolved social problems, including education, health care, social welfare, public safety, and environmental stewardship primarily require the mobilization of human resources at the local and regional level. The core strategies for mobilizing human resources are education and participatory democratic politics. The primary focus of complementary economics is on the redesign of economic systems and institutions so that they support sustainable, education-based economic development.


Introductory Bibliography on Complementary Economics

A manifesto for complementary economics is contained in:

Wendell Berry. (2003). In the Presence of Fear: Three Essay for a Changed World. Great Barrington, MA: The Orion Society.


David Bollier. (2002). Silent Theft: The Private Plunder of Our Common Wealth (Routledge)

Lester Brown. (2001). Eco-Economy: Building an Economy for the Earth. New York: Norton.

Jeff Gates. (1998). The Ownership Solution: Toward a Shared Capitalism for the 21st

Century. Reading, MA: Addison-Wesley.

Jeff Gates. (2001). Democracy at Risk: Rescuing Main Street from Wall Street

Cambridge, MA: Perseus.

Thomas H. Greco, Jr. (2001). Money: Understanding and Creating Alternatives to Legal Tender. White River Junction, VT: Chelsea Green Publishing Co.

Paul Hawken, Amory Lovins & L. Hunter Lovins. (1999). Natural Capitalism:

Creating the Next Industrial Revolution. Boston, Little, Brown & Co.

Hazel Henderson. (1999). Beyond Globalization: Shaping a Sustainable Global Economy. West Hartford, CT: Kumarian Press.

Bernard Lietaer. (2001). The Future of Money: Creating New Wealth, Work, and a Wiser World. London: Century.

Bernard Lietaer & Arthur Warmoth. (1999). "Designing Bioregional Economies in the Context of Globalization." In Joseph Kruth & Andrew Cohill, Eds. Pathways to Sustainability, published online by Tahoe Center for a

Sustainable Future at <>.

Jonathan Rowe. (2001, Summer). The hidden commons. Yes! <>

Jonathan Rowe. (2002, Autumn). The promise of the commons. Earth Island Journal, pp. 28-30.

Schumacher, E. F. (1973). Small Is Beautiful. New York: Harper & Row.

Stiglitz, Joseph E. (2002). Globalization and Its Discontents. New York: W. W. Norton. 

Comment by Jonathan Rowe: Thanks for sending this. An exhilarating first stab at the integration that has to occur -- the unified theory. We should talk about this "public goods" point. I get uneasy when these are equated with the commons. There is overlap, but I am not sure they are the same, especially in the narrow way in which economists have defined the term. I don't have examples at the top of my head -- haven't looked at the question for a while. But it is worth pausing and exploring before taking next steps.

Reply by Art Warmoth: Thanks for your comments. I agree that "the commons" should not be equated with "public goods." The commons is a much larger concept that includes public goods (which is why we need a new vocabulary). The commons includes the ecological commons that makes life possible, the gene pool that underwrites our adaptation as social primates (the behavior that Maslow called "instinctoid, and which is of particular interest to sociobiologists), and the cultural commons, which is all of those useful social arrangements that are managed by tradition.

However, when the commons gets into trouble and therefore requires our conscious attention, it becomes a matter of political economy. That is, it becomes grist for political processes and economic theory. In that context, the concept of "public goods" has some theoretical traction and is better than nothing. I tried to explore this issue more completely in my "Governing the Commons" paper, which I hope you will find of interest.

Comment by Kirk Templeton:

2 The purpose of economic institutions is the efficient, sustainable satisfaction of the full range of human needs. . . .

KT: It is difficult to see exactly where the competitive monetary system fits in, as the lower order needs seem to be those of the "commons".

Konrad Lorenz gives four things that agression is good for in the biosphere, and maybe these apply to competition in the market as well.

(1) Intra-species agression serves to distribute the individuals of a species over a range of individual territories, thus optimizing use of resources in a geographical range.

(2) Intra-species agression in the form of status/dominance fights secures access to resources (typically reproductive) of those individuals in the species who are the strongest and most intelligent.

(3) Similarly, intra-species agression provides the strongest and most intelligent jprotectors of resources -- such as children.

(4) Through ritualization, intra-species agression causes strong bonding both between individuals and among groups.

I am not sure how this fits in.

Is our goal to develop a system of two complementary currencies-- one competitive and one cooperative, or to replace the current competitive system with a system of the commons, in which competition plays a minor role, if at all?.

For an idea of how a soceity developed along purely co-operative lines might look, I refer you all to the Science Fiction Novels of Ian M. Banks dealing with the intergalatic society known as "The Culture" ( titles: "Consider Phlebas", "The Player of Games") Of particular interest is the fact that the humans of the Culture live in social symbiosis with AI machines and also how the Culture manages to deal with all the other socities in the Galaxy-- especially the Imperialist warrior societies based on conquest. Surprisingly-- even to itself-- when attacked by these societies, the Culture tends to win.

Not surprising to a martial artist. The lesson is simply: Dont ever fuck with a society of fully self-actualized human beings, because, if necessary, they can become as good at warfare as they are at anything else.

Reply by Art Warmoth: The availability of satisfaction for the lower needs is an aspect of the commons (which is why the commons includes the rules and conventions of the market system) but the satisfiers of the basic physiological needs, as well as security needs such as for shelter, are marketable commodities. Overreliance on free market economics leads to such anomalies as attempt to satisfy esteem needs by purchasing SUVs.

Culture (symboic communication) adds additional layers to the competition-collaboration debate. On of these is the fact that the design of the money system itself is part of the social commons. This would inlcude BOTH collaborative rules for mutual credit systems and competitive rules for bank debt-based fiat currency (modern national currencies)


The Five Basic Principles of Complementary Economics

Arthur Warmoth
Sonoma State University
Skaggs Island Foundation

1. Money is an agreement, not a thing.

"Money is an agreement, within a community, to use something as a means of payment." (Bernard Lietaer, The Future of Money, 2001, p. 41)

It should be noted that the "something" needs to be countable, and that "means of payment" is one of the two major functions of money generally recognized by economists: Money serves as a medium of exchange. (The second conventionally recognized function, money is as a store of value.) This definition describes the function of money at all times and places.

2. The purpose of economic institutions is the efficient, sustainable satisfaction of the full range of human needs

The function of economic systems is to enhance human wealth and well-being while managing the interface between human and ecological systems. Abraham Maslow's hierarchy of needs (Motivation and Personality, 1954) offers a useful schematic model of the full range of human needs:
  • Physiological needs
  • Safety needs
  • Love & belongingness needs
  • Need for esteem and self-esteem
  • Need for self-actualization

Maslow and others have also postulated a transpersonal or spiritual realm of various higher needs, including truth, beauty, justice, and transcendence. The conventional economics of commodities and markets deals only with the lower levels of human needs that are addressed by material consumption, making greed the only path to security and self-esteem. Complementary economics deals also with the economics of higher needs, including the economics of the "commons" which includes both social and natural resources.

3. Accounting systems must be based on a close relationship to the ecology of real wealth in real time.

The tendency of contemporary corporations to create wealth by manipulating legal and accounting systems, rather than by producing real wealth in real time, was labeled "paper entrepreneurialism" by Robert B. Reich (in The Next American Frontier, 1983). Fueled by the seductive complexifying power of information technology, this trend culminated in the financial scandals of Enron, Arthur Anderson, Global Crossing, K-Mart, Tyco, Merrill Lynch, Adelphia, WorldCom, and AOL-Time Warner. Those members of the middle class who saw their 401(k)s evaporate in this fiscal trainwreck&emdash;and those of us who are concerned about the future of our investments&emdash;might well look to alternative investment models such as microlending, stakeholder ownership (Jeff Gates, The Ownership Solution, 1998), and Natural Capitalism (Paul Hawken, Amory & L Hunter Lovins, 1999).

4. Human resources are relatively more abundant than natural resources in relation to their utility in satisfying human needs; therefore the economics of human labor should be an economics of abundance, not an economics of scarcity.

Chronic social problems such as education, health care, and social services for the working poor primarily require the mobilization of local human resources to solve. This would "prime the pump" in the current stagnant economy as well as contributing to the sustainability of local economies, making them more recession-resistant. To do this means investing more in education and less in paramilitary social control.

5. The economics of price-auction markets, which is suitable for goods and services that can be produced and consumed by individuals, requires a complementary "economics of the commons," which includes all resources, goods, services, and assets that must be produced and/or consumed (used), at least in part, collectively.

"The commons" includes all social system and ecological system assets essential to, or useful for, human wealth and well-being that cannot be produced and/or distributed to individuals operating in price auction markets. Today we find that most aspects of the commons, ranging from the integrity of the environment to the social fabric of our communities, are in a state of crisis. This is because we simply do not know how to think about the economics of these critical systems, including elements of the commons such as politics, health care, education, public safety, retirement security, employment security, energy, transportation, environmental quality, land use, affordable housing, and culture and the arts.