Beyond economics: Healthy communities and healthy economies

Beyond Economics: Healthy Communities and Healthy Economies

Joe Flower

Car crashes are good for the economy-by traditional measurements. Ambu- lance companies make money from them, emergency medical technicians pick up overtime. So do health care workers, body-and-fender shops, car dealer- ships and car makers, insurance adjusters, physical therapists, and psycho- therapists. All these are counted by traditional economic measures, and in those measures they probably far outweigh the lost capital represented by any undepreciated value of the destroyed cars. They may even outweigh the costs of the lost work hours and lowered lifetime productivity of the injured, and the hiring and training costs to replace the dead. What is not measured, what is not considered measurable in traditional economics, is the human suffering. That is dismissed as an “intangible.”

Similarly, the Exxon Valdez disaster pumped hundreds of millions of dollars into the Alaskan and U.S. economies, while the destroyed public lands and dead wildlife showed up on no balance sheet. The illegal drug industry pumps huge amounts of money into our central cities, hidden though it is in the underground economy, and creates shadow above-ground industries of anti- drug crusaders, treatment centers, narcotics squads, and investigators. The ruined lives, the mothers prostituting their children for crack, the fear in the streets, the young people cut down in turf wars-none of that shows up on the balance books.

A forest has value only if it is cut down, as so many board feet of timber, or as a tourist resource. Its beauty, the role it plays in the ecology of the planet, the oxygen it generates, the species that live in its boughs and barks and under the needles of its deep-layered floor, its awesome quiet-these do not count.

We measure the value of a town by its tax receipts, property values, and payroll generated. Whether the citizens feel safe walking the streets at night, whether the young people are well educated and have a sense of opportunity, whether the water is pure and the air healthy, whether the town looks beautiful

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or shabby, whether people enjoy their lives, none of these counts in traditional economic measures, except by raising or lowering property values, payroll, and taxes.

Repeatedly and continually, we face choices that pit one value against another-to fill in a wetland and build a shopping mall or to uproot a family and take a higher-paymg job someplace else, or to lure a new factory to town by relaxing the environmental requirements. Only one value is represented in traditional economic terms: the value of dollars on the bottom line in the short run. All other values are considered unmeasurable externalities in traditional accounting. Clearly, something is wrong with the traditional ways that we think about economics, with the ways we measure and maximize value in our lives. If a healthy community is a whole community, then clearly we need an economics that goes beyond dollars and cents, and money in the till, a “deep economics” that measures and maximizes our true wealth. In recent years, some thinkers have attempted just that.

New Thinkers and Deep Economics A number of new economic thinkers, such as Hazel Henderson and Paul Hawken, have wrestled with the conundrum of measuring our true wealth so that all our values can be weighed in each decision. Clifford Cobb, Ted Hal- stead, and Jonathan Rowe of Redefining Progress, a nonprofit public policy institute in San Francisco, have suggested a substitute for gross domestic product (GDP), which they call a “genuine progress indicator.” This indicator includes twenty measures beyond the simple bottom line of the GDP. Herman Daly, coauthor of For the Common Good, has influenced the World Bank’s rethinking of what constitutes wealth, assets, and income.’ Paul Ekins has suggested that we consider three other kinds of capital in addition to the traditional one.2 His “four capitals” model starts with human development (counting people as assets in which we can invest) and then includes natural capital (looking at natural resources such as seed corn), social capital (measuring the family and community strengths that are necessary to any true wealth), and, finally, economic capital (traditional capital treated not as an end in itself but as a means to nurture the other types of capital).

Human Development: The Real Bottom Line Traditional economics views people as consumers and as costs. The clearest example of this is on the corporate balance sheet. People show up as expense items labeled “payroll,” “health benefits,” and “training.” We might think this is an unimportant artifact of the arcane methods of accounting, but it permeates much of corporate thinking. If it did not, we would never have seen layoffs become so commonplace. Layoffs rip the complex human fabric of an organi-

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zation, damaging and destroylng carefully gathered human capital. Layoffs are often necessary, notably in the cases of such giants as General Motors and ATGTT, which had become bloated under the assumptions of a different time. But many studies have shown that, in the majority of cases, layoffs do not achieve the goals of those who initiate them: not higher productivity; not a leaner, swifter organization; not even short-term cost cutting. Still, if we think of people only as costs, it is all too tempting to pare them away when we are under pressure to improve the bottom line and get that share price up.

A new, more comprehensive economics would see people as assets; it would make “investing in people” more than a metaphor, whether in the corporate world or in the community Investing in people’s health, education, and safety makes them worth more, any way we measure it.

Natural Capital: Living Off the Interest

Traditional economics treats natural resources much as Atilla treated the Roman Empire: easy pickings, an object of plunder, of no value until we have cut the trees down, strip-mined the land for its ore, swept the seas clean of fish. Again, this is no peculiarity of accounting. This is how we have come to see the world: A resource has no value before it is used, and the despoli- ated land and fouled waters left behind are marked SEP-somebody else’s problem.

Yet, there are plenty of large-scale examples of a different way to use resources, examples of sustainable development that leaves the resources in better shape than we found them. This is not about self-denial; this is about intelligent management. As Paul Hawken has observed, “To create an endur- ing society, we will need a system of commerce and production where each and every act is inherently sustainable and restorative. We must design a system . . . where doing good is as like falling off a log, where the natural, every- day acts of work and life accumulate into a better world as a matter of course, not a matter of conscious altruism.”’ He cites a favorite example. The Menom- inee Indians of Michigan have a private forest of 243,000 acres right next to the Nicolet National Forest. The national forest area is over twice as large, but the Menominee consistently get far more board feet of usable lumber out of their forest. Are they clear-cutting? No. They cut carefully, selectively. Every seven to ten years they survey the forest, and at each survey over the last 40 years the forest has more trees, more lumber, increased biomass. They have been doing this for more than 135 years. The asset on which they make their living is said to be a beautiful place: a recent study declared that “aesthetically [it] has no equal among managed forests in the Lake States regon.” This is sustainable development: Using the resource at hand as if the future mattered- the future of that place, the future of our own children and culture, and our future as a species.

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Social Capital: The Soft Infrastructure Traditional economics takes no account of friendship, social networks, family, community, church, or neighborhood, unless they directly produce goods and services that are exchanged directly for money. Yet clearly, without these we are impoverished in many ways, and it is more difficult to produce wealth even in the traditional narrow sense.

Robert Putnam of Harvard University has written and lectured widely and cogently on the weakening of civic engagement in American culture- from the fall in church and parent-teacher association memberships to the rise in bowlers who bowl alone rather than in leagues-and what this may mean for the quality of our lives. John McKnight and John Kretzmann of Northwestern University have explored ways to measure and mobilize social capital for the task of rebuilding communities. Amitai Etzioni of George Washington University, and others of the communitarian movement, have written vividly of the need to revive our common bonds of community and place them at least on a par with individual rights, and above a sense of individual entitlement.

Social capital is expressed in a “soft” or civic infrastructure, in the skills, processes, and relationships that underpin any effective society. The effectiveness of any policy change, any invested dollar, any practice, or any structure in a community seems to depend on whether the community’s civic infrastructure is strong and intact.

Economic Capital: The Means to an End Traditional economics makes no distinctions among types of investments based on content: Capital does the same work whether it is invested in health care, in weaponry, or in mining. The only meaningful measure of effectiveness allowed by traditional economics is the return on investment-how many dollars flow back for every dollar put out.

Yet clearly, different investments with the same return have different effects, hard to measure as they might be. These are of two types: multiplier effects and the effects on other types of capital. Multiplier effects answer the question, Does this investment result in a product that creates more wealth? Suppose we invested in two products: a bomb and a machine tool, such as a lathe. The bomb, once manufactured and stored in an ammunition dump, does not produce any further wealth, unless we count the salary of the watchman at the dump. The same could be said of any investment in something that is not actually put to use. The lathe, on the other hand, is bought by a machinist, or used in a factory, to produce other items: jet engines, motorcycles, electric motors, computer printers. The capital invested in the lathe goes on to produce more wealth, that is, it has a positive multiplier effect. Some investments, on the other

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hand, actually have a negative multiplier effect. An illegal drug wholesaler who invests in creating crack cocaine gets a very positive return on his investment, but the crack seriously reduces the economic value of the people who take it, and the neighborhoods in which it is sold. The tobacco industry, a legal, prof- itable industry that generates lots of tax revenues, produces products that, when used as intended, sicken and kill millions of people.

From the point of view of the investor, each of these investments shows a positive return. From the point of view of society, measured strictly in economic wealth created or destroyed, the lathe is a more productive investment than the bomb, and much more productive than the crack or the tobacco.

The second type of effect answers the question, What does this economic investment do to other types of capital? Does it leave people more or less educated, healthier or more diseased, safer or more endangered? Does it enhance and preserve our natural resources, or deplete them? Does it nurture social institutions or wither them, strengthen families or enervate them, bolster communities or sever their bonds?

This question of effects on other types of capital is often considered an ethical or moral question, a matter of “ethical investing.” The arguments of the new economics seek to put the question beyond ethics, which can be considered relativistic and personal, and into the realm of study, where effects can be measured, or at least identified.

Putting It Together The interaction of these four kinds of capital, often shadowed and difficult to extract from the swirl of reality, begins to rise into stark clarity when we attempt to build healthier communities. As a way to increase health, medicine has always shown a very low return on incremental investment (that is, a low return of increased health, or years of productive and pain-free life, for each extra dollar spent). This low return has been noted especially in the research of Walter Fuchs, Rene Dubose, Thomas McKeown, and John McKnight. This has always been true compared to environmental and public health measures (such as the availability of clean drinking water, vaccinations, and work safety rules). The low return is increasingly realized as those incremental investments come in larger and larger lumps of high-tech medical and surgcal techniques designed to scrape out a few more days and weeks of life for people with mul- tiple failing systems.

In contrast, with respect to many specific diseases and conditions, a great return can be ylelded on very small nonmedical investments. Studies show, for instance, that women with breast cancer double their survival rates by joining a support group, and that older people who are socially isolated have a mor- tality rate two to four times that of people with abundant social bonds. Repeat- edly, studies conducted by Dr. Nathan Pritikin and others, and published in

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peer-reviewed medical journals, have shown that 66 percent or more of patients diagnosed as needing cardiac bypass graft surgery can actually reduce their symptoms and reverse the diagnosis through a program of diet and exercise followed for six months. In similar, controlled studies, Dr. Dean Ornishs lower- fat vegetarian diet, coupled with life-style changes and exercise, has shown a 90 percent success rate in the avoidance of cardiac surgery or angioplasty for people diagnosed as needing these procedures.

The magnitude and power of such research have grown tremendously in recent years. Two things have pushed it into the spotlight. The stunning rise of health care costs throughout the 1980s and into the early 1990s brought business into a desperate search for ways of cutting health care costs. And business made health care its partner in this search by forcing health care to take on risk for covered lives. For the first time, as health care becomes at risk (or “at profit,” we might say) for the health of populations, the financial life or death of institutions depends on increasing the health of populations through nonmedical means. The magnitude of the stakes involved is illustrated by studies undertaken by Ornish in conjunction with major insurance companies. These show $6 saved for every $1 spent on nonmedical methods of reducing heart disease.

Business is often more aware of the long-term, community-centered nature of this work. Businesses typically have a much longer term, more intimate, day-to-day relationship with their employees than health care organizations do with their members. Businesses have a wide range of concerns (not merely that their employees be well but that they be productive, that the company not be exposed to suits or regulatory action, and so forth). Businesses perforce have a very intimate relationship with the communities in which their employees live. The kind of work that creates a healthier community also creates a positive environment for economic development. A healthier community is a community that can be “sold” to other companies that might want to locate in that community.

Beyond these direct bottom-line concerns, in the 1990s increasing num- bers of organizations have come to see a direct relationship between business and values, between the bottom line and a sense of stewardship. They are becoming deeply involved not only in their employees’ health but also in their communities’ health and in the health of the globe.

In the context of traditional economics, it can be hard to sell community and corporate leaders on the task of building healthier communities. They want to know, Where’s the short-term return on investment? For many such efforts, there is no short-term return beyond good public relations. However, under the more powerful lens of the new economics, the true economic returns of community-building efforts are far more visible: These efforts are aimed directly at preserving and building the natural capital, human capital, and social capital that undergird any attempt to build economic capital.

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Notes

Environment, and a Sustainable Future. Boston: Beacon Press, 1994.

Economics.

ness, 1994.

1. Daly, H. , and Cobb, J. For the Common Good: Redirecting the Economy Toward Community, the

2. Ekins, P. , Hillman, M. , and Hutchinson, R. The Wealth Beyond Measure: An Atlas of Green

3. Hawken, P. The Ecology ofcommerce: A Declaration of Sustainability. New York: Harper Busi-

Joe Flower is principal of the Change Project, an educational and consulting organization in Larkspur, Calijomia. He is afrequent writer and speaker on the issue of change in communities.

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Beyond economics: Healthy communities and healthy economies