The Need For A Third Way In Economics

by Maynard Kaufman
This essay proposes that the rediscovery of self-reliant activities in households and communities will open a more dependable way to economic security and lead to ecological sustainability.

It is time to consider a Third Way to economic security in addition to jobs and welfare payments. Neither the private sector nor the public sector can be trusted to offer well-being to people or to care about the sustainability of our ecological life-support system. This essay proposes that the rediscovery of self-reliant activities in households and communities will open a more dependable way to economic security and lead to ecological sustainability.

The Third Way is needed for three inter-related reasons. First, to help those who are impoverished by inequities in the present system, second, to restore civil peace and revitalize local communities, and third, to help our society move toward a more sustainable lifestyle. These three goals will reinforce each other in synergistic ways. But they all depend on the homecoming of economics. For too long economics has been "out there" serving the interests of industry and government rather than the people. The market economy has grown at the expense of the household economy.
What is "the economy"? Most of the time we tend to see it in the market, or exchange, economy where goods and services, or stocks and bonds, are bought and sold. But we need to distinguish more clearly between different forms of economic activity. There is a difference between the market economy, where people earn money to buy things, and the redistribution economy, where people receive money from the state to buy things when they cannot earn money. In both cases, however, in both private and public sectors, money is the means of exchange.
The household economy, in contrast, is a form of nonmonetized activity, involving production for use rather than production for sale, as in backyard gardening or food preparation. Since so many of these activities have been displaced by the market economy we no longer have a word for them. The phrase "household economy" implies subsistence activities, as in pre-industrial societies, but much more, including many community-based activities are also involved.
Alfredo de Romana, following Ivan Illich, (see bibliography) uses the word "vernacular" to denote cashless but productive activities in the household and community. Our use of the word "vernacular" with reference to language learned at home instead of language taught in schools, reflects this originally broader meaning. These spontaneous vernacular activities, through which people individually and collectively satisfy everyday needs, differ from satisfying needs by buying industrially-produced goods and services through the market economy. And it is these vernacular activities that need to be rediscovered by opening a Third Way to economic security.
In addition to vernacular activities, which are outside the money economy, there are many "informal" economic activities somewhere intermediate between the vernacular realm and the formal economy of regular full-time employment. These informal economic activities include various human services, appliance repair, arts and crafts which may be home-based, part-time, low-profile, and freelance, but produce goods and services for sale on a local level. Barter systems on a community level can also be seen as part of this informal economy.
The commodification of goods and services through the formal market economy has nearly obliterated vernacular and informal activities and weakened a sense of community. As "new" goods and services are marketed we are able to notice the loss of what had been a community function. A commercial dating service reminds us that we used to meet friends of our friends at parties. The nursing home reminds us that aging parents used to be cared for in the home. Restaurants, where people eat about 40% of their food, remind us that we used to prepare and eat food at home or with friends. Working out at a fitness center reminds us that we used to get our exercise by gardening or playing with children or in neighborhood sports events. We tend to think of these things as hobbies, and in the vernacular realm the distinction between work and leisure is indeed blurred. As these vernacular activities are commercialized it is possible to recognize their economic value. In this process the distinction between work and leisure becomes more pronounced.
We do need to focus on economic possibilities because we live in an econo-centric society. Economic considerations are the bottom line. Because money mediates between production and consumption, it is central in our plans, hopes and fears. Our dependence on money is nearly total. As both husband and wife take jobs for money to buy goods and services, even more goods and services are commodified, such as child care and meal preparation. Such shifts from the household to the market economy create the illusion of economic growth since more monetary transactions are recorded. But it is illusory growth since there is no real increase in productivity.
Dependence on money also creates scarcity. Those goods and services that were freely available when people produced for themselves became scarce when they had to be purchased with money. Since the perception of scarcity creates value, we are in a state of constant dissatisfaction, always wanting more. The perception of scarcity thus creates demand and drives our consumer society with its destructive ecological impact. Much of this is also engineered by advertising and governmental policies in order to promote economic growth.
The unchallenged assumption among economists and politicians is that economic growth is necessary to improve our economic well-being. In fact this is a lie. Although the economy, as measured by the Gross National Product (GNP), is growing, wages have been falling as more workers chase fewer jobs. This leads to a shrinking of the middle class and a growing underclass -- people either unfit for work in advanced industrial society or actually rendered superfluous by labor-saving, or really labor-displacing, machinery.
Two developments during the past year lend special urgency to the need for a Third Way. The first is the effort to generate economic growth on a global scale through free trade agreements-- the North American Free Trade Agreement and GATT, the General Agreement on Tariffs and Trade. It may be that these agreements will indeed promote more economic growth, but it is also likely that they will result in the loss of jobs in the United States as manufacturing corporations move their plants to Mexico or other countries in search of cheap labor and looser regulations. Free trade agreements were opposed by many grass-roots groups, especially labor and environmental groups, because they were expected to reduce job opportunities and weaken health, safety and environmental regulations. But corporate interests, with their powerful lobbies, prevailed, and free trade agreements were approved. As these agreements come into effect American workers will see fewer jobs and lower wages as they compete in a global job market.
The second recent development is the electoral victory of Republicans in Congress and their determination to cut welfare benefits. This reinforces the mood to curtail welfare programs which was already strong in many states. In some ways this may be necessary to regenerate self-esteem in welfare recipients. Thus some politicians argue that training for jobs should substitute for welfare payments. But if the jobs to be provided are simply "made work" at public expense, "useless employment", it would be better to affirm "useful unemployment" in which people are encouraged and guided in household and community production of goods and services for use. In a society where the market economy has obscured the possibility of vernacular activities it is sheer folly to expect people spontaneously to rediscover these activities. Cuts in welfare must be coordinated with policies which open the Third Way.
These two developments will certainly exacerbate the problems of underpaid working people and unemployed people. The prospects for a recovery of general well-being through economic growth are dismal. Since a share of economic growth has been illusory, simply a shift from household to market, and since paying interest on the national debt now takes nearly one out of five tax dollars, it is not surprising that economic growth does not help people. Perhaps this is a good thing. As Alfredo de Romana suggested, "we do not need an 'economic recovery' as much as a cultural renewal." Perceptive people are beginning to see that the materialistic assumptions which under gird the quest for economic growth are dysfunctional in both environmental and social contexts. The paramount question in our time is this: how can citizens live with economic recession and still maintain a sense of well-being?
It should be clear that the term "recession" implies a slowdown or even reversal in the rate of economic growth as measured by the GNP. This entails less dependence on manufactured products and more production on the vernacular and informal levels. Recession in this sense is eventually necessary to preserve environmental quality and to restore global equity. We Americans, 6% of the world's population, consume 35% of the world's resources and generate more greenhouse gases, such as carbon dioxide, than any other country on a per capita basis. We need to search for a better balance or synergy between industrial and household production.
We can learn to affirm economic recession only if we open the Third Way to economic security. As long as people are dependent on commodities, as long as materialistic values in our consumer-oriented society prevail, people will feel cheated when they have less money to spend. When unlimited desires are frustrated by limited means, the result is civil discontent and more violence in our streets. One could say that people have been misled by rising expectations, but in fact alternatives to the money economy have been destroyed and new opportunities along the Third Way have yet to be promoted.
The social deterioration resulting from high levels of consumption in our urban-industrial society is also a reason to change our way of life. Certainly some sort of socioeconomic reorientation is necessary to counter the anomie and alienation which is manifest in high levels of crime, drug use, child abuse and neglect, along with other similar problems. The United States, the richest nation in the world, holds a higher percentage of its citizens in prison, and for longer terms, than any other nation. Something is seriously wrong here. Too many people in our society are without jobs or meaningful work. They have lost dignity and self-respect. Only 0.17 of one percent of the work done in our society is done with human muscle. We need to use less fossil fuel energy and more muscle. We need more meaningful work. Production for use in the household and community would help people gain self-respect and help to revitalize communities.
Will people want to go "back" to raising their own food and "return" to a lifestyle that demands more physical effort and personal initiative? This will certainly sound retrogressive to many. But others, as we can see from the experiments of the 1970's, such as voluntary simplicity, appropriate technology, communal living, and homesteading, have chosen these possibilities even though they were not promoted by government or community leaders. It may be that people during the 1970's felt free to experiment because they still felt affluence around them. That spontaneity may not be repeated. Now it may be necessary to open the Third Way in order to help people cope with the decline of affluence generally and with real hardships in the underclass. The stick of economic necessity may help to move people toward a more self-reliant lifestyle in harmony with the ecosystem and its natural energy flows. But many people can also respond to the carrots: new opportunities and the joys and satisfactions that more self-reliance and personal independence can bring.
Since a large share of vernacular activities have been considered women's work (housework, child care, food preparation) one of the real challenges in promoting these activities is to do so in a way which preserves equality between the sexes. It is at least theoretically possible for a couple to share such work and the fact that so many women are working outside of the home has helped many couples rethink household responsibilities. Patriarchy is being rejected and discredited by many educated young people. The Third Way must be promoted along with the conscious rejection of patriarchy and a conscious choice for free partnership between the sexes.
The Third Way, with its new emphasis on household production, should not be rejected because household work was gendered in the past. In a post-patriarchal ethos members of a household can freely negotiate and choose the work they do. And we must bear in mind that the industrial economy is not providing jobs for everyone and that the sexes are still not equally rewarded in it for the work they do even when they do the same work.
Finally, it is important to recognize that there are virtually no advocates for non-monetized economic activity such as the production of goods and services for use in households and local communities. Since the market economy emerged two hundred years ago along with the industrial revolution, it has everywhere been promoted and aided by the state. Both government and business promote a shift from vernacular activities to the money economy, the one for tax revenue and the other for profit. Churches and schools are also dependent on a share of the cash flow.
Schools teach students to be good consumers but it is extremely rare to find places where schools explicitly teach students about the possibility of vernacular and informal economic activities. Schooling is often little more than job training. The best academic minds are also colonized by the market economy. Not only are they personally dependent on it in an economic way, they are part of a system that provides professional services, which it prescribes, for its clientele.
If there are so few advocates for the Third Way, how can we expect it will be opened? Certainly the prevailing ideology is focused on the job and money economy. But ideology may give way to necessity as politicians recognize that if there are not enough jobs to go around, welfare cuts will force more people to seek money through extra-legal ways. This would divert more money to a "black" or "underground" economy already swollen with drug money. The cost of crime control and prisons is already a burden on taxpayers. If the first two ways to economic security, jobs and welfare, are failing for more and more people, surely the Third way must be given consideration.
Those of us who see the logic of the Third Way can work on various levels to promote it. We can participate in more vernacular activities in our personal lives. We can recommend the Third Way to our elected representatives on state and national levels. It needs to be recognized as public policy. So far politicians, under pressure from corporate lobbies, are inclined to keep subsidizing corporations and industries in order to stimulate economic growth or prevent economic collapse. We must challenge this as a stupid, futile and counter-productive strategy. Eventually some politician somewhere will recognize that the Third Way is in the public interest.
Most importantly, we can work with or organize local community-based groups to actually facilitate vernacular activities and more production in the informal economy. It is on this community level that the Third Way will be opened. The following list may help to suggest projects for community organizations.

1. Promote awareness of economic opportunities in the non-monetized or informal economy and help people recognize that they can do productive work even though they are unemployed-- "useful unemployment."

2. Empower people by helping them recognize that they have skills and abilities that they can trade or use outside of the money economy so that they can move toward self-reliance on the household and community levels.

3. Facilitate community barter systems such as LETS, Local Exchange and Trading System, so people can help themselves by helping each other and building community.

4. Develop educational materials, workshops, courses, and schools to help people learn self- reliant technologies such as sewing, gardening, canning, home building and repair, mechanical repair of tools and appliances, renewable energy devices and energy-efficient techniques.

5. Develop a "micro-enterprise" revolving loan fund to help people acquire equipment needed for self-provisioning activities and/or cottage industries.

6. Organize community garden projects and provide access to capital assets such as land through community land trusts so that people can produce food for local use.

7. Emphasize the importance of developing local economic activities so that communities can retain and recycle their wealth and not have it sucked out by large corporations. This is especially appropriate in the case of food production, processing and distribution.

8. Explore the feasibility of community-based mutual insurance or mutual aid projects.

9. Seek a better balance or synergy between what people can produce for themselves and what can be produced by the industrial system.

10. Promote understanding of the need for full partnership between the sexes in household work so as to prevent more sexual inequality.

11. Provide leadership for the full and responsible exercise of political empowerment made possible by a greater degree of economic independence.

12. Work through elected representatives on state and federal levels to prevent further subsidies to transnational corporations and industries so that local and informal economies can thrive.

Maynard Kaufman has been a teacher, writer, organizer with the Michigan Greens, and founding member of the Organic Growers of Michigan. In 1991-2, he organized a state-wide non-profit group incorporated as Michigan Food and Farm Alliance, Inc., and continues to chair their Board of Directors. He operates a 160 acre organic cattle farm near Bangor.

Bibliography For A Third Way

Berry, Wendell, The Gift of Good Land. San Francisco: North Point Press, 1981. An excellent collection of articles and essays on rural homesteading and small-scale farming by our foremost agrarian philosopher, poet and essayist.

Burns, Scott, The Household Economy: It's shape Origins and Future. The first and still most comprehensive survey of non-monetized economic activity in the household.

Dauncey, Guy, After the Crash: The Emergence of the Rainbow Economy. London: Green Print of Merlin Press,1988. Good on community building through local economic activity.

De Romana, Alfredo L., Post-Crisis Equilibrium: From Growth to Harmony. Montreal: Interculture, Issues 104 and 105 (Summer and Fall, 1989). Available from Monchanin Cross-Cultural Centre, 4917 rue St. Urbain, Montreal, Quebec H2T 2W1. This is an excellent and systematic review of the structure of informal and vernacular activities in the context of the formal economy by a Peruvian architect and economist. It incorporates many insights from Ivan Illich in more meaningful contexts. This author most clearly outlines the Third Way.

Ekins, Paul,ed., The Living Economy: A New Economics in the Making. London and New York: Routledge and Kegan Paul, 1986. A collection of essays and papers from TOES, The Other Economic Summit, conferences by British and American authors.

Greco, Thomas H., Jr., New Money for Healthy Communities, 1994. (Available from The School of Living, RD1, Box 185A, Cochranville, PA. 19330). An up-to- date review of the problems in our federal money system and of the possibilities for community-based alternative currency and barter systems.

Henderson, Hazel. Creating Alternative Futures: The End of Economics. New York: Berkeley Windhover Books, 1978. The earlier of Ms. Henderson's two great books, clearer on the emerging "counter-economy."

llich, Ivan. Gender. New York: Pantheon Books, 1982. Shadow Work. Salem, NH: Marion Boyars, Inc., 1981. Illich is the most scholarly, original, insightful and abrasive critic of the industrial economy and its way of life. His writings always point to a better balance between vernacular and industrial modes of production.

Meeker-Lowry, Susan, Economics as if the Earth Really Mattered. Philadelphia: New Society Publishers, 1988. The best reference book for alternative economic organizations, enterprises, resources, newsletters, and possibilities for socially-conscious investing.

Nicholls, William M and Dyson, William, The Informal Economy: Where People are the Bottom Line. A Canadian survey with many anecdotes to illustrate both household and community efforts to move beyond dependence on the money economy.

Polanyi, Karl, The Great Transformation. Boston: Beacon Press, 1957. This great economic historian here explains how the market economy came to dominance and obscured other forms of economic activity. Polanyi is famous for showing how the market economy was "disembedded" from matrix in cultural and community life.

Robertson, James, Future Work: Jobs Self-Employment and Leisure after the Industrial Age. New York: Universe Books, 1985.

Future Wealth: A New Economics for the 21st Century. New York: Bootstrap Press, 1990. Robertson, a founder of TOES and the New Economics Foundation in England, is one of the most influential and explicitly green writers on alternative economics. We cannot afford to ignore a thinker who makes the conservation of resources and the empowerment of people basic to his proposals.

Sale, Kirkpatrick, Human Scale. New York: G. P. Putnam's Sons Perigee Books, 1980. While the organizing principle here is decentralization and the virtues of smallness over bigness, there is a lengthy part on "Economics on a Human Scale" which shows that such an economics would be reembedded into a human community.

Schumacher, E. F., Small is Beautiful: Economics as if People Mattered. New York: Harper Torchbooks, 1973. By common consent Schumacher is a pioneer thinker whose writings and actions helped to shape an appropriate technology movement and a rethinking of economics in the light of social and considerations.

Toffler, Alvin, The Third Wave. New York: Bantam Books, 1981. By focusing on the "prosumer" as a key factor of Third Wave economic life, Toffler seems to be moving toward a more ecological and humane alternative to "indust-reality."

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