Economics of Happiness
Helena Norberg-Hodge
It is a great honour for me to receive this award: to follow in the footsteps of world-renowned thinkers and activists—many of whom, incidentally, I am happy to count among my friends and colleagues. An honour, and also a source of great hope and strength: that an organization as prestigious as the Goi Peace Foundation should understand and value the role of economic localization in helping to create a more equitable and sustainable world. I thank you for your wisdom and your support, and accept this award on behalf of the emerging worldwide localization movement: a movement that, I believe, can not only help to prevent ecological devastation but also substantially improve the quality of life for the great majority of people on earth.
My organization, ISEC—the International Society for Ecology and Culture—has been promoting economic localization for more than three decades: not as an ‘add-on’ to business as usual, but as a deep-rooted and systemic alternative. As we see it, communism, socialism and today’s corporate capitalism all suffer the same fundamental—and, ultimately, fatal—flaws. They are all top-down, centralized, ‘one-size-fits-all’ systems that, to a greater or lesser extent, both suppress the best of what is human and deny the first law of nature: the law of diversity. Localization emerges from a very different worldview: one that celebrates diversity; that values different ecosystems and climates and cultures; and that sees the vital importance of community.
What does this mean in practice? Simply put, localization means shortening the distance between production and consumption: moving away from an ever-growing dependence on global trade, and instead encouraging greater self-reliance—both at the local and regional level. It doesn’t mean an end to international trade, but it does mean taking control of giant multinational corporations and requiring them to be place-based and accountable to individual nation states.
The benefits of such a move are enormous. It can radically cut energy use and waste; it can help to restore true democracy; it can reduce the gap between rich and poor; and at a personal, spiritual level, it can restore to our lives a sense of meaning and purpose. I call it the “economics of happiness”.
I might not have seen the crucial links between the economy, community and the environment had I not had the privilege of living in relatively intact local economies in both Europe and Asia. My greatest teacher in this regard has been Ladakh, or “Little Tibet”, a remote region high up in the Western Himalayas. I have spent much of the last 35 years in Ladakh, and it has become my second home. From the first year I have been fluent in the local language, and have been able to experience the culture almost from the inside. These experiences have had a profound effect on the way I now see the world.
For more than a thousand years, Ladakh was home to a thriving culture. Traditions of frugality and cooperation, coupled with an intimate and location-specific knowledge of the environment, enabled the Ladakhis not only to survive but to prosper. Everyone had enough to eat; families and communities were strong; the status of women was high.
Perhaps the most striking aspect of the traditional culture was the Ladakhis’ sense of self. In my early years, the overwhelming majority of people still lived in large, extended families, within communities that were of a human scale. An intricate web of mutual support had the effect of minimising the strain on individual relationships. It was a peaceful culture; there was little strife and conflict. The very young had multiple carers—siblings, parents, grandparents, aunts and uncles—while the very old were integrally involved in the rhythms of daily life.
Importantly, this interdependence was structurally reinforced by the economy. People relied on each other for the very food they ate; they exchanged seeds, they shared draft animals for ploughing and threshing. And these economic exchanges provided a structural relationship of give-and-take that bound people together in ways that provided both material and psychological security.
As in other traditional cultures, the Ladakhis also had a deep connection to the land. People depended on the living world around them for their basic needs; with few exceptions, their food, clothing and shelter were all produced within the region. Most necessities were met within walking distance. You knew the land intimately, you knew its limits; and you knew how to live with the land in a sustainable way.
Over the last three decades or so, Ladakh has been increasingly opened up to economic development, exposing the people to a range of outside influences they had not encountered before: advertising and corporate media, tourism, pesticides, western-style schooling, and consumer goods. Political power has been centralized in Leh, the capital, and a dependence created on an outside money economy. Tragically, the Ladakhis have been made to think of themselves and their culture as backward and inferior, and have been encouraged to embrace a Western, urban lifestyle. Over the course of twenty years, I have watched Leh turn into an urban sprawl. The streets are now choked with traffic, and the air tastes of diesel fumes. The once pristine streams are polluted, the water undrinkable. For the first time, some people are even homeless. Unemployment—an unimaginable concept in the traditional culture— is now widespread, while friction between different ethnic and religious groups, virtually unknown in the past five hundred years, is on the rise.
Observing these changes in Ladakh forced me to question basic economic principles. Like most Westerners, I had grown up under the impression that economic growth meant progress, and that the various costs of growth were unfortunate but necessary. But the more I looked at what economists meant by growth, the more I realised that the whole concept was fundamentally flawed. Gross Domestic Product, I now know, counts all the expenses associated with war, for instance, on the positive side of the balance sheet. So too, cleaning up after oil spills and nuclear contamination disasters. The economy ‘grows’ when crime rates go up; when we buy bottled water because other sources are too polluted.
This is not just a matter of accounting. The pursuit of economic growth above all other considerations has taken the planet to the brink. Climate change poses a threat to humanity on an unprecedented scale. Worldwide, rates of depression, suicide and addiction are on the increase. Once affluent nation states face massive debt; some are literally bankrupt.
These and other signs of breakdown are not a regrettable by-product of some otherwise valid process, but the direct result of an economy that is out of touch with the real needs of people and the Earth. More and more people now realise that merely tinkering with the dominant economy is not enough; we need fundamental change.
The global economy is dependent for its existence on three key mechanisms, which together provide a hugely unfair advantage to big business. These are: regulations, taxes and subsidies.
Firstly, regulations. In the name of growth, global trade and finance is increasingly deregulated, while the local market is subject to often stifling amounts of red tape. Deregulation has led to an exponential expansion in the power and influence of transnational corporations, or TNCs. In the name of ‘free trade’, constraints on TNCs and banks have been removed, creating an interlinked global empire that has turned our elected representatives into little more than corporate servants.
Meanwhile, regulations operating at a national level tend to undermine their smaller competitors. Take the example of chicken farms. Huge, battery-style farms clearly need stringent environmental and health regulations. Tens of thousands of closely confined animals are highly prone to disease; the tons of concentrated effluent need to be safely disposed of; and the long-distance transport of poultry entails the risk of spoilage. When you reduce the scale of such an operation right down to the level of the family farm, these risks all but disappear. And yet a small farmer with a few dozen free-range chickens is likely to be subject to essentially the same regulations, often raising costs to levels that can make it impossible to remain in business.
Taxes and subsidies tilt the playing field still further. Across the world, prohibitive taxes on labour and heavy subsidies for energy and technology have the effect of encouraging both an increasing use of high technology and an ‘outsourcing’ of employment to parts of the world where labour is still relatively cheap. While these practices enrich the businesses that operate on a global level, they are largely irrelevant to the needs of the local grocery store. What’s more, they lead directly and inevitably to increases in both pollution and unemployment.
About fifteen years ago, we produced a report entitled, ‘Small is Beautiful, Big is Subsidized’. The title really says it all. Vast amounts of taxpayers’ money are spent on providing the infrastructure required for the global economy—the roads, the airports, the telecommunications—while export grants and other direct supports make it easier and more profitable for businesses to engage in long-distance trade. The end result is that goods from the other side of the world often sell for substantially less than the same goods produced locally. In the supermarkets of Australia, Californian oranges are cheaper than Australian oranges. In the modern stores of Ladakh, butter that has to be trucked in over the Himalayas is cheaper than butter from the farm a mile away. In England, roofing slate from China costs less than Welsh slate.
More absurdly still, nations routinely import and export almost identical quantities of identical products. Just two examples: According to recent figures, the United States imports about 365,000 tons of potatoes, and exports 325,000 tons, while the UK imports 114,000 tons of milk and exports 119,000 tons. These are not special cases or statistical freaks: they are the norm. At a time of impending climate chaos brought about by the burning of fossil fuels, they represent an economy on the edge of madness.
The only winners in this economy are the big corporations. Collectively, they effectively make the rules, putting enormous pressure on governments to sign on to trade treaties that give them ever more freedom and power. What’s more, they are able to influence the entire education system, increasingly gearing it to fit their needs. Scientific research, the media—in fact, virtually all our access to information—is now largely controlled by corporate interests.
Yet it’s important, I think, to recognise that it’s not a question of good guys and bad guys, good corporations and bad corporations. Inside giant transnational corporations, you can find highly ethical, concerned individuals, trying to do the right thing, just as within smaller businesses you can find people who are narrow-minded and greedy. The real malaise lies within the structures of the economic system itself. As the sociologist Juliet Schor puts it in our film, ‘The Economics of Happiness’, the global economy is a system run amok.
I won’t dwell on the damage that globalization is causing; switch on the television news or open a newspaper any day of the year, and it’s there right in front of you. But I do want to say a few more words about one vital issue that gets relatively little media attention; namely, its effect on our psyches, on our sense of who we are.
Globalization breeds a kind of zero-sum competition, in which only a small few can be winners. Nation against nation; corporation against corporation; employee against employee. For individuals there’s constant pressure to ‘keep up’, to hold onto your job; and never enough time. It’s very easy to feel inadequate.
And all the time we are bombarded with the cleverly constructed messages of consumerism. Young people are particularly vulnerable. Like all of us, they are looking for acceptance; they want to belong. And they are being told that if they want the respect of their peers, they must have the latest running shoes, the latest mobile phone, the latest gadget. But where does that path lead? All too often it leads to a sense of separation and envy: the very opposite of the connection—the love—that at a deep level they are really looking for.
So where does that all leave us? While the situation is undeniably precarious, there are three very good reasons why we can still look to the future with a sense of optimism. First, the mess we are in today is not the result of innate greed or some other human failing; it is the consequence of political decisions. These decisions can be changed. Second, the vast majority of the problems we face today—environmental, social, economic, and even personal—are linked. We don’t need to fight every fire individually, as a single issue; we can tackle the conflagration as a whole. And third, there are real and viable alternatives: ways of structuring the economy, in particular, that offer the prospect of more equitable human relationships, a cleaner and healthier environment, and a deeper sense of personal well-being.
Economic localization is a solution multiplier. And that’s because, in stark contrast with the global economy, it is in tune with fundamental human and ecological needs. It’s built on face-to-face relationships, on community, and on an understanding that Nature has limits that need to be respected. Closer connections between producers and consumers mean not only more transparency and accountability, but more participation too. We can be more actively involved in the provision of our needs, rather than mere ‘consumers’. Instead of allowing giant TNCs to create our culture and dictate our political priorities, society itself can make the rules.
Local, community-based economies are particularly crucial for the well-being of our children, providing them with a healthy and deeply-rooted sense of identity. Recent research into childhood development demonstrates the importance, in the early years of life, of learning about who we are in relation to parents, siblings, and the larger community. These flesh-and-blood role models serve as critical foundations for later life—so different from the artificial, media-hyped ‘celebrity’ role models of the global consumer culture.
It’s important to see localization not as an absolute, but rather as a process or path. Where that path may finally lead is something that needs to be determined by different communities and cultures worldwide. Each town, each region, each nation will find its own direction—mirroring, if you like, the cultural kaleidoscope of previous times, which was itself a reflection of different environments, different ecological conditions. So instead of end goals—or bottom lines—we need to be thinking more in terms of basic principles. Is the economy bringing the community together? Is it providing meaningful and fulfilling work? Is it looking after the needs of everyone, not just an exclusive few? Is it using natural resources in a way that can be sustained? Is it helping to make people happier? Conventional economics will at best pay lip service to such considerations. Within the economics of localization, they are centre stage.
Perhaps the central defining principle of localization is scale. Within the global economy, big is good. Huge corporations trading vast quantities of products over enormous distances, making super-sized profits. It’s an economy on steroids. It’s also what I call a ‘drone’ economy. In a manner eerily reminiscent of the control of Reapers, Predators and Zephyrs in the airspaces over Pakistan and Afghanistan, executives in New York boardrooms can, in an instant, profoundly affect the lives of peasant farmers in the Rajasthani desert or bankrupt a small printworks in Tennessee.
We need instead to be supporting economic activity on a smaller scale. That doesn’t mean reducing everything to the level of the village or small town; whether or not that would be desirable, it’s simply not a practicable proposition. Certain manufacturing processes, for instance, clearly benefit from economies of scale. But we can and must start to turn the economy round. We should call a halt to the wilful excesses of redundant trade that I mentioned earlier—the importing and exporting of identical products—and strive to provide both goods and services, especially those that relate to our most basic needs, as close to home as is reasonably possible.
The foundations of local economies are small and medium-sized businesses, which provide goods and services at a relatively local level and offer meaningful employment to local people. The economic benefits of supporting local enterprises are clear. Research suggests that every dollar spent at a small business generates five to fourteen dollars in value locally, whereas when you spend the same dollar at a corporate chain store eighty cents of that dollar immediately leaves town.
Our financial institutions too need to be smaller. We hear talk about banks that are “too big to fail”. But, as increasing numbers of people are realising, these banks are not too big to fail, they are too big, period. Anger over bank bailouts has led millions of people to pull their money out of big banks in favour of smaller, local institutions. After Bank of America announced a new debit card fee this year, for example, a Move Your Money campaign led more than 650,000 customers in a single month to join credit unions instead.
Mainstream economists will argue, of course, that localization can never work in the long run because businesses need to grow in order to survive. But we know from our own life experience that this is not true. Until quite recently, businesses of all kinds—from shoe shops to accountancy firms— provided a steady profit for their owners and secure employment for their workers without the need for continuous expansion. Businesses of this sort were, in fact, the bedrock of their communities, serving to hold the local economy together for generation after generation. It’s only when the economy is in the hands of distant investors and loses its connection to people and place that growth becomes an imperative.
Nowhere is the argument for localization more compelling than in food and farming. Some of us may buy a new pair of shoes every few months, a new car once in five years. But every human being on earth needs food at least twice a day. How that food is produced and marketed plays a fundamental role in shaping our lives. In fact, as we strive to dismantle globalization—to bring the economy home—food is the single most important element.
The list of benefits gained by localizing the food economy is a long one, and I’ll just skim through them. Greater agricultural and biological diversity; a reduction in the need for chemical fertilizers, pesticides and preservatives; decreased packaging and processing; less transportation; fewer ‘middlemen’; more jobs; higher profit margins for small farmers; less need for expensive technology and fossil fuels; stronger community; a healthier diet; greater food security; and a cleaner environment. It’s the ultimate win-win situation.
A farmer I know in Australia has a ‘before and after’ story that shows how much local marketing can affect an individual’s well-being. A farmer all his life, he used to sell exclusively to supermarkets; just two crops: bananas and avocados. He barely made a living, and was completely controlled by his buyers. Perfectly good fruit was routinely rejected for being too short, too fat or not round enough. He said he felt like a serf. In 2002, a farmers’ market was established in the nearby town. Now, ten years later, his situation has changed out of all recognition. He has diversified his range of production from two crops to twenty—a shift that has allowed him to go entirely organic. He is doing better—much better— financially; the environment on his farm is healthier; his customers are getting the range of fruit and vegetables they need at an affordable price. It remains a physically demanding life—he works long hours in all weather—but for the first time in decades he is, as he puts it, “engaged with life.” “Once the farmers’ market was started,” he says, “I felt like I was in different galaxy.”
In the last few years, the local food movement has taken off around the world. In the United States, for example, the number of farmers’ market rose by seventeen per cent just last year. In Detroit, one of America’s most blighted cities, there are now more than two thousand community gardens. A young man who founded one of these urban gardens told me: “I’ve lived in this community over thirty-five years, and people I’d never met came up and talked to me when we started this project. We found that it reconnects us with the people around us. It makes community a reality.”
Localization is not a pipe dream; it’s already happening. And what’s really inspiring is that it has come into being with almost no help from government or the media. You’ll find it in all shapes and sizes: local banks and credit unions, permaculture, ecovillages, the bioregional movement, transition towns, Via Campesina (incidentally, one of the largest social movements in the world), Occupy Wall Street, the Buen Vivir movement in South America, Décroissance, the new economy movement. A lot of work is also being done to develop alternative economic indicators, like the Genuine Progress Indicator or Bhutan’s concept of Gross National Happiness.
And at last even the mainstream media seems to be waking up and taking notice. The August, 2012 issue of Time Magazine carried a lengthy article on what it called ‘localnomics’, while a recent piece in the New York Times quoted a former Microsoft manager saying, “the future is local.”
In the wake of the global financial crisis, increasing numbers of people are beginning to challenge the basic assumptions—or, rather, myths— that have supported the global economy over the decades: that big business is more efficient; that long-distance trade creates jobs; that industrial-scale agriculture is necessary to feed the world. And they are coming to realise that more localized economies may well be the answer to some of the most intractable problems we face in the world today—mass unemployment and climate change among them.
Our task now is to build on this groundswell of popular support and goodwill to create a powerful movement for change. To be effective, we need to work in two distinct areas. At the policy level, we should be putting pressure on governments to favour—rather than undermine—smaller, more localised businesses, and insist that TNCs be subject to the rules of nation states. Only then can we put an end to the hugely damaging practices of today, which see corporations and banks roaming the planet in search of the most favourable working conditions and the weakest environmental and social regulations, effectively holding nation states ransom along the way.
It is unlikely that any one country would take such an initiative on its own. However, it would be perfectly possible for a group of nations to break away from the World Trade Organisation and to draw up alternative trade treaties, this time with an emphasis on the needs of their citizens and the environment.
At the same time as working politically, we need to focus on public education, helping both to raise the level of what I call ‘economic literacy’—through the exchange of books, articles, films and other materials— and to support all those grassroots initiatives that are building local economies from the ground up.
For the localization movement to really take hold, we need to forge alliances between concerned citizens. Environmentalists have long warned of the dangers of pollution, the extinction crisis, and impending climate disaster. Social justice activists, meanwhile, have focused on inequality and the roots of conflict. Now is the time to link hands—to bridge the divide between the movements for ecological and social change. Localization provides the opportunity to unite around a common agenda, because the steps we need to take to heal the planet are the very same as those that are needed to heal ourselves, improve our physical health, to increase employment, and shrink the gap between rich and poor.
The wonderful thing is that as we decrease the scale of economic activity, we actually increase our own emotional well-being. That’s because at the deepest level localization is about connection. It’s about re-establishing our sense of interdependence with others and with the natural world. And this connection is a fundamental human need.