Toward a Baha'i Economic Model
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Source: Bahá'í Library Online (bahai-library.com), curated by Jonah Winters. Used by permission of the curator. Original citation: Rick Schaut, Toward a Baha'i Economic Model, bahai-library.com.
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Toward a Bahá'í Economic Model

Rick Schaut

1995-10

What follows is an attempt to develop three positive
statements which might form the basis for such a Bahá'í
Economic Model. This discussion is by no means complete.
Indeed, the ideas are sparsely supported largely because
I know that my audience is comprised largely of Bahá'ís
who are as interested in developing a model as I am (or are
just plain not interested at all). These remarks will not stand
the light of critical analysis in an academic setting. They're
not intended to.

Before I get into a discussion of the model, there are some basic
observations I'd like to make. We have, essentially, solved
the old Economic problem of not enough to go around. The
world's productive capacity is sufficient to meet the basic
needs of all its inhabitants. The problem is no longer an
issue of production. It's an issue of distribution. At some
point between Adam Smith and the Post-Keynesians, the
goal of the system changed from satisfying the greatest
number of needs to satisfying the greatest number of wants.
The normative value of Western Economic paradigms is
fading rapidly, and the tools begin to resemble the proverbial
sledge-hammer being used to kill a fly.

Secondly, my starting point is to attempt to cast things in
terms of the biological model offered by the Universal House
of Justice in The Prosperity of Humankind. This implies,
to me, a point of view which considers processes more important
than static equilibria described in mechanical terms (the core
of Neo-Classical Economics). The best that the Science of
Economics, as it is currently practiced, is able to achieve in
describing social change is in terms of movement from one
equilibrium to another. Clearly this doesn't give us much
understanding of how we got from one place to another. It
only tells us that at one point there was one particular
equilibrium condition and now there's a new set of conditions.

The Monetarists come a little closer to some notion of
processes, but they fall short as well. While the initial thrust
of the Monetarist school is in terms of the flow of funds in
the system, the model bogs down in its focus on changes
in the aggregate money supply. The analysis falls back into
the same old saw of static equilibria. The analysis can
tell us what happens to an equilibrium when one of the
factors of that equilibrium changes, and, since the factors
analyzed are variables under the control of monetary and
fiscal authority, it forms a rudimentary guide for policy. But
it still falls short of explaining fundamental behaviors and
the relationship of those behaviors to the aggregate quantities
that are the model's meat and potatoes.

That leaves us with a glance at the ideas of the iconoclasts
and the new radicals. We can reject most of them offhand
because, while they are adept at criticizing caricature
capitalism, we don't need their help for such a criticism.
We need their help for the basis of a new model. Most of
these groups have nothing to offer but their criticisms.

Of the iconoclasts, however, one of the most well known is
concerned with observing present behavior, and it is to his
thoughts that I turn for a point of beginning:

The Planning Process

John Kenneth Galbraith discusses, in a number of essays,
most notably The Affluent Society and The New Industrial
State, something he calls the planning system; a system he
refers to as the 'technostructure'. He notes that the production
cycle, the time it takes to go from the design of a new product
to the actual sale of a new product, takes sufficient time in a
significant portion of the economy that firms cannot allow
themselves to be at the mercy of markets. These firms are
forced, then, to exercise some form of demand management.
This demand management can take several forms from the
effort to design a product in accordance to the needs of one's
customers to advertising designed to convince people that
buying a firm's product is worthwhile. Hence, where you
see advertising and marketing, you are, in fact, seeing the
result of planning.

I have two complaints with Galbraith's analysis. First, he
doesn't take his own analysis far enough. While pressing this
notion of planning as a means of describing the behavior of
large corporations, he still believes that the Neo-Classical
paradigm is adequate to describe supposedly more market-
driven entities like dairy farmers in Wisconsin.

This failure isn't Galbraith's fault insofar as he has, likely,
never spent time working on a dairy farm in Wisconsin.
Nonetheless, the dairy farmer in Wisconsin plans just
as much as the CEO of General Motors. Galbraith might
be quick to claim that the CEO of General Motors is able,
mostly through advertising, to exercise some control over
the consumer's demand for the firm's product, but that's only
because his busy life precludes him ever seeing his television
ask, "Got milk?"

My second complaint with this analysis is its focus on
structure rather than process. This is not to say that structure
isn't important. Following the biological model pressed by
the Universal House of Justice, we can note that certain cells
in a human body perform different functions. However, these
cells perform these functions through various processes. It
is not possible to fully understand the function of the cell
without understanding the processes through which these cells
carry out their function.

The observation that our economy is planned, as decentralized
as that planning process is, is not new. What is new, and what
I believe Bahá'ís have the most to offer, is in an understanding
of the planning process, for, wherever there exists a planning
process, the principles of consultation apply. Indeed, this can
form the first positive statement we can make about an economy:
the extent to which the planning process conforms to the
principles of Bahá'í consultation determines the 'success' of
that process.

This leads to some notion of what constitutes 'success' in
this model. In a broad sense, success for a planning process
depends upon the extent to which the process meets or
exceeds the goals set for it. While it's possible to note
that we can set whatever goals we want for our economic
system, such a step moves out of the model-building mode I
want to maintain in the present discussion.

However, if we stay in this model-building mode, we can
note that the planning process is capable of setting its own
goals. In fact, we can observe that it does. Firms set
production goals and earnings goals. Households set various
goals of their own. And individuals set their own goals in
relation to the planning process. In a sense, then, we can note
that the planning process determines its own success.

The breadth of literature discussing Bahá'í consultation is
sufficient evidence that this subject is deep enough to warrant
significant discourse. However, the goal of the present essay
is to provide some foundational thoughts for the development
of a model. The actual development of a model will take the
collaboration of minds greater than this essay's author. So,
let's leave the discussion of the planning process per se and
turn to the second area where I think Bahá'ís can offer some
thoughts to students of Economics.

The Individual and the Planning Process

If we are to fully understand the planning process, we need
a more complete theory of the individual. A utility theory
which holds the accumulation of material goods and means
as the highest aspiration of the individual doesn't adequately
explain behavior we can presently observe. The richest
human being in the world continues to work despite the
fact that he has more money than he can spend in his lifetime
on himself (he can, certainly, give that money away, but he
simply is not able to spend it on himself).

Why does this man continue to work? He could, if he wanted
to, live a life of complete leisure and be none the worse for
wear. Clearly, something other than simple remuneration
motivates him, and it motivates him to work. In this
context, the Bahá'í notion of our dual nature can form the
basis of a theory which explains such behavior.

Secondly, we can also note that no scientific, technological
or artistic advance in human society came from people who
were, at the time, thinking of their own physical comfort.
They might have been motivated by the desire for physical
comfort, but their efforts required thinking about things outside
themselves. This implies that progress in the planning process
has to do with the extent to which individuals can transcend
their physical needs.

This notion of our dual nature, then, gives us a basis for
understanding the individual's role in the planning process,
and leads to the second positive statement we can make in
this model: the extent to which the planning process is
successful is directly related to the extent to which individual
participants have developed those qualities inherent in their
spiritual nature.

Planning Units and Structure

The last issue I'd like to address in this model is the concept
of a planning unit and the observations we can make about
the structure of these units. Again, drawing from the
biological model, we should think of these units as collections
of individuals (individuals being the analogue of the cell) where
each collection performs a specific function in the planning
process (or exercises some form of authority over the domain
of a particular goal adopted by the planning process).

If we examine the large firm, it's relatively easy to see these
planning units. Research and development, marketing and
sales, and finance all operate over portions of the domain of
the firm's goals. In addition, we can see hierarchies of planning
units within each of these units. For example, the research and
development department of a large firm can have development
teams which are responsible for specific product ideas, and
each product team can be broken down into specific feature
teams.

So, we see two kinds of relationships between planning units:
lateral and hierarchical. Units which have lateral relationships
operate in complimentary spheres of the planning process
while hierarchical units operate at different levels within the
same sphere of the planning process.

There is a good deal of literature in the field of Business
Management which addresses aspects of both of these kinds of
relationships. All of this literature can be summarized in the
following, and last, positive statement of the present model: the
extent to which planning units can appreciate their role in the
overall planning process has a bearing on the success of the
planning process.

I think these three statements can form the basis of a coherent
model of Economic behavior. I think it has a good deal of
explanatory power. For example, it can form the framework
of an explanation for the failure of Soviet Socialism and
some of the difficulties faced by the US capitalist system.

There are, however, some shortcomings I am not yet able
to address. For example, the model doesn't directly address
questions of employment. Though one could, possibly, draw
the question into the planning process itself, that is one
can allow full employment to be a goal that the planning
process can chose to adopt, but I'm not fully satisfied with
that notion since it gives us no way of stating, explicitly,
how full employment can be reached.

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-- Toward a Baha'i Economic Model (Used by permission of the curator)