From the game theory and scarcity,

to the Systemic theory and abundance

SUSTAINABLE GLOBALIZATION

ESSAY

“The Competitive Cooperation:

¿the change of paradigm of the Free Market?”

Series of articles by Luis Bravo Villarán - Red Voltaire and others

June 2005
INTRODUCTION:

The present Essay, proposes a new Social-Economic Model with technical foundations based on:
freedom, market, extended well-being, human dignity and environmental preservation with natural
resources capitalization. That basically means a change of the “Free Market” paradigm.
Before presenting the Essay and as a way to have a necessary previous diagnosis to understand
why the proposed “change of Free Market Paradigm”, I invite you to read the summary of the
book “The Myth of Development” written in the last years of the XX century by Oswaldo de
Rivero, Peruvian Ambassador to United Nation Organization”. Reference: the page

http://www.sudnordnews.org/libriver.html

THE MYTH OF DEVELOPMENT

Summary of the Book by Peruvian Ambassador to United Nations Oswaldo de Rivero

The Non-Viable Countries in the XXI Century

Academics who theorize about the wealth of nations and technocrats who specialize in
formulating projects aimed to raise the standard of living may be willing to admit that they have
made mistakes in the design of their economic development models, but they do not appear to
harbor the slightest doubt about the possibility of development. To their minds, the very idea that
development may be impossible is absolutely unthinkable.

Economic development is one of the great myths of the XX Century. Rooted in our Western
civilization's idea of progress, it is constantly fed by an epistemological optimism founded on the
belief that all the obstacles to the material progress of nations can be solved by economic
science.

Economists, technocrats and politicians have held to the belief that one needs only to apply the
right theory and the correct economic model for the poor countries to begin to create wealth and
to become societies with high living standards, like those enjoyed today by only 24 industrialized
capitalist democracies. According to this prescription, more than 100 countries have attempted to
apply theories and models over more than half a century, but their development has remained as
elusive as El Dorado.

During the last 40 years, national development has been predicted many times and in many
places. In the seventies, it was considered a foregone conclusion that Brazil would conquer
poverty and become one of the world powers of the future. Then, the same was said of India.
Finally, Mexico and the "emerging countries" of Asia were in fashion. Following their severe
financial crises, the only remaining hope is China, a country with 1.2 billion inhabitants, saddled
with severe ecological problems, and where only 300 million inhabitants have sufficient income to
be consumers in the global economy.

The fact is that on the verge of the XXI Century, there are over 100 countries that have not
developed and only 3 Newly Industrialized Countries (NICs): South Korea, Taiwan and
Singapore. That is to say, two small countries and one city-state that represent less than 2% of
the population of the so-called "developing world".

These NICs - South Korea, Taiwan and Singapore - are the only cases to have achieved a
semblance of the capitalist industrialized powers' development, despite the financial crisis of
1997. This means that they have managed to convert their societies from agriculture to industry,
with an advanced service sector, overcoming generalized poverty, to raise their living standards
and create a middle class majority. In spite of this achievement, these NICs still do not enjoy the

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high incomes nor the scientific and cultural development, much less the democratic institutions, of
the United States and Europe.

Apart from these exceptions, the large majority of the mistakenly-called "developing" countries
are definitely not undergoing a process of development. Their production has not been
substantially modernized, they continue to produce raw materials and manufactures with very low
technology. The 4.8 billion inhabitants of these countries are light years away from becoming a
huge global middle class. Nearly 1.3 billion people live on less than one dollar a day and are
unable to buy enough food; and another 3 billion live on two dollars per day, with no hope of
satisfying their basic health, education and housing needs. In more than 100 countries, the per
capita income has remained unchanged or is less than it was twenty years ago.

Global Darwinism and National Economic Non-viability Today's technological revolution, driven
by a global competition, triggers off a process of natural selection, casting aside thousands of
unskilled persons and tons of raw materials at the very moment when an urban demographic
explosion is occurring in the poor countries. In addition, this selection by the market and by
technology, is starting to discard, through low prices, the manufactures with low technological
input produced by abundant labor, which represent the first step toward industrialization in these
countries.

At the end of this century, the amount of raw material per unit of industrial production is two-fifths
of that used in 1930. Forty years ago one of every four employed persons was a laborer, today
the ratio is one in seven. During this process, the developing countries' urban population is
growing explosively, and will have almost doubled by the year 2020. By the start of the next
century one billion new jobs will be needed, but it will be difficult to create them in view of the new
technologies, that do not cater to the proletariat. Today the technological revolution is on a
collision course with the population explosion.

Rapid and indiscriminate liberalization of the poor economies, in accordance with the World Bank
and the IMF's policies, has only worsened the situation, by connecting these economies to the
global economy, and forcing countries to produce, on the basis of the comparative advantages
they already had in the world market. Thus, the underdeveloped economies produced what they
always had, that is primary and marginally transformed exports subject to low demand in
exchange for volatile speculative investments from the global financial casino, which were not
designed to modernize production. It was this kind of non-viable economies that the development
gurus dare to call "emerging".

In truth, the policies of the World Bank and the IMF, despite their high social cost, did not make
anything emerge, only serving to consolidate a pattern of exports that is the least competitive in
the world economy today. These countries were condemned to export raw materials and products
with a low technological input, at ever less remunerative prices, while importing increasing
amounts of manufactured goods and services with a high technological content and at growing
prices, pushing them further and further into debt. As a consequence, the great majority of the
underdeveloped countries, rather than becoming NICs (Newly Industrialized Countries), are
turning into NNEs (Non-Viable National Economies)..

Ungovernable Chaotic Entities (UCEs)

The non-viable nature of many economies, together with the high growth rate of the increasingly
urban population, leads to greater social exclusion, social and political instability and violence. At
the present time, there are more than 23 domestic conflicts and about 50 armed groups in the
poor regions of the planet.

In all the countries that are subject to violence today, the average per capita income over a 35
year period (1960-1995) grew by less than the 3% which is considered the minimum required to
escape from poverty. For example, in Algeria the average per capita income growth over three

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decades was 0.5%; in Angola, 0.2%; in Somalia, 0.1%; in Mexico 1.8%; in Colombia, 2%; in Peru,
0.2%. The same was true of Liberia, the Congo, Rwanda, Burundi, India, the Philippines, Sri
Lanka, Myanmar, Yemen, Tajikistan and other countries.

The ongoing armed conflicts in the underdeveloped world have in common the fact that they are
real battles of national depredation, where respect for the most elementary principles of human
behavior has been lost and civil war colludes with criminality. In many countries these conflicts
become stabilized in situations of intermittent violence, repeated truces and new outbursts of
fighting, where rebel groups share the monopoly on violence that previously belonged exclusively
to the corrupt governments. When this occurs, the underdeveloped Nation State implodes and
becomes an Ungovernable Chaotic Entity (UCE).

The UCEs are typified by the collapse of government control over large segments of the territory
and of the population. Economic sectors, provinces, regions fall under the control of warlords,
drug traffickers, mafias, or a mixture of all of these. Legality, public order and the incipient civilian
society disappear. The population becomes a citizen of the Red Cross, Caritas, Doctors without
Borders and of the humanitarian system of the United Nations. This situation can be observed
today in Afghanistan, Somalia, Sierra Leone, Liberia, Tajikistan, Cambodia, Rwanda, Burundi,
Kosovo, Bosnia, Chechnya, Haiti, Albania, the Congo.

The Physic-Social Imbalance

The future disintegration of many underdeveloped countries may also be due to the physic-social
unbalance that is being created within them as the result of increasingly limited access to water,
food and energy, in the face of the explosive increase in their urban populations.

Twenty years from now, the population of the underdeveloped world will have reached 6.6 billion
and will be principally urban. Except for a drastic reduction in the birth rate, a radical reversal of
the migration flows to the cities, an unprecedented increase in water, food and energy supplies, a
major part of the planet's population will be living in a dangerous physic-social imbalance. That is
to say, in chaotic cities and megalopolis, lacking water, with food and energy priced far beyond
the means of the majority of the population. These poor cities and megalopolis could become
veritable human infernos and ecological time bombs, affecting the stability of the whole world.

The physic-social imbalance between the vital resources and a large and poor urban population
is analogous to the instability in the earth's tectonic plates. Everyone knows that some day an
earthquake will occur, but no one can predict exactly when it will happen, and even less whether
the violence will be shrouded in an ideology, religion, ethnic group, or will be simply a
combination of anarchy and common delinquency.

At the dawn of the third millennium, a growing number of low-income countries are founded on
enormous seismic faults, formed by the physic-social unbalance. Nearly the whole of Africa, the
majority of Central American countries, the largest Andean countries, Peru and Bolivia -and,
above all- China, India, Pakistan and Bangladesh, where the largest urban populations on the
planet will be located, are now beginning to combine the lowest per capita consumption of water,
energy and food with a high rate of demographic growth among the urban poor. If this situation is
not changed, social and political tensions will increase and wars of national depredation could
break out, or grow more violent, from which situation new Ungovernable Chaotic Entities UCEs
could also emerge.

The Quest for El Dorado

To escape from the trap of exporting only primary and marginally transformed products, finding
investments to increase the technological component of production and exports is a matter that
no longer depends on the national policies of the poor countries, since their national capital is
insufficient and domestic scientific and technological resources are virtually nonexistent. The

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global speculation capital would have to be transformed into a critical mass of productive
investments, amounting to at least 300 billion dollars a year. This critical mass of productive
capital has never been available, and now, in the wake of the financial catastrophes of the so-
called emerging nations, the possibilities of finding such investments are totally unrealistic.

Even in the hypothetical case that such a critical mass of trans-national productive investment
were to reach the underdeveloped world, this industrial process would apply modern
technologies, of very low labor intensity, that could hardly provide employment for the nearly 30
million unskilled men and women who are looking for jobs in the cities of Africa, Asia and Latin
America. Besides, if the underdeveloped countries become industrialized according to the
consumption patterns of the North American model (the global paradigm), the ecological cost
would be catastrophic. The planet's biosphere could be consumed by 4.8 billion credit cards. The
Asian-Pacific countries can be mentioned as examples; they were the recipients of the greater
part of the productive investment in the underdeveloped world between 1970 and 1990. In the
year 2020, these countries by themselves will produce one third of the world's emissions of gases
into the atmosphere.

A few years ago, the state-driven and communist development models collapsed. Today the neo-
liberal global model is being undermined by reality. The financial casino has driven to bankruptcy
even the so-called emerging economies and the use of modern technologies is making the
creation of jobs increasingly difficult, in the face of the urban explosion in the underdeveloped
world.

Since the industrial revolution, more than 140 Nation-States have proliferated in Latin America,
Asia and Africa. After a century or, at the least, many decades of independence, the majority of
them are still incomplete national projects, which are not developing, in other words, quasi-Nation
States. History is showing that nations are born with strong chances of not developing. A sort of
perverse historic law has fostered the birth of a myriad of feeble infant States, the children of self-
determination, but not of economic and scientific progress. It would not be surprising, therefore, to
observe in the XXI century that many of these aborted Leviathans collapse in profound economic
crises, then recuperate to continue to stagnate in their non-development, or end by violent
implosion.

The agenda on the wealth of nations will have to be replaced by one devoted to the survival of
nations. In order to prevent increasing social and political disorders, many countries with primary
production and explosive urban growth will have no choice but to abandon dreams of
development and adopt a policy of national survival based on the search for water, food and
energy security and on the stabilization of their populations.

Until now the belief that the process of development was part and parcel of the Nation State
prevailed, but experience has shown otherwise, compelling one to think the unthinkable. A large
majority of the countries mistakenly called "developing" are not in process of becoming Newly
Industrialized Countries (NICs). Far from that, they are on the way to being Non-viable National
Economies (NNEs) and are even in danger of imploding into Ungovernable Chaotic Entities
(UCEs). The story has not ended, it has just begun.

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The Essay: “Sustainable Globalization”
by Luis Bravo Villarán, June 2005

Part I

What is global today, has little to do with everyday society and culture, except for
the fact that we live in the "information age," and due to the fact that the great
corporations are imposing the stereotype of the world-wide client / consumer.
Globalization, as conceived today, is evolving mainly in a inequitable world market
scenario and is based on so called free commerce and economic exchange.

But it also has to do with what Hazel Henderson called “the global casino” where a
very small number of people is betting every day to turn a profit. In effect,
Henderson said: “Speculators are responsible for at least 90 percent of the trading
on the daily currency markets. Traditional economists have always said that currency
trading creates very deep markets, but a recent study revealed the opposite. Not
only does currency trading cause increased volatility, but currency traders are also
error prone. So we can expect a lot more disasters like Barings Bank and Orange
County, California.” I think implicit in this is the conclusion that, since the "free
market" (and “free trade”) is not so free - in the sense that only a few have enough
power and size to affect the prices – what is known as arbitration today really turns
out to be a manipulation of prices. It is the speculators that arbitrate. If there were a
great number of them with similar "power" (size), they would really make the
markets more efficient through their arbitration; but this is not the case, instead
there are a handful that concentrate their power through the management of money.

An efficient market means that its prices reflect (instantly) all the relevant
information available, information that is based on the “supply and demand”
conditions of the products and services of the companies whose titles are traded in
the market. But that does not mean that the consumers of those products and
services are basing their purchasing decisions on the capital market information
available; therefore, the distortion of the "real market" passes through the "financial
markets" that, meanwhile, will be efficiently processing consumer information, which
makes the financial markets work better, but not necessarily reflecting the true
needs of the consumers. Furthermore, the financial markets determine the course of
action of the companies since these markets ultimately decide which company is

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successful and which is not. Hence,this turns into a (mortal?) spiral. Isn’t this what
happened to ENRON four years ago?

Globalization should not be a perverse equlibrium; it should be a virtuous one.

Toward this end, we must orient our efforts toward a Sustainable Globalization
concept and abandon the current conception of globalization, which is nothing more
than the internationalization of the interests of multinationals and transnationals -
reinforced by the action of the World Trade Organization, World Bank and
International Monetary Fund - and based on a broadly extended availability of
information technology. This latter version of globalization will only make the
distance between those that have and those that have not ever greater and more
abysmal.

Part II

Continuing with the "Global Casino" theme of the previous article, below we illustrate
one of the great dangers of the globalization of financial markets:

“History shows that the need to trade has been the motivating force behind many of
the mankind’s greatest accomplishments. Columbus discovered America not because
he had some romantic notion about finding new lands but to open up a new, more
profitable sea route to the East. Vasco da Gama, Marco Polo and many of history’s
characters were driven by the need to trade.

It is ironic that, several hundred years later, one can still recognize similarities
between these early pioneers of global trade and those behind today’s computers
screens in the world’s dealing rooms. Many of society’s most successful characters -
both historical and contemporary - have achieved their remarkable feats by ignoring
the advice or orders of their superiors, working independently of the system (by
creating new systems) and following their instincts rather than the rule book
(changing the rules). If this sounds familiar, as it should - they bear an uncanny
resemblance to the characteristics of many of the more notorious rogue traders of
recent years. The difference between monumental success and monumental failure
for today’s most ambitious competitive dealers is marginal.

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Rule books, sophisticated risk management systems and training, all have a place
but as history shows time and time again, human nature will prevail particularly as
many of the very qualities which make a successful trader are those that could
ultimately be ruinous”
(From Aon Group Limited brochure – The Rogue Trader)

But we have to be careful not to fill the history of today and of the imaginable future
with characters whose success takes the whole world to ruin, and who themselves
end in colossal failure. What is desirable is that the characters who today control
economic resources be successful without necessarily making history. They should
create a success story, on a stage where the good life is extended and generalized;
only then will their individual successes endure and be respected by history.

Only conscious and transparent behaviors will save the "Global Casino," whose
operators are responsible for at least 90 percent of the trading on the daily currency
markets, as Hazel Henderson sustains; and also manage the world of investment
transactions in the primary and, above all, in the secondary markets, virtually from
their computer stations.

But to manage the world in a virtual way, first it is necessary to know the real world.

Part III

Professionals predisposed in favor of sustainability and eco-efficiency (mainly re-trained

economists and engineers), maintain that eco-efficient companies have higher "present value"
than those that are not, when their cash flow discount is considered over a longer term, because
the eco-efficient companies have a longer life expectancy. If this is true -as in effect it is- why
doesn’t it become evident in the capital and financial markets?. The reason is simple: the trade-
off between short term and long term.

Eco-efficiency although more convenient in the long term, has disadvantages for its
implementation in the short term, since normally it requires important capital investments with
lower short term returns than those obtained in conventional businesses. In the commercial and
economic globalization of our days, it is not easy to obtain funds for investment in eco-efficient
projects/programs, because investors privilege short-term profits and the money markets seek
immediate yield through speculative investments.

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For anyone with an understanding of economics, it is absolutely clear that there is a direct
correlation between the age of capital stocks and environmental problems. The older the capital
stock is, the greater the environmental problems it entails - besides being less competitive.
Nevertheless, progress has been observed in the consideration of the environment when new
investments are to be decided.

The solution to these problems would have to contemplate governmental regulations with
incentives for being eco-efficient; but these days the economies compete strongly in the global
market (products, services and capital), hence it is predictable that governments choose to defer
such regulations, in order to avoid losing participation in the markets.

On the other hand, developed countries maintain higher technological levels, greater purchasing
power and higher demand for their products and services; therefore, higher market shares in the
globalized world of today, than those of the developing countries. In this context, the developing
countries would face minors risks in the transition toward sustainable development and therefore
toward sustainable globalization.

The lines of action to overcome this situation, and to promote the attitude of governments toward
sustainable development, is to encourage the inclusion of sustainability policies within their
economic models, fulfilling regulatory policies that ideally should be proposed from International
Financial Institutions such as the International Monetary Fund, Interamerican Development Bank
or World Bank, among others, in the same manner as these institutions do today with stabilization
programs.

Part IV

A necessary parenthesis in these series of articles: in the World there is excess of money; but
there are not enough productive opportunities of investment to generate development and
well-being applying that enormous mass of money…

The Communist model came apart when the Berlin Wall fell; today China has become a sort of
“capitalist" country under disciplined management thanks to the centralized communist party; and
regarding Cuba … one could write a great deal.

But let’s look instead at the decadence of the neo-liberal model: between 1979 and 1999 US
mutual funds grew from $600 million to $6 trillion in assets; by the end of 2000 those funds grew

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to $7.5 trillion when the NASDAQ fell; then in 2001 came the regrettable events of 9/11 and in
December the collapse of the powerful Enron (more than $63.4 billion in assets) dragging down
with it the –at that time- prestigious accounting firm Arthur Andersen and, worst of all,
compromising the credibility of two of the most reputed world risk assessment companies:
Standard & Poor and Moody's and Wall Street itself, which, knowing what was going on with
Enron, all initially hid the crisis in order to avoid the inevitable collapse of Enron’s stock value,
harming the investors’ interests, among other stakeholders.

That is to say, the essence of neo-liberalism and one of its foundations -the controverted
deregulation of markets- underwent a hard blow. As a consequence, the mutual funds rapidly lost
position and the capital market was weakened. Then came the crisis of the also powerful
WorldCom ($103.8 billion in assets), which also engaged in the manipulation of its financial
statements in order to hide its true situation; in the telecommunications market Global Crossing
Ltd. (more than $25 billion in assets) had fallen shortly before. Then came Dinegy, United Airlines
(chapter 11), American Airlines (chapter 11), now also Delta Airlines, etc … almost one after the
other; and finally: the war. Nevertheless, today more than $2.0 trillion of that monetary mass in
the mutual funds is at a risk free rate and in search of being applied in sustained opportunities
with valuable underlying productive assets.

Has anyone asked themselves how it is possible that in that vortex of spectacular collapses, not a
single bank was dragged down? It would have been catastrophic for the "neo-liberal system" and
it had to be avoided. How? Simply, the Fed would leave it to the “bills machine” and cover all
those enormous holes. That would explain the fall of the US dollar v.v. almost all the currencies of
the World, that today they try to recover forcing the revaluation of the currencies (f.i. the Yuan), or
through the exaggerated rises in the petroleum barrel price (take into consideration that most of
the refineries in the producing countries, are North American).

That, plus the immense mass of criminal money, means that – with a sleight of the hand –
financial transactions can take place in the secondary markets without productive support (i.e.,
money that backs money). An important number of banks -directly or indirectly- concur to those
markets to make short term "yields" in a relatively simple way (hence, why risk money in lending
to a business or investing in projects?). In this way, quasi-money is created in order to shore up
the monetary mass of dollars and to try - in a way - to control it, which is now almost impossible.

That huge monetary mass (that could be fostering an enormous speculative bubble), continues to
grow and is no longer sustainable: IT IS NECESSARY TO PLACE IT IN

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PROGRAMS/PROJECTS that back it with productive activities that generate real economic
development – as mentioned above - based on valuable underlying assets.

That is the great opportunity for countries like Peru that are able to offer many and varied
sustained opportunities to efficiently apply part of those worldwide excess financial resources, but
under a "new system of foreign investment" that would partner capital investment with the
proprietors of those potentially productive assets. A practical and possible way "to clear up the
mystery of capital"?

Part V

Another parenthesis to present Hazel Henderson, North American futurist that is an authority in
sustainability and eco-efficiency in USA. She is defined as a social innovator, whose objective is
to investigate in the life side of human evolution.

Hazel Henderson believes the information age will bring an end to win-lost economics –
Game Over, Red Herring, April 1998 (by Deborah Claymon)

How is information technology changing global economics?

Let me count the ways. At the most fundamental level, we are now at a bifurcation point. For
hundreds of years, we have used money-based exchange. This system was an evolution from
the earlier days when we bartered. It doesn't matter what we call money -- coins or paper or blips
on a computer screen -- the idea is still that we have this substance called money that embodies
value and keeps track of transactions.

But now we're moving back to barter. And what's really fascinating is that we are going to a direct,
information-based exchange and trading system where money isn't necessary. Computers and
computer networks give us the capability for sophisticated barter without currencies. It isn't just a
matter of bartering a pig for a load of hay. Now we can accomplish multiple-party barter deals,
and we have the technological system to keep track of the exchanges.

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When do you expect that this return to barter will start affecting our everyday lives?

It's going to be a very gradual thing. Today it's most evident in high-level exchanges, especially
for developing countries, which are turning to barter to get what they need and therefore
circumventing the necessity of large sums of currency.

Have mainstream economists missed these changes brought by information technology?

Yes, I really think they have. When you tell economists we are going to a new system that doesn't
use money, they get very upset because all of their degrees and skills come from a focus on
money. This has been a 25-year-long crusade for me, and I've earned a lot of enemies in the
economics profession. No one likes to be told that they will be obsolete.

How is the move away from currency affecting worldwide banking?

We're only just now seeing the beginning of this revolution, but what it implies for central bankers
and finance ministers is that they have competition. Bankers have been trying to re-create
scarcity on the Internet through new electronic money systems. They are working like mad to do
this, because if a pure, information-based paradigm of exchange takes hold, they lose their
enormous power base. A return to barter -- to win-win economics -- will change all the world's
stock markets and will finally provide an alternative to the banks as a source of capital.

Is a major stock market crash imminent?

There's a 25 percent probability that before we are through with the Asian market meltdown,
there will be a major national default somewhere. This is exactly what I would have expected,
since we've taken down all the firewalls between economies. At some point, the finance ministers
of the big countries and the central banks will have to get together and establish some
regulations for this global casino.

¿A new Bretton Woods is necessary after 61 years?

Note … that crisis actually occurred toward the end of year 2000 with the fall of NASDAQ and
then with all the crisis that followed in year 2001 especially the Enron, case.

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Part VI

¿Are the natural monopolies a restriction to the free competition?

This is the crucial question which answer is avoided by the fervent believers of the neoliberalism,
because "free market" by nature implies "free competition" that is naturally based on the
existence and concurrence of competitors. But the "free competition" today –and already since
some years ago- faces the consolidation of the "natural monopolies", causing the proliferation of
"temporary monopolies" evolving to market dominant positions; and also propiciating the
strengthen of "oligopolies". In this scenario, the free access to the market is being severely limited
and the number of competitors tends to be reduced; what probably makes the "free market of
competition" to be next to last; and also the "free market" concept per-se if the paradigm does not
evolve; if it does not change.

We must nevertheless admit, that although the competition is being limited, in many industries the
globalization and the revolution of the information technology have made HUGE SCALE
(monopolies) the most efficient way to operate, that in itself is not bad, as long as the free access
for potential incomers remains there (is not restricted through lobbies), so the incumbent firm can
be displaced by a firm that brings more value to the market, and so on and so forth….competition
in some market will not happen at the same time it will happen through the time….is like the
presidency of a country (or presidents don’t face competition since there are not other presidents
in place at the same time?)…unfortunately if governments and societies do not pay attention to
this situation and truly become WATCHDOGS, free access will tend to be the exception not the
rule…. and competition will fade-out…. Again, do not forget what happened in year 2000 with the
Nasdaq and soon after in year 2001 with: Enron, Dinegy, World Com, United Airlines, American
Airlines; and then the WAR etc, etc.

Which is the exit: a Change of Paradigm, that can be summarized in the migrating from "the
free market of competition", toward the "free market of cooperation" proposing what we can
denominate as the "Competitive Cooperation", which tends to balance the system based on the
“Environmental Space” concept (Joachim H. Spangenberg -Wuppertal Institute), that calls for
two limits:

the ceiling limit above which consumption is ecologically unsustainable; and

the floor limit defined as the minimum amount of resource use needed per capita to have a
dignified life under which life is socially unsustainable

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 top level, above which OVER-CONSUMPTION is ecologically un-sustainable

Available Well-being
Environmental Space
Sustainable Life-styles

lowest level under which POVERTY is socially un-sustainable

The conception of the environmental space is an approach that invites to think on the
moderation about the consumption and the necessity to make both limits operative: the ceiling
limit (of comforts without deprivations above which consumption is ecologically unsustainable)
and the floor limit where the minimum level of life, is a worthy level for the human being under
which life is socially unsustainable.

Part VII

The Competitive Cooperation: some antecedents…

In his speech in California Mr. Lawrence Summers (economist, US Treasury Secretary during
Clinton’s government) argued that the Old Economy was a “negative feedback” economy. When
wheat prices rise, farmers produce more and consumers buy less (a balancing loop) .But the
information economy, he said, will increasingly be a “positive feedback” economy: Rising demand
drives higher efficiency and higher returns, which push down prices (through the network effect of
positive externalities, the more people has access to the network, the more efficient and powerful
it becomes: prices down) and push demand even higher -a reinforcing loop- (for people not
familiar with the terms positive feedback - same effect – negative feedback - opposite effect -
one could understand “positive for good” and “negative for bad” which is not necessary true;
even though it could be on the contrary)..

"In such a world," he said, "the avalanche, rather than the thermostat, becomes a more attractive
metaphor for economic policy." … so higher and more accelerated growth!!!!

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With all my respect -- and my ignorance, I am not economist (just a business consultant) -- I think
Mr. Summers is theoretically right!!, but dangerously wrong!!. In order to support this dared
affirmation we have to conceptually deepen and will conclude that the "negative feedback" in
"New Economy" exists, because the "avalanche" threatens burying to they that will not be within
the benefit of the "monopolies" -whether natural or not- of the companies or corporations with
"market dominant position”, of the "oligopolies" or of the so called "cartels".

It is very dangerous because while in the so called “Old Economy” some tendencies used to say:
“the reach people eats because the poverty of poor people” (but the poor people had a job); now
with the “New Economy” one could be saying in a near future: “there is people in the market; and
there is people outside the market”. None of them is “liberalism”, both are “libertinism” (out of
balance liberalism); but the second - the foreseeable outcome of the New Economy - is worse,
because we are talking about “exclusion”; and exclusion means “you are dead in life”.

This will be a process and clever-prepared people will become part of the new economy going
into the information economy; but simultaneously more and more people will be excluded from
the market and consequently their freedom denied; they will try to survive anyhow, one way will
be by depredation of nature, other by delinquency or by any unimaginable mean; and the
“positive feedback” of the information economy - of the New Economy - will end. As this will be a
process, it could bring along a dangerous “negative feedback”: the reaction against the
establishment and the attempt to return to extremist solutions of the past.

The best way would be to avoid this undesirable scenario by avoiding -- as Donella Meadows
suggests -- the “growth for growth” that originates a great deal of economic richness
concentration but at the same time originates increasing of poverty and hunger as well as
environmental destruction. Problems created by growth can not be solved with more growth. It is
necessary to grow, yes but with development extending and not concentrating the well-being.

Today as per the World Bank information, the planet has more that 6,000 million inhabitants;
1,200 million earn no more than US$1.00 per day; 2,400 million earn no more than US$2.00 per
day; and 251 persons earn the total of the 2,400 million poor population.

Reduce excessive earning is a rational and balanced way around “positives feedback” (within the
system we live); reducing growth acceleration, is usually more powerful and effective as leverage
point that to strengthen “negative feedback” (negative feedback: brings information about what,
and under what circumstances, things are going in the opposite direction than the variable that is

14
driving the model - for instance: growth ... that would be income distribution, natural habitats,
freedom ???)

Change the trade-off between short tem and long term is a must. This means an imperative
decision to modify our behavior passing from temporary actions based on momentaneous
relationships over short term horizons to well-being generated permanent actions based on
continuous relationship over long term horizons.

Part VIII

The Competitive Cooperation

Going back to the limits of the "environmental space", within them different life styles can
coexist based on the natural differences between the people: intelligence, ability, effort, work
dedication, responsibility and also opportunities; reducing the gap between egoism and ethics;
conforming therefore the well-being flow that can be conceptually approximated to the elliptical
figure, where those with higher
standard of life are nearer the
midpoint of the ellipse centers
coming near at the upper level of
the environmental space; and
above which OVER-CONSUMPTION
those with less well-being but Upper Limit is ecologically un-sustainable

with a dignified standard of life,

ENVIRONMENTAL SPACE
will be located remoter of the ELLIPTICAL APPROACH
Well-being Curve

centers and near the lowest level

of the environmental space. The Lower Limit under which POVERTY
is socially un-sustainable
distance between the centers
and the ratio of the ellipse, will differ from one reality to another and the area will be inversely
proportional to the "per capita GNP" of the community that is measured, or else to the average
well-being. The distance between the centers will have relation with the differences of well-being
between the diverse layers of the same society.

This elliptical approach -although hypothetical- tends to the relative balance that is more realistic
than the equitableness principle (normally understood and rejected by its subtle interpretation as
equality). Nevertheless, it is desirable to walk -and if possible- to obtain a reasonable approach
towards the fairness in opportunities; but from that point on, the personal well-being evolves

15
based on the differences in intelligence, ability, effort, dedication and responsibility of each
person.

"the first dimension of the global crisis is actually that our environment is overused and
that the stability of the systems that support the life, is threaten" Joachim Spangenberg

Perhaps –risking to be qualified as presumptuous- this could be the windy exit for the New
Economy because we cannot go against the "natural monopolies"; they are natural and nothing
fall from the heaven except the laws of nature, and a wise set of "self-organizing” rules is needed
to achieve success. Therefore it may be wise to look for a competitive cooperation around
those inevitable natural monopolies and instead of persecuting them or trying to avoid them, to
make them enter into a new conception of the "free market", changing the present paradigm,
organizing through and around them a new system in which there will be a timely coexistence of
positive (aggregation) and negative (regulation) feedback, with "free entrances" to the market.
Thus for instance, it will be very important to organize the suppliers-clients chains and to
propitiate the orientation of "natural monopolies" economic surpluses -in an organized and
transparent way- to support the R&D efforts for the evolution of the industry and the economy
(and of course of the society), towards the eco-efficiency and the sustainable development.

We have to take into consideration that most of the "mental models" in the world, are not
prepared for the New Economy and that will be resistance –as already may be noticed in many
countries- unless the future benefits for the inhabitants of the planet altogether can be
demonstrated and the freedom is not limited. The USA is not the world; it is simply a developed
country. There are other problems to be considered as: the world population, the drugs, the
alterations of climate at global level and of course the over-consumption, among others; and to
complete this concept, it would be important also to remember that as result of the existing
feedback within the system, we may have to correct the design and the dimension of the system.
The power of the feedback must be comparable to the power of the stock that it is trying to
stabilize. When there are powerful corporations in the market, the government must be stronger
to intelligently promote and regulate the system

16
Part IX

The Competitive Cooperation: The System – concepts (based on Donella Meadows papers)

In order to understand the Competitive Cooperation concept, we must frame it within a systemic
context; and to understand this context, we must consider that -in addition to the basic structure
and the risks involved- a system must define parameters, stocks, delays, flows, feedback's, etc,
within its dynamics.

What is important -once the system is well prospected- is to monitor its state throughout the time,
observing and influencing in stocks, delays, input and output flows; the feedback circuits (the
positives generating and the negatives regulating). The concept of feedback: "Let’s imagine a
room in summer, that we want to keep in 19 degrees Celsius and people begins to enter the
place; each person adds the heat of its body -positive feedback- until the desired level of 19
degrees is surpassed; the thermostat that perceives the difference is driven then and shoots the
air conditioned injecting cold air to the room -negative feedback- to regulate the temperature and
to return it back to 19 degrees". "Now we imagine another room in winter, that we want to keep in
23 degrees Celsius and the external temperature that influences the room temperature is
decreasing, causing the temperature of the place lowers –positive feedback- below the desired
level of 23 degrees; the thermostat then that perceives the difference is driven and shoots the
heating engine that injects heat to the room -negative feedback- to regulate the temperature and
to restitute the level of 23 degrees".

The “state of the system” is whatever standing stock is of importance; amount of water behind
the dam, amount of harvestable wood in the forest, number of people in the population, amount
of money in the bank, whatever. System states are usually physical stocks, but they could be as
well nonmaterial ones: self-confidence, degree of trust in public officials, perceived safety of a
neighbourhood.

State of
INFLOWS OUTFLOWS
the System

perceived
state

discrepancy

17
There are usually inflows that increase the stock and outflows that decrease it. Deposits
increase the money in the bank; withdrawals decrease it. River inflow and rain raise the water
behind the dam; evaporation and discharge through the spillway lower it. Births and immigrations
increase the population, deaths and emigrations reduce it. Political corruption decreases trust in
public officials; experience of a well functioning government increase it.

Insofar as this part of the system consists of physical stocks and flows -and they are the bedrock
of any system- it obeys laws of conservation and accumulation. You can understand a bathtub
with some water in it (the stock, the state of the system) and inflowing faucet and outlawing drain.
If the flow rate is higher than the outflow rate, the water gradually rises. If the outflow rate is
higher than the inflow, the water gradually goes down. The sluggish response of the water level
to what could be sudden twists in the input and output valves is typical; it takes time for flows to
accumulate in stocks, just as it takes time for water to fill up or drain out of the tub. Policy
changes take time to accumulate their effects

The rest is the information that causes the flows to change. If you are about to take a bath, you
have a desired water level in mind (your goal). You plug the drain, turn on the faucet, and watch
until the water rises to your chosen level (until the discrepancy between the goal and the
perceived state of the system is zero). Then you turn the water off. If you start to get into the bath
and discover that you’ve underestimated your volume and are about to produce an overflow, you
can open the drain for a while, until the water goes down to your desired level.

Very simple so far. Now let’s take into account that you have two taps, a hot and a cold, and that
you’re also adjusting for an other system state; temperature. Suppose the hot inflow is connected
to a boiler way up two floors, so it doesn’t respond quickly. And you’re making face at yourself in
the mirror and not paying close attention to the water level. The system begins to get complex,
and realistic, and interesting.

Mentally change the bathtub into your checking account. Write checks, make deposits, add a
faucet that keeps dribbling in a little interest and a special drain that sucks your balance even
drier if it ever goes dry. Attach your account to a thousand other and let the bank create loans as
a function of your combined and fluctuating deposits. Link a thousand of those banks into a
federal reserve system. You begin to see how simple stocks and flows, plumbed together, make
up system way too complex to figure out.

And thus the system of a State: government, society, legal frame, companies, institutions, labour
force, contributors, markets, consumers, the GNP, banks, credits, deposits, imports, exports,

18
external credit, trade balance, balance of payments, taxes, fiscal balance, external debt,
international exchange rates, reserves, etc, etc…

Part X

The Competitive Cooperation: Systemic Articulation

The money is not real…

It's a tracking system, a scoring system, to keep track of people's transactions. The real
resources are the human resources and the natural resources in these exchanges. We've gone
from shells and barter to coins and paper money. Now we've gone to global electronic money.
Suddenly people are realizing the possibilities in the "local information society."

The GNP is simply a number that goes up an down…

I have been proposing an alternative to the GNP for many years, one that would score the game
a little more sensibly than GNP. People don't realize that because GNP doesn't differentiate
between good and bad and it all is added together as if the GNP is going up, most of our
industries today are ameliorative; they're around to clean up the mess and to replace all those
services that we destroyed in our careless way…

The last symptom of the problem of the GNP growth model is that we're now getting GNP growth
by destroying jobs instead of creating them. The model has completely broken down, and it's
obvious that it has to be changed. The only way we're going to deal with that really is at the local
level, where people will have to create some of their own safety nets, and we're going to have to
match unemployed people with tasks that need to be done in their communities using electronic
debit and credit systems

... Hazel Henderson

With the Competitive Cooperation what it is intended is to migrate... “… from the theory of
game and scarcity … to the systemic theory and abundance …”

It is so that each organization scenario -corporative or institutional- must be defined as a

SYSTEM, in which all and every one of the actors –participants / stakeholders- will interrelate
through the processes, identifying in each of process, the risk points throughout the system for its

19
appropriated handling. Naturally the system is dynamic and therefore, also is the management of
its inherent and external risks. The key of success, is that the WHOLE SYSTEM MUST BE
COMPETITIVE and SUCCESSFUL; only in such way, all their participants will be successful.
Then it must be clearly determined which is the nature of the system (normally defined by the
economic or institutional sector of activity) and all the actors must concentrate its efforts, so that
the main actor(s) will be successful, because that is the only way for the SYSTEM to be
competitive and achieves success. In the eventuality of one or more of the actors want to yield
more of the foreseen level on another actor(s) cost, the system will become unbalanced and
stops being competitive, then all participants will lose, including those actors that circumstantially
earned more than they should had earned.

That is the key for the Competitive Cooperation: well defined systems, with clear roles and
regulations, conscientious and committed participants in a way to guarantee the productivity and
competitiveness of the system and in that way the yields and profits for each and every one of the
stakeholders, within a lasting scheme based on the balance related to the involved efforts and
costs.

The system thus become element or cell of a greater (or hierarchical higher) system and so on
until reaching the State System where the government policies and legal framework should be
well defined and known. The Government must be essentially promoter and intelligently regulator,
to attain a dynamic economic activity with extended well-being, within the "environmental space"
–previously explained- in which the top level is one with comforts without deprivations but with
rational and moderated consumption; and the lowest level, one with a worthy minimum standard
of life for human being; all this within an ecologically sustainable context, with capitalization of
natural resources and priority in the use of renewable energies.

In such way the GNP will develop with quality as a result of the capacities and requirements of
each society and each country; and the money will not be the wealth but only the mean to
facilitate the interchange among the systems and also the registering unit for the transactions.
The true wealth, are the human resources and the natural resources involved.

FREDDOM is the essence of the Competitive Cooperation, but the “freedom” understood as the
"access to well-being"; it is for that reason that we sustain that the Competitive Cooperation is a
synonymous of the "Free Market of Cooperation" that result in a paradigmatic evolution of the
"Free Market of Competition" that has regrettably evolve to libertinism, where the “jungle law” -
the law of the strongest- grazes and dominates.

20
Perhaps with this Free Competitive Cooperation, it will be surpassed the already obsolete
paradigms of the "right", the "center" and the "left" with their diverse shades and extremes,
although the “center” has been and continues being, a nonexistent space: the equilibrist cord.

Part XI

The Competitive Cooperation: Management Tools I

In the scenario of the Competitive Cooperation, the Strategic Planning is a key tool for
management that stays effective, but must continue to evolve in order to maintain its worthiness
incorporating to the value chain -in an integrated schematic elaboration-, the System Dynamics,
the Risk Management (within its modern conceptualization) and the Intelligent Organization
Hexagon on whose first five disciplines were proposed with vision by Peter Senge back in 1990
–Systemic Thinking, Team Learning, Shared Vision, Mental Models and Personal Control- same
that is complemented with the today unavoidable sixth discipline: the Sustainability and Eco-
efficiency due to their commitment with the future.

Indeed the approach of Senge’s Learning Organizations fitted within an every time more
dynamic conception applied of the Strategic Planning, will be able to finally show its efficient
application to business and socio-economic system in general.

The evolution of Strategic Planning within this framework, does not imply too many changes in
the business definition, except that a matrix method should be applied to facilitate the process.
The subject of values should be extended to tangible grounds linking their impact in the market
and society; they should be formulated in terms of sustainability and social responsibility.

The entrepreneurial and corporate definition must reflect the strategic intent and be
formulated within the present scenario projected to the future, in terms of vision, mission (social
responsibility), main objective (economic and entrepreneurial responsibility), and white space
opportunities.

Once the enterprise -or corporation- has been properly defined the Business Ecosystem should
be drawn and listed in terms of actors –stakeholders- and factors. Then the inter-working actors
matrix to allow proper analysis must be structured.

21
The Business Ecosystem - Stakeholders Matrix allows a qualitative prospecting of the risks
scenario, both in the external and internal areas, allowing a first appraisal of risk exposition. This
appraisal is developed through a matrix analysis (diagnosis - prospection) within the system in a
way to make a first approach to the System Dynamics and to the need of programs oriented to
facilitate the decision making process and the managing of the systemic risk.

Key questions must be answered:

• What risks does the business face?

• Is it possible to quantify and monitor those risks?
• What risks can be managed within the Organization?
• Does the Organization has available the appropriated infrastructure and control policies and
processes to effectively manage the risks it faces or takes?
• Are there people in the Organization accountable for each and every risk?
• Is there a clear decision making hierarchy?

With the qualitative prospection of risks, a general strategic analysis within the system dynamic
scenario should be carried out. The suggested model to be followed is based on “The Learning
Organization Hexagon ” five of which elements are the five disciplines of Peter Senge, oriented in
management terms; the sixth element as it has been mentioned, is the Sustainable Development.
This model will facilitate an orderly analysis.

The strategic prospection should be boarded by process -externally and internally- to identify the
dynamic elements that will allow the prospection of general strategies among the Learning
Organization components, starting with the co-evolution and dynamic adaptability.

With the strategic prospection of the Dynamic Business Ecosystem, the Strategic Business
Profile is completed. Then the strategic planning team will be in the best position to define and
develop the Key Strategic Objectives and their specific strategies that will allow in a later
process to develop the budget and eventually the business economic and financial projection.

For strategic control purposes it will be convenient, while developing the key Objectives, the
identification of Critical -or Key- Factors of Success according with the functional scheme
organization, identifying the risks involved in each factor.

In this context, the Organizational Development will have to evolve and also migrate from the
hierarchic organizational chart paradigm, towards radial functional organizational charts based on
the "team work" with systemic and risk management mentality.

22
Part XII

The Competitive Cooperation: Management Tools II

In a world characterized by the internationalization of a diversity of interest gaped with the almost
universalized INTERNET, what everybody calls Globalization, the last decade management tools
will be left behind unless they are modernized and dynamically integrated.

Within this context, new tools are emerging and concurring to reinforce the corporate strategy;
those are the so called System Dynamics which mentor is the Professor Jay Forrester (Sloan
MIT) and the new Risk Management methodologies: Enterprise Risk Management (ERM), Risk
Mapping (RM) and Process Mapping (PM).

The synergy between System Dynamics and these new tools of Risk Management, configures
the new grounds for strategic and operational development of modern enterprise which operate in
a diversity of scenarios where there is a common factor: the risk.

Risk is unavoidable and drives markets. The ability to manage risk is critical to growth and
survival. In today’s competitive global markets, every business faces risks, and in the even more
competitive markets of tomorrow, firms must learn to quantify and manage those risks if they
want to thrive.

Volatility and the interplay of competition, economic conditions, product designs and asset
structure have changed forever, so too, have the penalties for organizations that make the wrong
decisions, and do not react to the dynamic of competition and financial markets.

Efficient Risk Management is imperative to the performance and long-term viability of any
business. It is an old and at the same time a new and non lasting management philosophy. It is
old because risk management was always there, but mainly associated with the insurance type of
instruments, mostly applied to protect physical and human assets. Now ERM attempts to bring
together the management of all risks -financial, operational, strategic and traditionally insured
hazards- into a single portfolio, integrating them within a dynamic perspective. The manager who
does not handle the risk efficiently, is destined to fail.

Risk Management must then be systemic, so the System Dynamics have to be visualized, and
models to improve decision making are to be developed. For a risk management system to be
effective, it must be comprehensive, including all risks. It should use market benchmarks or risk

23
factors so the portfolios of risks are modeled to a detailed enough level in order to accurately
portray the risks.

Out of the computer tools, the risk management must fundamentally be based on the human
experiences, which are directed by the mental models, based on which the decisions are finally
taken; nevertheless, the mental models must be reinforced -making use of the modern
technology- by means of the construction of computer models that will prospect and run
simulations of dynamic scenarios, supporting in such way the mental models and the process of
decision making.

Finally, pay attention, when we think today that in new situations reengineering is the solution,
without no doubt we must re-think on considering a change of paradigm, from the
reengineering to the reinvention, this shift is indeed the integral application of the System
Dynamics and the modern tools of Risk Management, for which it is due to begin by the
elaboration of a Strategic Plan based on the characteristics that have been described.

Part XIII

To conclude the technical aspect of the proposal we will recall the master piece of Donella
Meadows when she was seated back in 1996 or 1997 in a meeting “about how to make the world
work better” --although “it was in fact a meeting about how the new global trade regime, NAFTA
and GATT, and the World Trade Organization, is likely to make the world work worse” as she
stated. The more she listened, the more she began to simmer inside: “This is a huge new system
people are inventing” she said to herself. “They haven’t the slightest idea how the complex
structure will behave” she said back to her: “It’s almost certainly an example of cracking the
system in the wrong direction – it is aimed at growth at any price!!. And the control measures
these nice, liberal folks are talking about to combat it –small parameters adjustment, weak
negative feedback loops (regulation leverage point)-- are way too puny!!”

Suddenly, without quite knowing what was happening, she got up, marched to the flip chart,
tossed over a clean page and wrote (original list: 10 points, she later complemented to 12; from
lowest to highest leverage):

12. Constants, parameters, numbers (such as subsides, taxes, standards)

11. The sizes of buffers and other stabilizing stocks, relative to their flows

10. The structure of material stocks and flows (such as transport networks,

24
 population age structure)

9. The lengths of delays, relative to the rate of system change

8. The strength of negative feedback loops, relative to the impacts they are
trying to correct against

7. The gain around driving positive feedback loops

6. The structure of information flows (who does and does not access to what
kinds of information)

5. The rules of the system (such as incentives, punishments)

4. The power to add, change, evolve, or self- organize system structure

3. The goals of the system

2. The mindset or paradigm out of which the system –its goals, structure,
rules, delays, parameters- arises

1. The power to transcend paradigms

Everyone in the meeting blinked in surprise: “That’s brilliant!”, others breathed: “Huh?”. Donella
realized that she had a lot of explaining to do (and also a lot of thinking). Quickly she completed
the last point, as the most effective: The power to transcend paradigms. We will comment directly
on the Paradigm issue:

The mindset or Paradigm out of which the System arises

The shared idea in the minds of society, the great big un-stated assumptions (un-stated because
unnecessary to state); everybody already know them, they constitute the society paradigms, or
the deepest set of beliefs about how the world works.

‘There is a difference between nouns and verbs’. ‘Money measures something real and has
meaning, therefore people who are paid less literally worth less’. ‘Growth is good’. ‘Nature is a
stock of resources to be converted to human purposes’. ‘Evolution stopped with the emergence
of Homo sapiens’. ‘One can “own” land’ … Those are just few of the paradigmatic assumptions of
our current culture, of which have utterly dumfounded other cultures, that thought only about what
for them was obvious.

Paradigms are the sources of systems. From them, from shared social agreements about the
nature of reality, come system goals and information flows, feedbacks, stocks, flow and
everything else about system.

25
The ancient Egyptians built pyramids because they believed in an afterlife. Skyscrapers are built
because it is believed that space in downtown cities is enormously valuable. Whether it was
Copernicus and Kepler showing that the earth is not the center of the universe, or Einstein
hypothesizing that matter and energy are interchangeable, or Adam Smith postulating that the
selfish actions of individual players in markets wonderfully accumulate to the common good,
people who have managed to intervene in systems at the level of paradigm have hit a leverage
point that totally transforms systems.

One could say paradigms are harder to change than anything else about a system, and therefore
this item should be lowest on the list, not second-to-highest. But there’s nothing necessarily
physical or expensive or even slow in the process of paradigm change. In a single individual it
can happen in a millisecond. All it takes is a click in the mind, a falling of scales from eyes, a new
way of seeing. Whole societies are another matter. They resist challenges to their paradigm
harder than they resist anything else. Societal responses to paradigm challenge have included
crucifixions, burning at the stake, concentration camps, and nuclear arsenals.

So how do you change paradigms? Thomas Kuhn, who wrote the seminal book about the great
paradigm shifts of science, has a lot to say about that. In a nutshell, you keep pointing at the
anomalies and failures in the old paradigm, you keep speaking louder and with assurance from
the new one, you insert people with the new paradigm in places of public visibility and power.
One doesn’t waste time with reactionaries; rather one works with active change agents and with
the vast middle ground of people who are open-minded.

Systems folks would say you change paradigms by modelling a system on a computer, which
takes you outside the system and forces you to see it whole. They say that because their own
paradigms have been changed that way.

The power to transcend Paradigms

There is yet one leverage point that is even higher than changing a paradigm. That is to keep
oneself unattached in the arena of paradigms, to stay flexible, realize that no paradigm is “true”,
that every one, including the one that sweetly shapes your own worldview, is a tremendously
limited understanding of an immense and amazing universe that is far beyond human
comprehension.

26
Part XIV
The summary is to migrate from the “free market of competition”
to the “free market of cooperation” (Luis Bravo Jr.)
… or Competitive Cooperation.

Strategies on how to bridge the trade-off between short term and long term investment within the
frame of Sustainable Development are key to the future of society and economic frameworks
throughout the world.

If we keep our minds focused in reaching short-term results, what will be ahead for our
Planet and for us, is just the “short term”. If we evolve toward a long term mentality, with
stable profits; what the Planet and its inhabitants will see, is the “long term” with stability
and well-being. (Luis Bravo Sr,)

Matthew J. Kiernan (Investment Capital Advisor):

... Companies that are light apart in their environmental risk and performance level, continue
to enjoy identical investment rating from Wall Street. Most analysts and investors, it seems,
remain un-persuaded that environmental considerations are anything more than superficial
and temporary blip on their Bloomberg screens.

Mounting evidence suggests they are dead wrong. What they are sleeping through is nothing
less than the beginning of a profound and worldwide industrial restructuring.

Kyoto-style multilateral environmental treaties, tightening environmental regulations, multi-

million dollar cleanup costs, exploding lender liability, consumer boycotts, shareholders
activism, and even executive jail sentences for polluters, have begun to impact corporate
bottom lines with unprecedented speed and ferocity. Increasingly, managing environmental
risk and investment opportunities effectively will determine whether companies outperform
their competitors, lag behind, or disappear altogether.

The Kyoto climate change agreement, for example, will likely require reductions of as much
as 40% in US industry’s CO2 emissions. This is not a trivial or incremental adjustment. In the
electric utilities sector, even a modest carbon tax of $20 per ton would extract roughly $60
billion a year. Given the 2,500% differential in the “carbon efficiency” of the top 100 US
electric utilities, this burden clearly will not be shared equally by all companies. Investors will

27
have a strong incentive to distinguish the future winners and the losers (now protected
because of Mr. Bush position regarding the Kyoto Agreement).

Access to capital, customers, suppliers, and committed employees –in other words
competitiveness- already depends more and more on companies’ environmental performance
and efficiency. Some senior Asian industrialists have termed this as Eco-industrial
Revolution.

In the 21st century, individuals and even entire industrial sectors will need to make strategic
and operational adjustments of un-precedent proportions, or else face obsolescence and
even extinction. British Petroleum and Monsanto are only two examples of major global
companies that are literally reinventing themselves largely in response to the imperatives of
the Eco-industrial Revolution.

Few intrepid, leading-edge financial analysts and investors have recently recognized a
strong, positive, and growing correlation between industrial companies’ eco-efficiency and
their competitiveness and financial performance, whether measured as “rate of return”, “return
on equity”, or “stock market return”.

Eco-efficiency is simply the capacity to produce greater shareholder value with lower
level of environmental risk and resource inputs than one’s competitors

... Wall Street rating agencies persist in regarding companies with differential as much as 500
basis points in their environmental risk profiles as identical credit and investment risks.

... What has been lacking, until recently, is a set of robust, credible analytical tools and
database capable of translating environmental risk and performance profiles into terms
meaningful to financiers and investors. These tools now exist ranging from straightforward
environmental data profiles to sophisticated investment models such as “Innovator’s Eco-Risk
21”, which translates environmental risk into share-price analysis and investment insights. ...

... A recent Price Waterhouse study of 1,100 major US manufacturers revealed that over 62%
had major but undisclosed environmental liabilities. ...

... As environmental regulations continue to tighten and globalize, competitive pressures

mount, and capital markets become more sensitized to the financial consequences of eco-
efficiency, investment performance gains of 500 basis points and even more should become
achievable for companies with superior environmental risk performance and profile. ...

28
 ... willfully ignoring newly available and increasingly strategic information on the risk levels
and out-performance potential of major investment alternatives, serves nobody interests, least
of all those of plan sponsors.

The question is not to confront a system against an other, or a model against and other or
financiers and investors against social thinkers and environmentalists. What we should look after,
is for integrated solutions where a balance should be found in the trade-off between short and
long term, generating well-being among all stakeholders involved, and satisfaction among
investors that will see their investments, productive and sustainable throughout the time in a
healthy Planet.

As nobody can argue, the final goal should be to reach well-being extended all throughout the
world, and then bigger markets for corporate and for all level economic activities. That simply
means to evolve the game theory approach and accept the fact that in some markets –specially
the IT based ones- the common denominator will be abundance, no scarcity. Economists have to
recognize this unavoidable way and then update their analysis.

Nobody should be left behind, but all should have the same objective: sustainable gradualized
multilevel well-being for everybody, within the frame of the “environmental space” for each
society: The Sustainable Globalization.

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Part XV

¿How we can take your ideas into practice?; ¿What type of government you would foresee
to adopt such system in an business world that does not yet understand nothing else but
to make more money?; were -days ago- the questions posed by a friend.

I answered him:

Definitively there is no free lunch and this is not an easy issue. But modernity is pulling the carpet
to the "right" as well as to the "left" and you know very well that the "center" is the no body land
(the equilibrist cord). With the gradual but unstoppable fall of the "right" -that does not die
because it continues to be stronger than the "left" not because it is better and neither the vice
versa- the "neoliberalism" will also die by its own contradiction.

The foundation of the neoliberalism -we reiterate- is the "Free Market of Competition", which
naturally considers the concurrence of "competitors"; but the "New Economy of the 21st Century”
-which is a new name for the "neoliberalism" since the second part of the 90s- privileges the
"natural monopolies", as well as other types of corporative monopolies; of course the "temporary
monopolies" that evolve to "market dominant positions", because they are also "natural"; in
addition they privilege the "oligopolies" and the "cartels". On the other hand and in the name of
"productivity" and of the "reduction of costs" -with regard to the "robotics" (that began in Japan)-
the great industrial platforms emerge and from the same great production line, similar products
with different brands are manufactured going out to the market to compete to each other.

In summary "Free Market of Competition" that is the sustenance of the Neoliberalism and of the
New Economy (that ends being only a new denomination for the same model because the
previous is wearing-out), tend to reduce the number of competitors in the market, therefore there
is less competition and less job generation and consequently the "exclusion" arises. This
"contradiction" will end killing the model and not even Greenspan dares to explain it and avoids
the issue.

I do not know if the "left" realizes it, but it perceives the "decay of the right" and wants to take that
space. Fortunately we live in a modern world that is developing (I was wrongly to say "is
evolving") and "globalizing", and nobody can stop it due to modernity and the IT technology; and
because this is "generational". ¿Do you think that you can sell either the “right” or the “left” tablets
to the new generations?. To those that are finishing their careers still can be; the best MBAs are
caught by the "right" as dependent herds relatively well paid so that they live reasonably well and
stay sleepy. But ¿for how long this capacity may absorb those herds?

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I do not believe too long; perhaps to the time the present "Mercantilist Globalization" –
consequence of modernity and neoliberalism- holds; until its instruments: the WTO, the WB, the
IDB and the IMF, will CHANGE with a new -urgent and imminent- "Bretton Woods " (after 61
years), that will have to orient a "new order"; but ¿what "new order"?; ¿the rescue of the "right",
the "neoliberalism" and the "dollar", that would be the harder dominant tendency present in such
event?; I do not think so, although -I reiterate- it will be the strongest tendency in the event
because the presence of the most "powerful stakeholders” and their "well paid employees" in the
form of the above mentioned institutions delegates, Central Banks and the Ministries of Economy
representatives of the countries that will attend.

Hopefully others will participate to contribute with new thoughts, but, outside of that big event, we
will be with all the others, but not with banderols of "Social Thinkers" or "Environmentalists", but
with the flag of the " Sustainable Globalization " that does not exclude nor condemn nobody,
not even to those that will be inside participating in the event (all the opposite, they will be also
very important actors, but will have to abandon its mercantilist and speculating mentality, to take
a positive mentality: enterprise, corporative and business wise, without "exclusions", with
responsibility and commitment with the "sustainability" and the LIFE).

As curiosity we can advance something that would seem a madness at a first sight: with the
"Competitive Cooperation", even the "External Debt" of countries as Peru could be paid
generating jobs and as consequence income for the state treasury.

For it one is due to understand that the foundations must be: freedom, market, competitiveness,
modernity, extended well-being (that is to say, more market, more business opportunities) and
the preservation of the environment, with capitalization of the natural resources.

The globalization does not have to be a perverse equilibrium; it must be a virtuous one

The "Sustainable Globalization" that is the "virtuous balance", will be a technical, economic and
social proposal, that will generate to change the paradigm of the "free market of the competition"
for the "free market of the cooperation" or "Competitive Cooperation".

A Non-Excluding Model, that definitively requires to orient the EDUCATION, with base to its
technical foundations (that –as we have seen through this essay- are many and varied) and that
therefore has to be generational; but as it is no longer possible to wait, we must begin today,
promoting the shift of "fundamental paradigms" right now; except for error, omission or better
proposal, that avoids the "exclusion" and assures the extension of well-being and the worldwide
continuity of life.

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I ask: ¿which are the technical foundations of the "right" and/or of the "left"?. And today my friend,
if there are no technical foundations, there is no viability for any model.

Of course, if it is not understood that the WEALTH is in the human resources and in the natural
resources that are the base of productive means; and we continue thinking about the paradigm -
or rather I should say about the fallacy- that the "money is wealth", we will learn when the life will
be extinguishing in our planet. ¿Do we want to reach that point?. I assure you that within that
possible scenario, the today paradigmatic called “rich people" will be the first in perishing flooded
of money that will not serve to them to pay a glass of water, less still to be buried with dignity.

Perhaps we must consider the migration from the model of "presidential government" to the
model of "parliamentarian government" with renovations by thirds with only one successive
election?

What we have exposed in this Essay of fifteen articles, is only the "top of the Iceberg"; there is a
lot of work done, much more work to be done, a long way to walk and short time to arrive.

Best Regards

Luis

GRAPHIC MIGRATION:

From no-Sustainable Development to Sustainable Development

32
We should evolve from …

No Sustainable Development

Democracy Low Participation

DEVELOPED EMERGING
ECONOMIES ECONOMIES

cy
Economic
Development en Over Consumption Low Development
ici

Po
eff

Social & Human

ve
o-

rt y
Ec

Pollution Acid Erosion

No

Rain
Pollutant
Urban Spaces Low
Technologies
Well-being in
Traditional
Rural Areas
Industries
Negative Impact
over Social Space
FREE MARKET SURVIVING
ECONOMY ECONOMY
Indiscriminated
Use of Natural LOW
ECONOMIC CAPITALIZATION
Resources
CAPITALIZATION SOCIAL & HUMAN
(with no inclusion)

Natural Economy

Nature Depredation / Environmental Degradation

… to …
Sustainable Development

Democracy Participation
DEVELOPED DEVELOPMENT
ECONOMIES ECONOMIES
Economic
Su
cy

Development Rational Consumption Social & Human

sta
en

So able

Development
ici

in
cia Le
eff

lly ve

Pollution Control
o-

Environmental
Ec

and Surveillance Environmental Space

Cleaning
l

Clean Less Less Well-being and

Technologies Pollution Urban Spaces Erosion Cultural
Modern (housing & infrastructure) Development in
Industries Rural Areas
Society and Culture

FREE MARKET IMPROVED

ECONOMY ECONOMY
Reduction of Use
and Resources
ECONOMIC CAPITALIZATION
Recovery
CAPITALIZATION SOCIAL & HUMAN
(with inclusion)

Natural Economy NATURAL CAPITALIZATION

Environment Preservation / Development of Natural Resources

33