Olden times: the land economy, the labor economy and the service economy

I’m going to throw out two numbers and ask you to keep them in mind: 3.7 and 2 trillion.

When I first studied economics 30 years ago, the textbooks said that businesses and economic activity always had three basic ingredients: land, labor and capital. Land, what folks like Paul Hawken now call “natural capital,” represented the raw materials needed to make things. This work of making things was presumably done by people, that is, labor. And capital, the third component, was understood to be the machines, equipment, and technology which increased the productivity of both land and labor, along with the financial investment which sustained it. Thirty years ago, most economists were certainly not friends of land or labor, but they did at least understand that both were essential to a healthy economy.

All of that has changed. First, we shifted from an economy based primarily on manufacturing goods to one based on providing services. Now this is not altogether bad, as many services are useful, even essential to a healthy world. But this transition to a service economy, particularly in an increasingly globalized world, accelerated our estrangement from the land, both its wonders and its limits. Of course we all still used stuff ““ food, oil, steel, computers, appliances ““ in fact, we used more of them than ever. It’s just that we weren’t growing or making those things anymore, preferring to outsource and offshore these functions.

The service economy soon gave way to the so-called information or “knowledge” economy. This is the notion that economies based on things, or even tangible services, have been replaced by an economy based on ideas. So strong was ““ and is ““ this belief in a “knowledge” economy, that the old notions of land and labor, even capital in the tangible sense, became passé. George Gilder, a frequent writer and cheerleader for this new economy said, “We have seen the overthrow of the tyranny of matter”¦. Our ability to create wealth is not bound by physical limits, but by our ability to come up with new ideas. In other words, it’s unlimited.”

lehman brothers
Lehman Brothers
Photo: Mark Lennihan , for AP

But ideas, of course, are abstractions. You can’t eat them or heat your home with them. They don’t filter the impurities out of water or sequester carbon. To believe in a “no limits” economy is to believe that we can live from abstraction, what James Howard Kunstler calls the “fictitious economy.” It shouldn’t surprise us, then, that the final stage of this economic paradigm is the global financial services sector, where “wealth” became completely estranged from productive activity, where liabilities ““ things like risky mortgages, or the energy speculations of Enron — could be “repackaged,” and, voila, stock values soar.

And that brings me back to my numbers.

Wall Street lost $2 Trillion dollars over the past few weeks. That’s nearly $7,000 for every man, woman and child in this country. If there really was that much wealth to go around, we’d all be rich. But it isn’t real. What is real is the 3.7 acres of productive land per person that remains on our planet. A century ago we had 14 acres per person. Now it’s 3.7. That land is the true foundation of our wealth. If accelerating climate change and the Wall Street debacle have taught us anything, it should be that we’d better target our capital and use our labor to restore this shrinking base of land and build communities of modest, but real wealth.

Anthony Flaccavento is a national Food and Society Policy Fellow and a part time organic farmer. He is also the Executive Director of Appalachian Sustainable Development, based in Abingdon, Virginia.

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