From Ego-System to Eco-System Economies

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= Book: Leading from the Emerging Future - from Ego-system to Eco-system Economies. Otto Scharmer and Katrin Kaufer.

ISBN = 9781605099262

See also Transitioning from the Ego System to the Eco System Approach – Otto Scharmer's blog post about the book.


Via Kelvy Bird:

"In their new book Otto Scharmer and Katrin Kaufer suggest that addressing today’s global challenges requires a threefold revolution: a revolution of economic thought from ego-system awareness to eco-system awareness, a revolution of relationships among partners and stakeholders from reactive to generative, and an institutional revolution from hierarchy and organizing around special interest to co-creative eco-systems and organizing around commons. Their intention is to contribute to the currently emerging global transformation and new economy movement by connecting the dots across eight acupuncture points. The authors feel these points need to be addressed in order to lead personal, relational, and institutional transformation to a new economy that creates well-being and happiness for all. The book also offers a short introduction to Theory U and presencing, that is, the art and practice of leading from the emerging future." (


Kristian Stålne:

"Scharmer and Kaufer present an evolutionary economic framework, a stage theory for socio-economic development. This has much resemblance with the Spiral dynamics framework, although it seems not to be related to psychological development according to the field of adult development. The stages are, however, associated to a certain mindset or core belief and mode of technology. They refer to the stages as Economy 0.0, 1.0, 2.0, 3.0 and 4.0 that seem to be in good correspondence with the Purple, (Red)/Blue, Orange, Green and the Yellow value systems, respectively, as briefly follows up to 3.0:

  • Society 0.0 is referred to as pre-agrarian, which seems to correspond to the purple value system in Spiral Dynamics where man is embedded in “mother nature”. The corresponding mindset is premodern awareness, typical of indigenous tribes.
  • Society 1.0 is seen as state-driven society with stability as its main focus. The description of the logic corresponds to the blue value system (the previous red value system seems to have no correspondence in Scharmer’s and Kaufer’s framework, or could be included in this 1.0 stage). This stage corresponds to a traditional awareness.
  • Society 2.0 is associated with the industrial revolution, the rise of business with competition on a de-regulated free market (laissez-fair) and mass-consumerism. The main challenge of the system is growth, clearly corresponding to Orange in Spiral Dynamics terms. Scharmer and Kaufer refer to this mindset as ego-centric awareness, which gives a hint that they see this as a non-desirable stage in itself, being main responsible for the above mentioned crises.
  • Society 3.0, or stakeholder-capitalism, is described as dealing fundamentally with negative externalities of the previous stage, such as poverty, exploitation of low-income workers and the environment. Examples are European style regulated social-market economy. Technological advancement is characterized by the second industrial revolution with oil, combustion engine and chemicals. The 3.0 mindset extends from the 2.0 self-interest to a stakeholder-centric awareness and the main logic of this society can be seen as being a reaction towards the previous 2.0 and dealing with its limitations:

Measures to correct the problems of Society 2.0 include the introduction of labor rights, social security legislation, environmental protection, protectionist measures for farmers, and federal reserve banks that protect the national currency, all of which are designed to do the same thing: limit the unfettered market mechanism in areas where the negative externalities are dysfunctional and unacceptable. […] Stakeholder capitalism, or Society 3.0, as practiced in many countries, deals relatively well with the classical externalities through wealth redistribution, social security, environmental regulation, farm subsidies, and development aid. (Scharmer and Kaufer, 2013, p. 54)

Before going into the limitations of society 3.0 and moving on to the next stage, I will take a closer look at the most central problems that this stage is trying to address. It will be addressed in more detail due to its central importance to the question on the limits of the current economic system and of capitalism, and on possible ways forward.

The Challenges of the 3.0 Society or the Postmodern World

In Dawlabani’s analysis the Green value system is only elaborated on with respect to one theme, the knowledge economy, but gives only brief attention to the second theme that I think is of greater importance here: the distributional or social aspects. A third theme, perhaps of even more importance and also not more than briefly mentioned by Dawlabani, is the environmental concern and focus on sustainability. Both these themes can be described in terms of being in conflict with the modern Orange value system and with its most fundamental premises of economic growth. Here follows a description of the two latter themes and challenges according to Scharmer and Kaufer, but also with some other sources that I find useful and illustrative.


Beginning with the aspect or theme of environmentalism or sustainability, the perhaps most fundamental premise of an Orange economy is that it should grow and the most obvious critique from an environmental or sustainability perspective is that there are limits to growth on a finite planet (Meadows, Meadows, Randers, Behrens III, 1972). In terms of ecological footprint we currently overshoot the planet’s carrying capacity with 50 percent. This shift in perspective is sometimes referred to as going from an empty world to a full world (Costanza et al., 1997), where an Orange view of the world is one of abundance but Green views it as limited with a scarcity or recourses and a limited ability of the planet to absorb waste.

A common critique of the current market economy is that it fails to take into account externalizations, meaning that the environmental impact is not included in the price of a commodity such as an airline ticket that doesn’t include the cost of the CO2 being emitted or the many ecosystem services that we take for granted. An ecosystem service is something that nature produces that is of value to us, such as fresh water, soil, the air we breathe or bees pollinating our plants. A response according to the Orange value system is to assign an economic value to these ecosystem services, which would also allow the economy to continue to grow since more things of value are added to the economy. Giving the ecosystem and its services a value would mean that they can be taken into considerations when we make decisions on whether we should exploit such a resource.

This commodification of nature and attempt to subordinate nature into the economy, which can be seen as an Orange or Society 2.0 logic, gets heavily criticized from many environmental activists and proponents, one such I find in George Monbiot (2014). Monbiot argues that giving things an economic value also means that it will be treated as any other exchangeable commodity instead of a necessity for our survival. It can also be argued that we reinforce the view of nature as instrumental, i.e. as something that is there for the sole purpose of being exploited by us. It is meaningful to talk about financial capital and natural capital, but they should be seen as noncommensurable – you can’t eat money.

Other examples of insufficiencies in the 2.0 mode of business to adapt to life conditions of a full world are manufacturing and material flows.

This was succinctly summarized by Robin Wood in his keynote speech at the IEC 2014:

Linear economy: We dig holes on one side of the planet, we extract resources, we pump them through supply chains, then we go to the other side of the planet and in two years we deposit 98% of these precious resources in another hole. (Wood, 2014)

A typical 3.0 response to this this linear economy is to regulate and reduce the material use. Another alternative to the linear economy, a circular one, will be discussed in the description of Society 4.0.

Another aspect of sustainability of interest is energy, and using renewable energy is something almost everyone pays lip service to, but a transition from a society currently where roughly 85 percent of the global energy consumption comes from fossil fuels may be harder than one first could expect (Heinberg, 2009). In his Crash Course Chris Martenson (2014) emphasizes the close connection between increased energy consumption and economic growth, and where global oil extraction during the 00s has been at a constant level. Kjell Alelkett, president of ASPO, Association for the Study of Peak Oil and Gas, argues that the spike in oil prices in 2008 was a trigger to the financial crisis (Aleklett, 2012). In terms of energy we are possibly not only approaching a full world but one that is shrinking.

Fair Distribution Between and Within Cultures

After these examples of how the Orange system fails to address sustainability challenges and the planet’s limits to growth, let’s turn our attention to the distributional or social aspects of the economy. With Scharmer’s and Kaufer’s global outreach they give emphasis to what they refer to as the socio-economic divide. An obvious illustration is that the richest 1 percent own 40 percent of the world’s wealth, even 48 percent according to more recent data (Oxfam, 2015), while half of the world’s population own just 1 percent. Often it is described that capitalism and globalism implies that the wealthy world externalizes its real costs to the poor. Starvation is not a sign of lack of food, but rather of poor distribution.

Other arguments of the benefits of striving towards a more equal distribution, but within cultures, are found in The Spirit Level by Richard Wilkinson and Kate Pickett (2009) who investigate the relation between GDP and other variables that they argue are of more relevance, such as life expectancy, health and happiness. They all increase with increasing GDP up to a certain point when the relation gets weaker and the curve levels out. In the industrial world, dominated by the Orange value system and above, economic equality then becomes a better predictor of these indicators of a good life.

For these problems capitalism and market liberalism appear not to be positive forces. Rather, they produce larger gaps Scharmer and Kaufer argue with support from studies made by the International Labour Organization in 2008. This is also in line with the arguments made last year by Thomas Piketty in the widely debated Capital in the Twenty-First Century (2014), where he discusses the inequalities in income and wealth that has increased after 1975, refuting the claimed effect of the Reagan era’s “trickle-down economics” with deregulations and tax-breaks for the already wealthy. Capitalism is great at producing new wealth but not at distributing it, Piketty argues as he proposes a global wealth tax to counteract this.

A way of dealing with the material and economic inequalities and a system where profit has become more important than creating jobs, basic income has been discussed in greater extent, although it being an old concept. And the concept of a sharing is not limited to information and knowledge, a sharing economy with couch surfing, sharing of tools, car rides and different services have been discussed and practiced more, not least due to the new possibilities of connecting on the web.

In conclusion, Scharmer and Kaufer show that the 3.0 economy of the Green value system is much about opposing and transcending the limitations of the Orange 2.0 market economy. It does so by problematizing economic growth as an intrinsic goal in itself and by stating that the economy should be of limited and subordinate nature instead of the opposite. And that it should also act as a means towards satisfying social needs and increasing economic equality. Still, Scharmer and Kaufer do not consider it to be enough to deal with the current crises: “There are three essential limitations of Society 3.0: It is biased in favor of special-interest groups, it reacts mostly to negative externalities, and it has only a limited capacity for intentionally creating positive externalities” (Scharmer and Kaufer, 2013, p. 54). They dismiss what some argue, to go back to a 2.0 society, 1.0 or even 0.0 state of economy, and proposes a way forward, to a 4.0 society. But what would that look like and how would we reach it?

Society 4.0

Society 4.0, is characterized by co-creation and as being human- and life-centric. Money and the economy should serve the real economy and the well-being of all, and to be means to positive social change. Technological development, and more specifically the third industrial revolution (with renewable energy and information technology), is seen as a prerequisite to the 4.0 society. However, just as the economy, the information technology should be seen as being humancentric, i.e. means toward human well-being, growth and social creativity.

Where 3.0 can be seen as a reaction towards the problems of the previous stage and dealing with them separately, 4.0 offers a systems view and shift in perspective where the described problems are seen as symptoms of the divides described the introduction of the book. The shift in perspective is from problems to the underlying causes, to the system and inwards to ourselves. Thus, they argue that the challenges need to be addressed first on a personal/spiritual level, then on a relational and finally on an institutional level by creating social and cultural movements. When they go into the psychological processes necessary for change to take place they refer to Theory U, described in previous work by Scharmer (2009).

Scharmer and Kaufer gives several examples of how different interests are needed to be addressed and to work together instead of competing, for instance by addressing poverty and environmental issues at the same time.

Here is a characterization of the 4.0 stage:

In the emerging 4.0 stage of our economy, the natural self-interest of the players extends to a shared awareness of the eco-system. Eco-system awareness is an internalization of the views and concerns of other stakeholders in one’s system. It requires people to develop the capacity to perceive problems from the perspective of others. The result is decisions and outcomes that benefit the whole system, not just a part of it. (Scharmer and Kaufer, 2013, p. 56)

When it comes to material flow, the natural response to the limitations of a linear economy is a circular one, where material flows are kept in closed loops, either in a natural cycle and totally degradable or in technical cycles where they can be processed and reused. This is referred to as the Cradle to cradle design principle by Michael Braungart and William McDonough (2009) or as circular economy, and is taken as an example by Scharmer and Kaufer as a way forward.

In conclusion, I think the strength in Scharmer’s and Kaufer’s book lies in its rich description on cases and way of overviewing the current challenges and limitation of our current system. They don’t back down from the big challenges. The book has as its main broad focus the socioeconomic issues of the lower right quadrant in AQAL terms, but aims for making the connection to the other quadrants in its emphasis on taking action (upper right quadrant), in organizing and doing it together as a culture (lower left), and on the personal, psychological and spiritual aspect (upper left), and that these aspects are interdependent: “The matrix suggests that the evolution of economic structures follows the evolution of human consciousness – or, to be more precise, that they are highly interdependent” (Scharmer and Kaufer, 2013, p. 239). However, the book does not refer to any theory from the field of adult development or integral theory in further elaborating on what they mean by evolution of consciousness, a connection that needs to be further addressed."

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