*5.1. Neoliberalism*

Given the almost universal appeal for economic growth and citizen expectations that governmen<sup>t</sup> should support job creation, reduce poverty and provide more public services, it is not surprising that the pro-growth, neoliberalism ideology has become more widely adopted by governments and policy makers. Neoliberalism is an ideology that strongly emphasizes economic growth as the single most important objective while depicting governmen<sup>t</sup> as an obstructive force impeding the free market [26–28]. Specifically, neoliberalism supports many policy measures to promote the free market, including massive tax cuts (especially for businesses and high-income earners); reduction of social services and welfare programs, downsizing government, anti-unionization measures, removal

of controls of global financial and trade flows, and the creation of new political institutions, think tanks, and practices designed to reproduce the neoliberal paradigm, among others [28]. The variable neoliberalism support is shown as a significant leverage point in the Corporate Profit Loop model and it represents the degree of support for this paradigm. Higher neoliberalism in the model leads to less governmen<sup>t</sup> support, lower taxes, higher corporate propaganda (promotion of the neoliberalism paradigm), and higher corporate power, and thus, increased job support.

The corporate profit loop model illustrates that as corporations become more powerful, they reinforce neoliberalism and citizen mental models through propaganda efforts that contribute to the growth mindset. Corporate influence can be dangerous because political leaders will feel compelled to support policy that favors short-run corporate interests. Further, citizen support adds to the likelihood that governmen<sup>t</sup> policy will be aimed at short-run business concerns over the common good.

#### *5.2. The Anthropocene: A New World Created from Human Values, Viewpoints and Narrow Focus*

Anthropocentric orientations, together with economic imperialism, can be viewed as a positive force that have generated tremendous wealth for human society. However, this wealth has come at a cost. Externalities from the economic imperialism viewpoint have resulted in extreme changes in biodiversity, habitat and biomass loss, and climate change [29]. The changes are so grea<sup>t</sup> that many scientists are now referring to these human impacts as a new geological age—the Anthropocene. Of course, people who view humanity as isolated from nature tend to have a very different value system and may hold a completely distinct set of goals and objectives for society from those with an eco-centric orientation.

Human values can thus have a dramatic impact on the objectives and directions chosen by society. An overly narrow focus on economic imperialism, for example, means that citizens place greater emphasis on gross domestic product (GDP) over sustainable development goals such as conservation of the natural world, economic equality, and social justice.

Historical analysis reveals that resources are consistently and inevitably over-exploited primarily because wealth and its pursuit generates political and social power that is used to exploit the resource [30]. This situation is graphically depicted by the imbalance portrayed in the corporate profit loop and the dominance of feedback that reinforces corporate size, money and power. The further this growth mindset plays out in the global scene as competition among countries, the more industries move to locations with lower cost structures. In essence, we ge<sup>t</sup> a standards-lowering competition with increasingly lower labor and environmental regulation [5,6]. Lower costs mean the ability to price lower and further drive growth. More growth, especially in physical products, further drives unsustainability.

The power of global corporations and neoliberalism has created a power imbalance in the world, allowing tremendous bargaining power to corporations, enabling lower cost production for industrialized countries while not necessarily helping poorer countries rise out of poverty [31]. The term neocolonialism has evolved to describe the economic power imbalance [32]. Neocolonialism is also in obvious direct conflict with the UN sustainable development goals.

Poverty in the developing world creates additional problems for sustainability. Indigenous farmers in the developing world often slash and burn rain forest and prime habitat in order to increase their acreage and boost income [33]. Meanwhile, large multi-national corporations such as Monsanto, Dupont, Syngenta, BASF and Dow promote industrial, mono-culture farming practices. The stated idea is to increase agricultural productivity in an effort to help with world hunger. However, such practices require increases in pesticides, herbicides, fertilizer, and water. Adopting these techniques in the developing world is expensive for farmers, who must purchase genetically engineered seeds and additional fertilizer while profits return to the large corporations [34].

The long-run prospects for industrial agriculture are also loaded with risk. Climate change makes farming far riskier as it increases the likelihood of extreme weather along with the potential for pest damage. A far simpler way to handle adverse conditions is to use traditional farming methods. Agro-ecological farming uses traditional seed and diverse crops for resilience and climate adaptation. This approach has added benefits such as reduced pollution (less fertilizer), reduced costs, and fewer side effects, such as pesticide poisoning of bees and beneficial insects [34,35].

#### *5.3. Lock-In and Deadlock*

We cannot expect the free market to develop products and services fast enough to solve our global environmental problems and especially climate change [36]. The primary reason for this is short-termism on the part of citizens, politicians, shareholders, and business owners—all of us. Short-termism can be thought of as a built-in part of capitalism. Specifically, most firms are not in a position to postpone short-term profitability for higher, but time-delayed profits later. Only the governmen<sup>t</sup> can afford to make many of the larger, riskier and time-delayed investments necessary to combat climate change [36].

Thus, neoliberalism has emerged as an ideology at direct odds with global sustainability and climate change [26,27]. Figure 4 depicts the situation where consumers in the market economy are unable to purchase "green products" due to deadlock or lock-in.

**Figure 4.** Lock-in and Deadlock: Actors in the Global Sustainability System Exhibiting Diffused Responsibility.

Lock-in occurs in the following way: companies are reluctant to produce green products (e.g., electric or hybrid cars, solar panels) without sufficient demand from consumers. Consumers are reluctant to buy green products because the prices are too high; but prices are too high because production volume is insufficient, a vicious loop [5]. Cutting-edge companies look to governmen<sup>t</sup> to initiate regulation, but governmen<sup>t</sup> will not act in democratic societies without substantial support from the public, and legislation that hinders one group will be resisted, even if it benefits the majority [36]. Ultimately, responsibility lies with us—citizens, voters, consumers, and employees. However, realizing the wider system view brings to light the especially important role for citizens/voters in democratic societies, and this is where our deadlock really resides.

Finally, just as the lack of environmental regulation causes a lock-in effect with status quo products, the inability to correctly price energy and incorporate a carbon tax can also be directly linked to citizen votes. Once again, neoliberalism ideology and propaganda influence citizen mental models. Political interference means information feedback (via price signals) is lost as social costs are not incorporated into energy prices. In essence, stressing the free market and economic growth as the answer to our problems causes traditional economic corrections to be rendered ineffective.

The way out of this trap is to first see that we are in an addictive cycle. The Corporate Profit Loop is another portrayal of "the loop you can't ge<sup>t</sup> out of" [5,37]. A basic problem is that we are all enticed by immediate rewards (short-run results) and most of our systems are predicated on short-run feedback, including the stock market, quarterly profits, political elections, and consumerism (pursuit of novelty). Once we start down this path (the right-hand side of Figure 3), the system rewards corporations with more money and power to influence the political system and consumer society. Corporate propaganda drives ideological support for neoliberalism. Since corporations influence the political system, neoliberalism creates a reinforcing feedback loop. The more this dynamic operates, the more influential corporations become relative to government. The underlying problem is that the real, physical world does not operate under an economic imperialism model, but we do have limits within a finite planet, and it is becoming increasingly clear that we are living beyond our means and outside of the safe operating space for humanity [2,29]. Eventually, resources become eroded (See Figure 3; R9, Planet Loop) and the balancing loop, B10 Ecology Tradeoff, will also become dominant. Finally, ecosystem services and environmental degradation will reduce our quality of life.

#### **6. Competitive Strategy and Making the Transition to Sustainability**

Currently, our mental models remain fixated on the dominant loops in the right-hand portion of the Corporate Profit Loop. This is a dangerous position as corporations have tremendous power to influence governmen<sup>t</sup> policy and to promote short-termism. Rather than realizing the necessity to transition to renewable energy, policy is used to favor status-quo companies and to keep fossil fuel subsidized. Not realizing or accepting that disruptive technologies are coming does frequently happen in the private sector (e.g., with Eastman Kodak and digital photography [38]). When this occurs in the private sector, it is largely due to the managemen<sup>t</sup> dogma of listening to customers and shareholders, that is, focusing on short-run concerns [39]. Disruption in the private sector is limited. However, when it occurs on a grand scale, such as with a country's energy supply, the economic impacts can be substantial. Currently, China has plans to invest \$360 billion dollars in renewable energy by 2020 [40]. Furthermore, Germany is getting one third of their energy needs right now through renewables [41]. The United States energy policy could thus be putting US companies and the economy at a substantial disadvantage. First-mover advantages can be extremely beneficial for green technologies and products because of learning curve effects [42] (p. 215) and the typically large initial investments required. This is where balancing the Corporate Profit Loop can be beneficial to the economy while simultaneously advancing green initiatives and helping to achieve the UN Sustainable Development goals. Making this happen, however, requires citizen buy-in to break the current deadlock or lock-in.

#### *Unlocking the Freedom of Markets and Government with Systems Thinking and Ecological Regulation*

The current world view of US citizens is focused on the high volume, neoliberalism of the right-hand side of the corporate profit loop. While reduced regulation by outsourcing production has helped to keep costs low in the past, this approach is dependent on global consumer and citizen thinking. This is changing. That is, as people's thinking evolves to a "greener" mindset more and more of the global market will be dominated by renewable energy, green products, and innovative services. We know this will happen because we know we are pushing up against more limits. The sooner industrialized countries adopt more stringent environmental and labor regulations, the faster cutting-edge companies can plan, invest, and support innovations [43]. Designing products and services for the strictest regulations will actually streamline manufacturing and logistics and save costs because multiple product versions will not be necessary for international markets [43]. Thus, regulations and economic nudges will be critical to help develop new disruptive technology.

Newer market-based incentives hold grea<sup>t</sup> promise for providing the right environment for environmental innovations and technologies [44]. First, a broad natural capital depletion tax could be used to ensure that resource use is sustainable while also providing incentives for new technology development (applicable to Loop R9, Planet in Figure 3). Second, the adoption of a flexible environmental assurance bonding system can be used; this is where an estimate of the largest potential environmental damage is used to purchase a bond, kept in an interest-bearing escrow account, to offset the potential of a catastrophic future effect. This approach is consistent with the precautionary principle, and it requires committing resources in the present. Again, such an approach would

encourage technology innovation as the burden of proof, and cost of uncertainty is shifted from the public to the resource user (applicable to Loop B10, Ecology Tradeoff in Figure 3). Finally, the use of ecological tariffs could be used to "level the playing field" for those countries that do not adopt these market-based incentives. In fact, given recent global commitments and UN sustainable development goals, such ecological tariffs could be politically possible [44] (pp. 247–256).

Therefore, sustainability education is vitally important because it can inform citizens who must vote and pressure policy makers to create the most responsible business climate for sustainable innovation. Sustainability issues are extremely complex because they are embedded in a global web of systems, political processes and dynamic interactions [45]. Systems education is a necessary and ideal complement to sustainability because tools like stock-and-flow diagramming and computer simulation can contribute to a better understanding of sustainable business and socio-economic-political systems.

Over-focus on only one part of the corporate profit loop can lead to excessive exploitation of people and planet. This narrow range of concern or focus can be rationalized, but this type of rationalization can more accurately be portrayed as bounded rationality. Liberal arts education that opens minds to concerns beyond short-term profits and economics can be beneficial. Rationality that is more open to different views, cultures, feminism, and the natural world can develop a more just and equal society [46]. In fact, the rationality and value system that focuses on and seeks endless economic growth is at the heart of our multiple crises of ecological destruction; economic, gender, and racial inequality; and poverty [47,48]. Indeed, corporations that can open up from just a shareholder profitability perspective to a wider concern for all stakeholders will have reduced risks and better prospects for sustained profits [49]. A sustainable world requires an equitable distribution of wealth and resources [33]. We cannot expect the poor in the developing world to go without food, nor can we expect the poor in industrialized countries to be able to afford green products and energy while the rich use up excessive resources.

Education that opens citizens' mental models and expands the boundary of their thinking will help to reveal important feedbacks and long-run dynamic behavior. The corporate profit loop model is a fairly concise and simple model that reveals where our current citizen mental models fall short. Sustainability education, coupled with systems thinking and system dynamics, can inform citizens and help us rebalance the corporate profit loop.
