A glance at the most noticeable trouble spots around the globe in 2008 (suicidal bombers in Iraq; genocidal warriors in Africa; military despots in Myanmar) reminds us that even the most gruesome lessons in history are soon forgotten. What lessons did the last century teach us about the laws of economics? Will they, like other lessons of history, be wasted on future generations?

Here, in no particular order, are my Top Four Lessons of twentieth-century economic history:

• Planned economies (the ex-Soviet Union and the continuing disaster called Cuba) don’t work and can’t make people happy.
• Societies that suppress freedom of religion don’t work and can’t last (same as above: Fidel doesn’t have enough relatives to freeze a nation in time forever).
• Economic growth does not in itself eliminate poverty or make people happy (as the overloaded welfare system in the United States proves).
• Modern economic science has absolutely no answer for the question, what makes life worth living?

People can pretend to ignore one or more of these four lessons of recent economic history; indeed, every trouble spot in the world today is the result of someone insisting that one of these four things isn’t so.

A Wrong Image of Man and His Reality

There is good news on the horizon: an increasing number of economists are fed up with the limitations that mainstream economic theory imposes on the search for solutions to the world’s most pressing problems. You haven’t seen their names in the press; they probably won’t be nominated for the Nobel Prize anytime soon. But if you listen, you can hear their voices in the wilderness.

Dr. Kamran Mofid, an Iranian-born economist and founder of the Globalisation for the Common Good Initiative, is one of those calling for a return to sanity. In Mofid’s opinion, we only need to take a look at the state of the world to reach an obvious conclusion: economics has failed to provide a roadmap for modern society because it has failed to take into account humanity’s deepest need of all—our need of a meaningful spiritual life.

Mofid examines the roots of economics to discover why it has gone so wrong. As Mofid points out, economics was divorced from theology at the end of the eighteenth century; it was freed from political theory in the nineteenth century; finally, in the last several decades of the twentieth century, economics was turned into the abstract science that confounds people today.

Mofid’s mission is to make economics work for the good of all people on earth by reuniting economics and theology. “We need to recreate economic theory based on an understanding of what a human being really is and what makes him happy,” he explains. “As long as economics is based on a partial or wrong image of man and his reality, it will not produce the results we need.”

The First Economist

Kamran Mofid is to the 21st-century what John Ruskin was to the nineteenth. Ruskin opposed the laissez-faire economists whose thoughts provided both philosophical and practical justification for the sprawling slums left in the wake of Britain’s Industrial Revolution.

In Ruskin’s view, society was betrayed by economists like Adam Smith, David Ricardo and John Stuart Mill, who advocated the benefits of enlightened self-interest. As Ruskin told an audience at the Bradford Town Hall in 1864, “Friends, our great Master said not so.” With an ear to Jesus’ words in the Sermon on the Mount, Ruskin concluded, “Indeed, to do the best for others, is finally to do the best for ourselves.”

“Economics must once again find its heart and soul,” says Mofid, echoing the call to sanity voiced by Ruskin in Victorian England and—if we are serious about wanting to get to the root—by King Solomon of Israel. After all, economics is simply about wants being satisfied, and in that sense the author of Ecclesiastes was the first economist.

Since the end of the eighteenth century, economists have written elaborate prescriptions for the regeneration of society. Solomon knew better. “People are always writing books, and too much study will make you tired,” he advised 3,000 years ago. Ruskin suffered incapacitating mental attacks the last twenty years of his life; he spent his last decade as an invalid at his estate in England’s Lake District.

In Small Is Beautiful, E. F. Schumacher wrote, “It is hardly likely that twentieth-century man is called upon to discover truth that has never been discovered before.” Schumacher was right, of course; we won’t discover anything new by opening the pages of a 3,000-year-old book. But it will take us to the real root of economics, and it is there that we can begin to understand what went wrong.

I’ll take a look at King Solomon’s economic theory one week from today. Once we understand the source of the problem, we’ll have an opportunity to be part of the solution.

But something doesn’t add up. Despite the region’s economic stability and willingness to open its economy to the global marketplace, China still only attracts 8% of global FDI (compared to 37% in western Europe).

Put simply, China is undergoing an image problem: after all, less than 40 years ago, China was a closed, totalitarian state behind the sinister Bamboo Curtain. However, since the introduction of economic reforms in 1978, China has industrialized rapidly and embraced the capital markets, growing by an annual average of 10%. Although modern-day China has moved on, it is still haunted by the shadows of its history.

Ironically, 2008 was to be the year that China would finally confirm its development to the world. The Beijing Olympics was the perfect opportunity for China to demonstrate its economic and political supremacy to an international audience. Rather, high-profile media coverage of the numerous protests against the Chinese government presented a very different picture. The world has seen the dragon of old – Chinese military sweeping aside demonstrators in an attempt to silence opponents.

Allaying Doubts

Some foreign investors do not feel that their capital would be safe if invested in China’s economy. Is this fear justified? The Chinese authorities are attempting to facilitate FDI by implementing policies aimed at strengthening and diversifying their economy. In January, the China Securities Regulatory Commission (CSRC) set out to develop the bond market and improve the quality of listed companies in order to make them more appealing to FDI.

“With sophisticated legal and regulatory systems, bigger and more efficient markets and improved international competitiveness, China’s capital markets can play an important role in building a harmonious society,” sates the CSRC. “Then China will become a significant and influential member of the world financial system.”

And so, a process is underway: China’s insatiable appetite for resources and finance has forced it to look beyond its borders, thus fostering an international business environment. The back-room secrecy that once dominated Chinese business practice is slowly being replaced with disclosure and transparency procedures, corporate governance, auditing and the declaration of quarterly results.

Old Habits

However, establishing international confidence and credibility has been difficult for China. For all the government’s “forward thinking” policies, the future success of FDI in the region rests upon the government and business community’s willingness to change.

It is ironic that the companies least willing to adapt and meet the government’s international vision are China’s State Owned Enterprises. Also, despite the rhetoric, the Chinese government remains unafraid to make heavy-handed interventions into the equity markets, evidenced recently when they reportedly capped the bid of two state-owned banks for Wing Lung Bank.

Is China really ready to let outsiders in and fully integrate FDI into its economy? For the moment, China is wrestling with this question – and perhaps the Chinese business community has not fully escaped from the shadow of its closed, totalitarian history.