The jargon-dense economic commentary reinforces our belief we are unqualified to have a view on how our economy should be designed, but it's time to democratise economics and demand an economy that works for people and the planet
Opinion: Imagine a day when you tune into the financial news and the announcer reports:
“Share markets have plummeted to historic lows overnight with more of the world’s mega-corporations losing investor confidence. Investors are flocking instead to promising social enterprises, citing pressure from grandchildren who would rather inherit a liveable planet than a private jet.
“In New Zealand, the Domestic Happiness Index (DHI) is continuing its strong upwards trajectory and our national contribution to the Planetary Overshoot Index (POI) is trending downwards. This mirrors global trends, and leading ecological economic commentators are bullish, predicting that we may still have a liveable planet in 2050.”
Just imagine.
This scenario may not be as far-fetched as we first think. But for it to happen, we must be part of redesigning an economy fit for the 21st Century.
“How can we do that?” you ask.“We are just ordinary citizens – not experts in the economy. How can we have any valuable contribution to make?”
That is what we have been led to believe, and the inscrutable, jargon-dense economic commentary reinforces our belief that we are unqualified to have a view, let alone any contribution to make on how our economy is designed or functions.
But most economists are not experts in 21st Century economics either. The economic system we have is designed as a closed, circular loop dislocated from the reality that it is entirely dependent on inflows of energy and resources from the Earth for its productive capacity and generation of wealth.
READ MORE: * A pathway out of environmental collapse * The future must use less energy and have more of the things that really matter * Give progress a chance: Embrace degrowth
Not only that, but also our economy must produce continuous growth, otherwise it collapses – into recession, or worse. And this growth is exponential, so that even a seemingly modest growth rate, of say 3.5 percent, means a doubling of the economy in 20 years – and a further doubling of that economy in a further 20 years. And unless growth is decoupled from resource use and environmental harm, this means a doubling of global resources and damage over the same timeframe.
In conventional economic thinking there is no provision made for an economy functioning in postgrowth conditions – that is, where growth plateaus or even decreases. For many economists and policymakers alike, this is beyond the imagination. It is assumed the economy will continue to grow exponentially – and in spite of the glaring reality that resources on a finite planet are finite – simply because this is all we have known in the post-industrial world.
But this history of a socioeconomic system based on exponential growth is a mere blip in the context of human civilisation. We have long had market economies – the buying and selling, or exchanging of goods and services needed to live. But an economy that is fed by an ever-increasing exploitation of the earth’s finite resources is entirely novel; the explosive growth of the ‘Great Acceleration’, powered by the exploitation of fossil fuels, is usually dated from the 1950s.
Not only that, but also our economy gives primacy to the generation of gross domestic product, despite the warnings of this metric’s creator that it should not be used to measure a nation’s economic progress. The economist Simon Kuznet warned that though GDP was a measure of monetised economic activity, it was blind to whether that activity was useful or destructive. And, as we know in New Zealand, a catastrophic earthquake or flood may be devastating for human and social wellbeing, but the recovery phase is fantastic for GDP – nothing like all the rebuilding of homes, buildings and infrastructure to get the economy buzzing! GDP also doesn’t count non-monetised economic activities, even when they are essential to human life and wellbeing. If you grow your own food, care for children or ageing parents, or contribute to your community or environment through voluntary activity, that doesn’t count. It only counts if we pay companies to do these things. And of course, GDP does not account for any costs to the environment or indeed to human wellbeing – these are externalities.
Across the political spectrum, people are starting to question the viability, desirability and morality of an economy that has GDP as its central goal. Treasury has developed the Living Standards Framework which offers a number of wellbeing metrics, but though GDP remains the central goal of our economy, it is likely that inequity, social and environmental harm will only grow, not diminish. This is because our economic system distributes wealth unequally and incentivises and supports economic activity that harms human wellbeing and the environment.
But institutional economists or policymakers are not able to offer the alternative – growth is all they know. (Though post-growth scenarios are beginning to be explored by influential international institutions such as the Organisation for Economic Co-operation and Development, this shows no signs of translating into a change of policy direction soon.) We are told that to address the environmental harm caused by past growth, we need more growth. But in generating more wealth from growth, we are creating more harm, which by this logic we will need more growth to offset. This thinking is irrational in the extreme.
Ah, but this is where ‘green growth’ will come in, we are reassured. Green growth policies will mean we can still have growth but this growth will be decoupled from harmful resource extraction and carbon emissions. Sounds great, but the only trouble is, all evidence points to this not happening – at least not at a scale or speed anywhere fast enough to limit climate warming to within 1.5C.
So where does this leave us? We may not be experts in monetary policy or macroeconomics but the economy is collectively ours – it is (or should be) there to serve the collective good, not to profit those who have accumulated the most capital. We are the experts when it comes to what we need in life: nutritious food, healthy and warm housing, good relationships with family and friends, to feel valued and connected in our community, and time to move, play and have fun. So why don’t we design our economy around providing for these needs, rather than generation of wealth through the production of things we don’t need, which harm the planet and diminish our commons (the planet’s natural systems)?
Scholars such as the economist Dr Kate Raworth offer alternative economic models such as doughnut economics, and recently presented to the New Zealand Treasury. New economics has garnered broad support in the UK as a viable alternative to the neoliberal system, while steady-state economics has its roots in the scholarship of Herman Daly, the father of ecological economics. And degrowth offers a compelling alternative, which governments in Europe are turning their attention to as the green growth promise loses its shine.
Let’s democratise economics and tell politicians, policymakers and economists that we want the economy to work for people and the planet, not the other way around.
