It's time to judge our economy on a scale that puts humanity at its core.
It is often said that financial markets do not like uncertainty. Indeed, for nearly 20 years prior to the 2008 crash, markets became so accustomed to predictability (low inflation, stable growth and low volatility) that it became the norm. But since the economic crisis seven years ago, western nations have been locked in triage mode: working tirelessly to restore their wounded economies to pre-crash health. Market stimulation, quantitative easing and austerity have returned many economies (with some notable exceptions) to a position of slow growth, providing the markets with a semblance of the stability they crave.
But in the rush to restore economic equilibrium, it seems that the real issues of our time have been cast out to the margins of public debate. The effects of disruptive technology, seismic income and wealth disparity, climate change and resource scarcity have all remained conspicuous in their absence from political dialogue.
To think that we can restore the economic conditions of the pre-crash era through managerial competence alone is to ignore the bald facts about the fragmented and complex world we now live in: the global population is now more than seven billion and keeps rising; life expectancy in major western nations has increased dramatically; income and wealth disparity has grown to record levels; greenhouse gas emissions continue to rise apace; and technology is now enabling a ‘second machine age’ that is redefining work as we know it. Knowing this, is it really possible to be fit for our economic future while managing it with 20th-century tools?
The dominant economic orthodoxy of the past 20 years is that economic growth, with its associated house price inflation, buoyant financial markets, rising consumer demand and productivity growth can provide for all society’s needs. But this ‘growth solves all problems’ discourse is now under attack.
Those in the ‘wellbeing’ camp believe prosperity must be about more than fiscal growth. It was driven with great fervour in the UK by the prime minister, David Cameron, who set a goal during in his first term of formulating policy “focused not just on the bottom line, but on all those things that make life worthwhile”. In 2010, the Sarkozy Commission considered an array of alternatives to GDP, and its findings prompted a flurry of new measures to assess national wellbeing in the UK, Germany, Italy, Australia, South Korea, Canada and the US. While providing interesting data, ‘gross national happiness’ has yet to topple GDP as the driver of these nations’ economies.
Alongside it, the environmental movement broadly asserts that there are finite limits to growth. The overarching premise is that the ‘take, make, waste’ model of a high-growth, consumer-driven economy does not consider these limits. Without bold action from governments and business in rethinking the economic system, society will fail to combat the impending environmental crises of resource scarcity, biodiversity loss, pollution and climate change.
Most recently, a wave of criticism from economists and academics alike has brought inequality to the fore. Thomas Piketty and Joseph Stiglitz have highlighted the burgeoning scale of income and wealth disparity and argued that the capitalist system can only be sustained if it addresses the question of fairness. President Obama has been quick to seize on this narrative, perhaps recognising that it puts the basis of the American Dream to the test. However, the difficulty he and fellow global leaders face in forming an actionable response to these critiques is that the sum of their parts does not add up to a single viable alternative to the status quo. When our system of market capitalism has historically served us so well, imagining its evolution is incredibly challenging.
But what if we were to imagine an economic system that had the fostering of human flourishing at its core? Social justice, wellbeing, creative expression, lifting care’s status, environmental sustainability: if these were our minimum success criteria, how would the economy change? If our economic system is to address the complex problems arising in the 21st century, we must put our collective creative minds to the challenge of redirecting the traditional model of market capitalism to a more humane place.
The huge challenges facing tomorrow’s society are already prompting a sharp rise in social innovation, a proliferation of new business models, such as B Corporations in the US, and a range of new ideas for systems, like the sharing economy. What comes out of this is highly unlikely to be a single managed system. Our economic evolution will be driven by a collective – but not necessarily coordinated – effort to co-design the kind of economy we want.
The power of ideas
At the RSA, we believe that society plays a vital role – through the power of ideas, discourse and democracy – in designing the systems of the future. Over the years, we have been part of a movement that seeks not only to boost the economy but also to improve society, recognising that the former would not inevitablity deliver the latter. We want to engage in a deeper debate about the relationship between economic development and long-term human welfare in order to help facilitate the process of bringing to the mainstream those ideas that are currently seen as too radical for serious consideration.
We have initiated a programme that seeks to understand the conditions that will drive change. Beginning with the annual President’s Lecture from Sir Tony Atkinson, professor of economics at the Institute for New Economic Thinking at Oxford University, we have developed an economics-focused event series that will continue throughout 2015. Later this year, the RSA’s Action and Research Centre will publish a range of reports and thinkpieces on new economic approaches, including a series of ‘Power to Create’ papers exploring the new economic tools that could foster mass creativity. The research team will also share the findings of our five-year study into community wellbeing ‘The Value of Connected Communities’. In it, in partnership with the LSE and UCLAN, we have sought to understand the true value of social networks and their impact on community wellbeing. There will be an analysis of how our Great Recovery programme is driving design practice for the circular economy in business and, building on the work of last year’s City Growth Commission, we will explore the social effects of city devolution, considering how this might go beyond the promotion of economic growth and foster social prosperity.
The RSA’s programme is premised on the belief that we are at a moment of great potential for economic system evolution. Any serious attempt to address the challenges we all face in the future must seek to not only deepen understanding among economists and policymakers but also engage others in the debate about what it will take to succeed. We hope you will join us on the journey.
This article first appeared in the RSA Journal - Issue 2 2015
A blog on the rural and post-industrial perspectives on the just transition in Scotland highlighting some of the key takeaways which, if implemented, will help achieve this vision.
Toby Murray Nik Gunn
Young people are on the frontline of the cost-of-living crisis. Here we explore what the cost of living crisis means for the economic security of young people.
Matthew Johnson Elliott Johnson
A universal basic income can alleviate anxiety and depression in young people. Elliott and Matthew Johnson of Northumbria University explore the benefits this kind of economic security can deliver.