What is the goal of economic policy? According to the Treasury it is to “achieve strong and sustainable economic growth”. But surely this confuses the ends with the means? So argues Christian Felber in ‘Change Everything: Creating an Economy for the Common Good’. Drawing on the constitutions of democratic states, he sets out how to measure the success of economies and businesses against five fundamental goals: human dignity, co-operation and solidarity, ecological sustainability, social justice and democratic co-determination.
As Felber is keen to point out the ideas set out for an Economy for the Common Good are not new, they’re based on intuitive and widely held precepts that the economy is a means for a greater end: the public welfare or the public good.
He shows how philosophically and constitutionally this idea, and that of the limit to individual freedom being responsibility to the rights and dignity of others, can be found in the codified constitutions of democratic states from Italy to Columbia. He cites German Basic Law: “Property entails responsibility. Its use is also to serve the general public”
Perhaps there’s no dormant consensus for a better economy hidden away in these constitutions, but it establishes a point of departure for democratic debates about how freedom and equality should be realised and reconciled, and what that means for the rules and organisation of society.
By starting here, the economy is re-embedded into the public and political sphere, subject to moral interrogation and democratic deliberation. Modern markets are not an organic or private realm, they have depended entirely on states for their formation and management. Whilst the study of economics can identify market dynamics these are not natural laws but flow from the system design. When the economy is seen as private or natural, debate about how it could change is prevented.
The result is a situation where everybody knows it’s not working – from the UK housing catastrophe, to climate change, to financial instability, to the hollowing out of middle income jobs - but imagining even modest reforms seems somehow beyond comprehension. Political debate reverts to the same old platitudes and myths, financial markets seem allergic to any uncertainty and this is conflated with evidence that a change is bad for the economy. The dysfunctional status quo staggers on like a zombie. It’s crucial to see the economy as part of the public realm entailing winners and losers, and trade-offs, for democratic processes to enter economic policymaking and institutions and to move beyond this impasse.
In response to TINA (There Is No Alternative) Christian Felber offers the motto TAPAS (There Are Plenty of AlternativeS). In his book he presents a detailed and interlocking system of possible policy measures, incentives, locks and design features for what a new economy could like and which, through its dynamics, would produce a more equal distribution of reward, create meaningful work and foster wealth in human qualities such as trust, cooperation and intrinsic motivation.
The Economy for the Common Good is an active movement in 40 countries and over 2000 businesses. Broadly it sits in and draws upon an eco-system of “new economy” movements and thinking, including: economic democracy, the solidarity economy, the post-growth economy, the gift economy, social business and shared value.
It shares with these movements the notion of re-defining prosperity by replacing GDP as the headline indicator of progress with a composite measure of those things we actually want the economy to provide - moving from more to better.
Most distinctively Felber and Economy for the Common Good have developed a detailed Common Good Balance Sheet to re-define company governance based on how well the company performs against a set of humane and constitutional values:
- Human Dignity
- Cooperation and Solidarity
- Ecological Sustainability
- Social Justice
- Democratic Co-determination and Transparency
Within each value area there are multiple criteria based on a company’s conduct in relation to its employees, customers, suppliers, the environment and other businesses - these include low income disparity, democratic decision making and penalties for subsidiaries in tax havens. Companies receive an overall score, which importantly is not only about greater transparency for consumers and investors, but becomes a recognised standard for evening up market power through preferential terms:
- lower rates of tax
- lower customs tariff
- favourable loan conditions
- Preferential status for the award of government contracts
The Government is currently running a consultation on how it can help mission driven business to double their social and economic impact over the next 10 years. To move beyond voluntary non-binding standards and towards a binding, externally audited, comparable and standardized one is food for thought as is the more comprehensive and strategic use of existing incentives methods for different company forms.
The Social Value Act 2012 which places a duty on Public Departments to consider not just price but how it’s commissioning and procurement can maximize social and environmental value is a building block for this but it’s weak. Where public departments have sought to insert strong social value criteria significant tension with competitive tendering legislation has arisen.
Currently social enterprises and worker cooperatives can find it much more complicated to incorporate and more expensive to access finance than traditional company forms. Smaller businesses in general are at a distinct disadvantage to large ones when it comes to borrowing. Public banks with social and regional remits could go a long way to addressing the massive ‘directionality’ problem with what we’d like our economy to look like and where investment and bank lending goes.
The time is ripe for a refresh of economic debate and in the coming weeks the RSA will be establishing a Citizens Economic Council, as outlined in Mathew Taylors lecture on creating a ‘Human Welfare Economy’ last year. The council will meet over two years to discuss the aims and design principles of a resilient human welfare economy. The goal is to democratize and de-mystify economics and create a broad and rich public conversation about the economy and what we want from it.
The biggest strength of Felber’s book in this regard is a free-thinking approach to re-designing policies and institutions that throws wide open the scope for policy alternatives.