Transforming Economics: Prioritizing People and Planet

Dear Readers,

In my last newsletter article, I expressed dissatisfaction with how climate change is progressing and affecting the marginalised unevenly.

I have been studying economic solutions for some time, and a major issue lies in our perspective on money, property, and the ownership of land and natural resources. Our current understanding of a successful economy is centered on individual gains, where the aspiration is to become a billionaire and hoard wealth and resources. This mindset neglects the reality that there are insufficient resources to satisfy everyone's greed. We must shift our focus towards collective well-being and sustainable resource management to create a truly successful and equitable economy. Traditional metrics such as Gross Domestic Product (GDP) have long been used to measure economic success, but these metrics fall short in capturing the true wellbeing of a society. As awareness grows about the limitations and environmental costs of perpetual economic growth, concepts like degrowth and a new economy are gaining traction. However, this shift faces significant resistance from governments and corporations that are deeply entrenched in the current economic paradigm.

Some peices of writing are shaping my thoughts about this.

1. Doughnut Economics- Seven Ways to Think Like a 21st Century Economist by Kate Raworth
2. A new economy- EY
3. Introduction to Degrowth as posted by Erin Remblance

The Limitations of GDP

GDP: A Flawed Metric of Wellbeing

GDP measures the total value of goods and services produced within a country but fails to account for factors that truly enhance human life. As Robert F. Kennedy noted in 1968, GDP does not consider the health of our children, the quality of their education, or the joy of their play. It overlooks essential aspects like the beauty of our poetry, the strength of our marriages, the intelligence of our public debates, and the integrity of our public officials. Essentially, GDP quantifies economic activity but neglects to measure what makes life worthwhile.

Environmental and Social Costs of GDP Growth

There is a well-documented correlation between GDP growth and increased material footprint, leading to significant environmental degradation. As GDP rises, so does the extraction and consumption of natural resources, contributing to unsustainable economic growth. This relationship extends to energy consumption, with historical data showing a close tie between economic growth and increased energy use.

Moreover, GDP growth does not necessarily translate to increased wellbeing. The World Inequality Report 2022 highlights that profits often go to the owners of capital, necessitating continual reductions in labor costs and natural resource exploitation. Dr. Jason Hickel argues that eradicating poverty at $5 a day would require global GDP to increase to 175 times its present size—an unsustainable level of growth with catastrophic environmental consequences.

The New Economy: Navigating the Polycrisis

Systemic Flaws in the Current Economic Model The current economic system is fraught with systemic flaws, including unsustainable growth, overconsumption, a linear economy, financial capital myopia, short-termism, and siloed thinking. These flaws contribute to ecological, social, and geoeconomic crises, collectively referred to as the polycrisis. Addressing these issues requires a fundamental shift in how we understand and manage the economy.

The diagram below illustrates how our biased approach to sustainability is still damaging to the Earth. It highlights how we continue to prioritize economic growth and quick-fix solutions instead of addressing the entire system and its inherent failings. This narrow focus neglects the interconnectedness of environmental issues, ultimately leading to further degradation.

Transitioning to a New Economy The transition to a new economy involves adopting principles of sufficiency, circularity, systems thinking, redefined value, and equity and justice. This new economy prioritizes sustainable production and consumption levels, transforms linear systems into closed loops, and recognizes the interconnectedness of complex systems. It expands the concept of value beyond financial returns to include human and planetary wellbeing, ensuring that the benefits of the new economy are shared fairly and inclusively.

Resistance from Governments and Corporations

Economic and Political Power Structures The shift towards a new economy and degrowth faces significant resistance from governments and corporations. These entities are deeply entrenched in the current economic paradigm, which prioritizes GDP growth and financial capital. Former CIA agent and whistleblower Philip Agee noted that any movement aiming to provide for all people and escape the control of the US economy faces opposition from powerful interests. The current economic system is structurally undemocratic and unjust, with global economic governance heavily influenced by the Global North. Dr. Jason Hickel highlights that for every dollar of aid the Global North gives to the South, the South loses $24 in net outflows to the North.

Corporate Interests and Short-Termism Corporations, driven by the pursuit of profit, are often resistant to changes that threaten their bottom line. Naomi Klein, in "This Changes Everything," argues that our economic system is at odds with the planet's ecological limits. While economic models demand continuous growth, sustainable resource use requires contraction. This contradiction presents a significant challenge to corporate interests, which are inherently short-term and profit-driven.

The Role of Technological Solutions Governments and corporations often advocate for technological solutions to address environmental issues, believing that future technologies will enable continued economic growth without compromising sustainability. However, many necessary reductions to achieve net-zero emissions depend on technologies that either do not yet exist or are not feasible at scale. John Kerry, US Special Presidential Envoy for Climate, acknowledges this dependence on future technologies, reflecting the reluctance to adopt more radical changes.

The Concept of Degrowth

Understanding Degrowth Degrowth challenges the conventional wisdom of perpetual economic growth, proposing a sustainable and equitable alternative. Degrowth involves a deliberate and democratic reduction in material and energy throughput in over-consuming nations, aiming to respect planetary boundaries while improving wellbeing and global justice. It emphasizes the need to decouple wellbeing from economic growth and promote sustainable lifestyles that prioritize quality of life over material wealth.

Degrowth and the Decolonisation of the Imaginary Federico Demaria and Serge Latouche describe degrowth as a "decolonisation of the imaginary" and the implementation of other possible worlds. This approach seeks to shift the focus away from growth-centric policies to those that meet human needs directly and sustainably. Degrowth aims to realign human activities with the Earth's carrying capacity, ensuring sustainability and equity.

Conclusion

The evolving understanding of the economy recognizes the limitations and environmental costs of perpetual economic growth. Concepts like degrowth and the new economy offer sustainable and equitable alternatives, emphasizing the need to decouple wellbeing from economic growth and prioritize planetary boundaries. However, this shift faces significant resistance from governments and corporations entrenched in the current economic paradigm.

To overcome this resistance, we must fundamentally change our thinking about natural resources, money, and property. Instead of viewing these as commodities to be exploited for individual gain, we should see them as collective assets that belong to the community. Natural resources should be managed by and for the people, ensuring equitable access and sustainability. Money and property should serve the collective good, not just individual wealth accumulation.

By fostering shared values for communities, where resources are democratically controlled and used to meet the needs of all, we can dismantle the entrenched power structures that prioritize profit over people. This means embracing a system where communal well-being is the ultimate goal, and economic progress benefits everyone equally. Only through a united, revolutionary effort can we transition to an economy that truly enhances human wellbeing while respecting the Earth's ecological limits.

Further Reading:

https://phys.org/news/2023-09-planetary-boundaries-exceeded.html

Poor Economics- Abhijit Banerjee and Esther Duflo

Mutual Aid: A Factor of Evolution- Peter Kropotkin

Yours in hoping for solutions,

Jogitha