Executive Summary of Report
This post contains the executive summary of the report ‘Towards the Wellbeing Economy; Implications for Public, Environmental and Financial Policy‘. The report was written by members of the think tank of young economists that is part of the Future Markets Consultation.
The world is facing a significant amount of problems. Most acutely are the coronavirus pandemic and the socioeconomic crisis it has caused. There are, however, many longer running issues, such as climate change, rising inequality, financial instability, biodiversity loss, increasingly precarious and stressful working lives, growing power concentrations, and resource depletion.
The economy is at the core of many of these issues and as a result there is a growing recognition that our economy has to be fundamentally reformed to solve these problems. This has led various thinkers and institutions, such as the OECD, to argue we are currently experiencing a paradigm shift away from neoliberalism and the focus on (GDP) growth. There is also a growing coalition of countries and organizations called the Wellbeing Economy Alliance. In the new paradigm, the well-being of people and the planet is put at the center of the economy and society is organized more democratically. In this way, it concerns both a shift ideas and in power.
The shift in ideas relates to how we should think about value creation and preservation. Over the last decades (economic) success was mainly judged on the basis the level of shortterm financial gains, whether its look at GDP at the macro-level or quarterly profits at the micro-level. In the well-being economy, it is critical put ecological and social aspects as well as the long-term at the center in how we define progress, for countries with a new range of indicators and for companies with integrated reporting. As such, the new paradigm is (GDP) growth ‘agnostic’ and instead focuses on sustainably creating and maintaining well-being, with its subjective, material, and relational aspects.
The shift in power is about ensuring that our societies function democratically. Research indicates that countries, like the US but also Germany and the Netherlands, as well as international organizations, such as the European Union, are not democratic in the sense that policy outcomes do not reflect the preferences of citizens. Business interests groups, the highly educated and the rich, on the other hand, do see their policy preferences being translated into actual policy. Because of this lack of effective democracy, policies reflect power inequalities rather than serving the well-being of all citizens, let alone those of future generations and nature. To achieve the well-being economy, citizens need to be empowered so that actual policies will reflect their informed deliberations. For this reason, local, national and regional governments should experiment with citizens’ assemblies, which bring randomly selected representative groups of citizens together to deliberate policy issues with each other, informed and supported by experts on the topic at hand. The economy can furthermore be democratized by promoting and strengthening more democratic forms of economic organization, such as community and civic organizations, cooperatives and social enterprises.
Besides exploring what this paradigm shift entails for the economy in general, our report takes a closer look at the following three fields: (1) the public sector, (2) environmental policy and (3) the financial sector.
1. Implications for the public sector
For the public sector, this paradigm shift requires us to re-appreciate the public sector and recognize its value creation and innovation capabilities. The role of the state should thus no longer be to simply facilitate and fix markets, but instead actively enable society to ensure the well-being of its citizens and to achieve democratically chosen missions. In contrast to neoliberal ideas, privatization and marketization often do not lead to more efficiency and in fact often create problems in terms of equity and resilience. Therefore, we need to be more cautious with privatization and marketization, and reverse past decisions.
Respect for public sector workers has declined over the last decades, but the corona crisis made us realize again that many of these jobs are essential for our society and well-being. Empirical studies show that these essential public workers are underpaid in comparison to what they contribute to society. Paying these workers more is not only fair, it is also efficient as it makes jobs with positive externalities more attractive.
The last decades have been characterized by a weakening of the welfare state, which has made citizens, and especially economically vulnerable groups, more precarious. To better ensure people’s well-being we need to renew the welfare state and seriously consider innovative ideas like a job guarantee, extending the basic services to which citizens have assured access, and less punitive and restrictive income support through benefits as right.
2. Implications for Environmental Policy
For environmental policy, the paradigm shift leads us to challenge the way in which power structures dominate current policy-making, preventing a socially just transition. For too long we have witnessed the debates across different policy schools, driving us away from pragmatic decision making, preventing compromises. We have also failed to integrate shared perspectives of commonly valued principles such as democracy, equity and power redistribution. Because climate change will challenge the very way we organize our societies, the future of environmental policy should be politics-resilient, as well as more democratic and socially just.
Examples of such policies include an ecological tax-and-dividend which not only taxes carbon emissions but also extends to other polluting and extractive sectors, while also actively redistributing its revenue as a dividend. It also includes active coordination and financing provided by state-led investments, embracing social industrial policy. A final example is that of fostering user-led innovation, actively embracing a prosumer economy which provides energy autonomy while promoting the transition to a circular
3. Implications for the Financial Sector
In the financial sector the main goal is a change of power structure. Currently, the role of the financial sector in our society is too dominant and too big. Financial institutions are often too big to fail and the real economy is serving the financial sector instead of the other way around. The financial sector had the opportunity to get a life on its own, because a public anchor is missing and there is a lack of fundamental structural reform and hence a lot of inefficient regulation. A more supportive and facilitating financial sector is needed in order to accelerate the changes in the real economy which we desire. To get there, we need four things:
- First of all, change the way money is created. From a privately held, profit driven form, to public money creation where money is brought in circulation without interest and on a debt free basis.
- Secondly, a coordinated debt jubilee is needed to cope with the current debt levels. After this jubilee, prevention mechanisms have to be installed to prevent new unsustainable debt levels from building up again.
- Thirdly, more diversity in the financial system is needed to distribute power and serve all forms of demand for credit. A public payment infrastructure, which gives people an alternative to banks, is a precondition for this.
- Lastly, to prevent undesirable effects of complex financial products, they need to be able to show their added value to society before they are allowed through a social value test for new financial products.
To achieve the paradigm shift, changes in ideas as well as in power (in)balances are needed. This report contributes to a growing literature that focuses on changing the way we think and talk about the economy. But besides talk, action is needed. Special interests have too long been able to block reforms towards a more sustainable, social and stable economy.
Therefore, we call upon citizens, companies, the media, national governments and the European Union to take action and help us move towards the well-being economy. We call…
- … upon citizens to become actively organized and start the shift towards democratization;
- … upon the media to speak about the well-being economy instead of referring continuously to GDP, as well as to distance themselves from special interest groups;
- … upon the private sector, including the financial sector, to develop public-private partnerships and move to social business models;
- … upon local governments to enable citizens’ assemblies and develop local circular hubs;
- … upon researchers and academia to challenge the GDP hegemony as well as expand their research on pathways towards an economy of well-being;
- … upon think tanks and NGOs to build bridges to lead the way for private and state actors to more societally-relevant roles;
- … upon national governments to be cautious about privatization and marketization, as well as to reap the benefits of its R&D investments, pay more to essential workers, strengthen the welfare state, set benefits as a right, and decrease dependency on banks;
- … and finally, upon the European Union institutions to consider a fiscal union which may enable it to tackle income inequalities, redesign the ETS and expand taxation to all types of ecological degradation, to provide industrial guidance, start with public money creation, regulate complex financial products, stop stimulating financing via debt through taxation and finally, to actively diversify the financial system.