We need a new economics for the 21st century. Here are five potential pillars.
Credit: Alpha Stock Images/Nick Youngson.CC BY-SA 3.0.
We live in a world that’s facing many destructive and entwined crises including growing inequality, climate change, poverty, pollution and human rights violations. Our current economic system is perpetuating and exacerbating these crises.
Over the last thirty years, neoliberal fundamentalism has put corporate and financial interests ahead of social and environmental standards through policies like privatisation, trade liberalisation and deregulation. If economics is about the allocation and distribution of scarce resources as many first year university text books claim, then 30 years of these policies have failed. We have created more wealth than ever before but have been unable to share it equitably, and in doing so we are destroying our common home.
We need a new economics for the 21st century. To protect our fragile planet, we need to listen to communities and social movements across the world who are already creating just and sustainable economic solutions to social and environmental challenges. Here are five of them.
1. Public services for all through tax justice.
From health clinics in South Africa to clean water in Uruguay and public transport in Vienna , public services provide necessities to hundreds of millions of people around the world. They also drive economic activity and so can play a leading role in the shift towards a more sustainable economy.
To do so, they must ensure the meaningful participation of communities through systems like participatory budgeting, greater transparency, stricter environmental standards in relation to functioning and procurement, and mandatory universal access.
Fair and redistributive tax policies are required to pay for these services. Rather than more tax cuts we need more taxation of multinational corporations, financial transactions, capital gains and wealthy individuals.
Tax havens are costing governments hundreds of billions of dollars. Saving our planet from global warming is possible, but it requires tax justice to finance the necessary energy alternatives. For example, Friends of the Earth International calculates that revenue lost between 2015 and 2030 to tax havens could power half the world with 100 per cent socially controlled renewable energy.
2. Scale up social ownership and cooperativism.
Across the world more than one billion people are already members of cooperatives, a key part of the ‘social and solidarity economy’ which the International Labour Organisation defines as a concept that encompasses organisations that produce goods, services and knowledge while pursuing social and economic objectives. The solidarity economy is fundamentally about reasserting people’s control over the economy. Its principles are based on collective power, democratic decision-making, women’s autonomy, transparency, sustainability, self-management and the egalitarian distribution of economic returns.
Cooperatives produce and distribute millions of goods and services every day, from the food we eat to the hotels in which we stay, the factories we work in and the credit unions in which can choose to invest our savings. In Quebec, Canada, ten per cent of all economic activity comes from this solidarity economy, and in Brazil it has lifted millions of people out of poverty.
Without sufficient support these initiatives can struggle to grow from small projects to transformative solutions with a broader social and economic impact. We must ensure that they have proper access to financing and supportive regulatory frameworks, learning from emerging ‘sharing cities’ like Seoul and Amsterdam.
3. Support local markets and fair trade.
Local and regional economies that are linked together through equitable trade relations are the backbone of a sustainable society. Yet trade liberalisation has rigged the game, writing the rules in favour of multinational companies. This has led to a ‘race to the bottom’ on social and environmental standards.
We need a trade system based on cooperation not competition. Policies must enable governments to reduce trade in environmentally and socially harmful products and introduce ‘supremacy clauses’ that bind states to follow international law and ensure that human rights are legally superior to trade deals.
Communities and local businesses recycle a much larger share of their revenue back into the local economy than multinationals. A study by the University of California found that twice as much money stayed in the community when people bought the produce they needed at local farmers’ markets instead of supermarkets. The promotion of local and agro-ecological production also eliminates unnecessary carbon-intensive transportation.
Many governments already recognise the importance of local economies: ‘farm to school’ programmes in Brazil, the US and France prioritise sustainable locally grown foods in school canteens, while Indonesia is supporting village economies with a fund that’s targeted at improving local public amenities and enterprises.
4. Create economies of purpose by valuing the wellbeing of people and planet.
Under neoliberalism, growth and competitiveness are treated as goals in themselves rather than means to a wider end. This exacerbates inequality and outstrips the rate at which the environment can regenerate or absorb pollutants.
The central aim of economic organisation should be to fulfill the needs of communities in harmony with the planet. GDP should be given much less priority and replaced with new indicators of progress. As economist Kate Raworth argues, “today’s economies are divisive and degenerative by default, and must become distributive and regenerative by design.”
In such ‘economies of purpose,’ democratically-accountable governments agree to prioritise activities like healthcare, education and renewable energy through subsidies and other measures while shrinking or stopping harmful activities like coal mining and weapons production.
This is already happening in some regions of the world. Government policy in parts of Latin America is being driven by concepts of ‘buen vivir’ or ‘well living.’ There are related transition initiatives taking place in India under the rubric of ‘ecological swaraj,’ and in Europe through the transition towns movement.
5. Binding rules to dismantle the power of big business.
Human rights abuses by the biggest companies are rife, be they communities in Indonesia losing their homes to palm oil plantations, rivers in Colombia so heavily polluted by coal mines that local residents can’t fish there any more, or communities in Nigeria that have been devastated by natural gas flares from refineries and pipelines, despite this being illegal.
Voluntary corporate responsibility or ‘self regulation’ is not enough. We need legally binding international rules to regulate and hold transnational businesses to account. The United Nations Inter-Governmental Working Group (IGWG) is already working towards creating such a binding instrument and a French ‘duty of care law’ was passed in 2017 to hold French companies responsible for human and environmental violations committed anywhere in the world.
Governments must also intervene to break-up national, regional and global monopolies and oligopolies, in order to create a more level playing field for small enterprises, cooperatives and public services.
In all these areas, the solutions to poverty, inequality and environmental degradation already exist. The challenge is to scale them up and transform the economy in ways that serve both people and the planet.
