Contribution by Günter Koch
Illustration by Ishaq Fahim for Noema Magazine
I n the search for alternative economic models that are better suited to the requirements of our time, namely the management of a series of so-called "grand challenges" - above all the climate catastrophe - one encounters above all proposals that aim to supplement the existing models with dimensions that, like the underlying economic parameters, reflect a characterisation of an economic unit based on financial data - be it macro- or microeconomic.
The problem, however, is that the "currently prevailing economic model", as we want to call it here, i.e. the capitalist model, is so cemented in all its legal, financial and, above all, monetary policy determinations that it would take an asteroid impact, as in the Mesozoic era and thus at the beginning of the Palaeozoic era, to fundamentally change this stable structure. To describe it impressively in reference to Mark Fisher's theory of "capitalist realism" (Fisher, 2009) or - complementarily - "socialist realism", the statement by Frederic Jameson (Jameson, 2014) or Slavoj Žižiek (Žižiek, 2014), which he adopted, is quoted here: "It is easier to imagine an end to the world than an end to capitalism".
Despite this fatalistic assessment of the reformability of the economic model that is generally dominant in the Western world, i.e. the capitalist model, macro- and micro-economists have set about proposing new economic models in the last few decades, claiming that these address new dimensions that are ultimately suitable for describing economic activity and can be used in practice. Three of these approaches, which are characterised by the fact that they have found a large number of supporters and advocates, including in politics, will be presented here as examples in order to define the discourse space of this blog contribution:
1) the degrowth (or post-growth) economy,
2) the solidarity economy and
3) the Economy for the Common Good (ECG).
Ad 1) Degrowth (or post-growth economics)
The essence of the degrowth or post-growth movement is to challenge the conventional paradigm of continuous economic growth as a necessity for prosperity and wellbeing. Instead, proponents argue for a shift towards sustainable and equitable forms of economic organisation that prioritise human well-being and environmental sustainability over GDP growth.
Key features of the degrowth or post-growth economy include:
- Sustainable resource use, emphasising the need to live within ecological limits and promoting sustainable resource management practices to ensure the long-term viability of ecosystems and natural resources.
- Reducing consumption, especially in affluent societies, to reduce pressure on natural resources, reduce waste and curb environmental degradation.
- Social balance and distributive justice with the aim of reducing inequalities within and between societies to ensure a fairer and more equitable distribution of resources and opportunities. - Promote local economic and production systems to strengthen community resilience, reduce dependence on global supply chains and support local businesses and livelihoods.
- Advocating for policies that prioritise wellbeing over economic growth, including shorter working hours, more leisure time and a reassessment of societal priorities beyond purely economic measures.
- Alternative economic metrics, i.e. proposals for alternative indicators of progress and wellbeing 'beyond GDP', such as measures of social cohesion, environmental quality and subjective wellbeing, to better capture the multiple dimensions of human wellbeing.
Key proponents of the degrowth 'economic philosophy' include Serge Latouche (Latouche, 2013), Giorgos Kallis (Kallis, 2018) and Tim Jackson (Jackson, 2009). Several institutions conduct research in this area: (1) the Center for the Advancement of the Steady State Economy (CASSE), based in the USA, (2) the international Research and Degrowth (R&D) Network, a voluntary network of academics and activists dedicated to promoting research and advocacy on degrowth and related topics, and to collaborating on R&D and knowledge exchange within the degrowth community (DEGROWTH). (3) parts of the European Parliament, which made its position clear at a conference entitled "Beyond Growth" in May 2023 (Kallis et al. , 2024) and (4) last but not least, the World Capital Institute (WCI), which operates this discourse platform on the alternative economy that was primarily inspired by its former president Javier Carrillo (Carillo, Koch, 2021).
Ad 2) The solidarity economy
The solidarity economy is an economic framework that emphasises solidarity, cooperation and social justice as central principles for the organisation of economic activities. It seeks to create an alternative to the mainstream capitalist economic system by emphasising community well-being, equitable distribution of resources and democratic decision-making. The solidarity economy encompasses a wide range of practices and initiatives, including cooperatives, community currencies, fair trade networks, social enterprises and mutual aid organisations.
Characteristics of the solidarity economy include:
- Cooperation and solidarity, emphasising collaboration, mutual support and solidarity between individuals, communities and organisations rather than competition and individualism.
- Democratic governance that promotes participatory decision-making processes that empower stakeholders and ensure the equitable distribution of resources and benefits.
- Social and environmental justice: prioritising the needs and rights of marginalised and vulnerable groups while considering environmental sustainability and ecological resilience.
- Equitable distribution: Promoting economic practices that aim to reduce inequalities and ensure fair access to resources, opportunities and benefits for all members of society.
- Promoting sustainable production and consumption patterns that respect ecological limits and promote environmental protection.
- Support local economies and self-reliant communities to increase resilience, reduce dependence on external actors and promote cultural diversity.
Advocates of the solidarity economy include a wide range of individuals, organisations and movements around the world. The main supporters and organisations associated with the solidarity economy movement include:
- The Solidarity Economy Network (SEN), primarily active in the USA
- The Intercontinental Network for the Promotion of the Social Solidarity Economy (RIPESS), which promotes co-operation, knowledge exchange and advocacy among solidarity economy practitioners worldwide.
- The UN Inter-Agency Task Force on Social and Solidarity Economy (UNTFSSE)
- Co-operative movements, such as the Mondragon Corporation in Spain (Mondragon) or in the Emilia Romagna region in Italy (Emilia Romagna).
Ad 3) The Economy for the Common Good (ECG)
The core of the concept of the "Economy for the Common Good" (ECG) is to redefine the goals and standards of economic activity in order to prioritise the well-being of people and the planet over pure financial gain. The Economy for the Common Good proposes a radical shift in economic thinking and behaviour towards a more ethical and sustainable framework.
Members of the World Capital Institute (WCI) and the New Club of Paris (NCP) such as Günter Koch (Koch, Goydke, 2019) or José Carlos Ramos (Ramos) have addressed the scientific foundations of the Economy for the Common Good by discussing the following concepts, with the founder of the European Economy for the Common Good movement, Christian Felber (Felber, 2019), being one of the main proponents:
- The "common good balance sheet", which is not a balance sheet according to the classical definition, but a model for reporting on a company's contributions to societal well-being, environmental sustainability, social justice and democratic participation. This is done by drawing up a common good balance sheet that assesses a company's impact on various social and environmental factors.
- The ECG is committed to transforming the market economy into an economy based on ethical principles such as solidarity, fairness, sustainability and respect for human rights. This includes promoting co-operation and collaboration between business, government, civil society and citizens to achieve common goals.
- The ECG proposes legal and institutional reforms to incentivise ethical behaviour and discourage practices that harm the common good. This may include changes to taxation, corporate governance and related regulations.
Quite a few prominent scientists, including Nobel Prize winners, have dealt with this topic, such as
- Elinor Ostrom, who received the Nobel Prize in Economic Sciences for her "Analysis of Economic Governance", in particular "The Commons" (Ostrom, 1990)
- Jean Tirole, Professor of Economics at the University of Toulouse Capitol. In 2014, he received the Nobel Memorial Prize in Economic Sciences for his analysis of market power and regulation (Tirole, 2019).
- Mariana Mazzucato, Professor at University College London, where she is the Founding Director of the UCL Institute for Innovation and Public Purpose (IIPP). One of her most recent publications is entitled "Governing the Economics of the Common Good - From Correcting Market Failures to Shaping Collective Goals" (Mazzucato, 2023)
- Jean Gadrey, a French economist known for his work on alternative economic paradigms and indicators of social progress. He has studied the ECG concept and its implications for rethinking economic priorities (Gadrey, 2002). - Lorenzo Firamonti, who has researched alternative measures of progress and wellbeing and whose work on 'Gross National Happiness' and beyond GDP indicators is guided by the principles of the ECG movement (Firamonti, 2017)
- Katherine Trebeck and Jeremy Williams, who have explored issues of sustainability, inequality and alternative economic models, including the ECG framework. In their book "The Economics of Arrival" they discuss the need to rethink the paradigms of economic growth (Trebeck, Williams, 2019).
- Kate Raworth, known for her work on "Doughnut Economics", whose ideas overlap with the principles of the Economy for the Common Good, particularly in her plea for a more holistic approach to economic thinking that takes into account social and environmental factors (Raworth, 2018)
Conclusion from the discussion on alternative economic models
The discussion of macro- and microeconomic alternatives to the currently prevailing, namely capitalist, economic model, exemplified here by three economic models, shows that all these "new" concepts are ultimately based on ethically founded political convictions whose aim is to bring about a major social transformation - possibly in the sense of Karl Polanyi's idea of a "Great Transformation" (Polanyi,1944) ? - with the common goal of saving our planet. With its discourse platform "Alternative Economies", the World Capital Institute is attempting to contribute to the reform of valid and defining models. The discussion is open.
References
Carrillo, F.J., Koch, G. (2021). Knowledge for the Anthropocene. Edward Elgar Publishing Ltd, Cheltenham UK
CASSE - Community Health Institute. Retrieved March 2024 from https://www.casseusa.com/
DEGROWTH - The international Research and Degrowth (R&D) Network. Retrieved March 2024 from https://degrowth.net/
EEAS - European External Action Service. Retrieved March 2024 from https://www.eeas.europa.eu/eeas/about-european-external-action-service_en
EFRAG - European Financial Advisory Group. Retrieved March 2024 from https://www.efrag.org/About/WorkingGroups/38/EFRAG%20Academic%20Network
Emilia Romagna. Retrieved March 2024 from https://www.regione.emilia-romagna.it/en/industrial-system
ESG – Environmental, Social, Governance. Retrieved March 2024 from https://www.climatepartner.com/en/knowledge/glossary/environmental-social-governance-esg
Felber, Chr. (2019) Change Everything: Creating an Economy for the Common Good, Zed Books Ltd.
Fioramonti, L. (2017). Wellbeing Economy: Success in a World Without Growth. Pan Macmillan South Africa, Johannesburg
Fisher, M. (2009). Capitalist Realism: Is There No Alternative? Zero Books Publisher
Gadrey, J. (2002). New Economy, New Myth. Routledge ISBN 9780415301428
ICR – (Corporate) Intellectual Capital Report(ing). Retrieved March 2024 from https://ec.europa.eu/invest-in-research/policy/capital_report_en.htm
IPCC - Intergovernmental Panel on Climate Change. Also retrieved in March 2024: https://www.un.org/en/climatechange/paris-agreement
Jackson, T. (2009). Prosperity Without Growth. Routledge – Taylor & Francis Group
Jameson, F. (2014). Representing 'Capital': A Reading of Volume One. Verso Books
Kallis, G. (2018). Degrowth (Economy: Key Ideas). Agenda Publishing. ISBN-10 : 1911116800
Kallis, G., Mastini, R., Zografos Chr. (2024). Perceptions of degrowth in the European Parliament. nature, Nat Sustain 7, 64–72 (2024). Retrieved March 2024: https://doi.org/10.1038/s41893-023-01246-x
Koch G., Tim Goydke, T. (2019), Economy for the Common Good - A Common Standard for a Pluralist World? tredition publisher. ISBN-10: 3347184319
Latouche, S. (2013). Degrowth as a Way Out of the Crisis. Centre de Cultura Contemporània de Barcelona. Retrieved March 2024 from https://www.cccb.org/en/multimedia/videos/serge-latouche/210803
Mazzucato, M. (2023). Governing the Economics for the Common Good. University College London, Institute for Innovation and Public Purpose. Also retrieved March 2024 from https://doi.org/10.1080/17487870.2023.2280969
Mondragon Corporation. Retrieved March 2024 from https://www.mondragon-corporation.com/
NCP The New Club of Paris. Retrieved March 2024 from https://new-club-of-paris.org/
Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.
Polanyi (1944). The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press (2001), ISBN-10 : 080705643X
Ramos, J.C. – Head of Research of the EBC - Economía del Bien Común (España y Latinoamérica) @ https://www.linkedin.com/company/econgood-international/ (Retrieved March 2024)
Raworth K. (2018) . Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. Cornerstone Publisher. ISBN:9781847941398
RIPESS - Intercontinental Network for the Promotion of Social Solidarity Economy. Retrieved March 2024 from https://www.ripess.org/?lang=en
SEN - The Solidarity Economy Network. Retrieved March 2024. https://ussen.org/about-ussen/
Stiglitz, J.E., Sen, A., Fitoussi, J.-P. (2008). Report by the Commission on the Measurement of Economic Performance and Social Progress. Retrieved March 2024 from https://www.economie.gouv.fr/files/finances/presse/dossiers_de_presse/090914mesure_perf_eco_progres_social/synthese_ang.pdf
Tirole, J. (2019) Economics for the Common Good. Princeton University Press
Trebeck K., Williams J. (2019) The Economics of Arrival: Ideas for a Grown-Up Economy Policy. Press University of Bristol
UNSSE - UN Inter-Agency Task Force on Social and Solidarity Economy. Retrieved March 2024 from https://unsse.org/
Žižiek, S. (2014). In Trouble in Paradise. Penguin UK