The state we’re in and the call for a new economy

I’m at the Imagine 2012 conference on cooperative economics in Quebec City. Here are some thoughts after the first full day. It’s a pretty frightening picture, folks. But there is hope.

The industrial age economy, and indeed the neoclassical model of economics underpinning it has reached the end of its useful life. Whilst it helped lift many millions out of poverty, we are now seeing greater inequality between rich and poor countries and even between rich and poor people within countries. A model of business based on maximising shareholder value in a world where only a tiny proportion of people are shareholders will only cause rising inequality. This is not just bad news for the poor. In unequal societies, the rich suffer from many more social problems than in more equal ones.

GDP growth brings about improvements to wellbeing, but only up to a point before tailing off and in many cases declining (for example, increasing obesity and mental illness in the United States.) Research by Manfred Max Neef suggests that this tailing off happened around the 1970’s or 80’s for most developed nations.

The economy is a sub-system of planet earth – an inherently closed, finite system, therefore the economy cannot keep growing indefinitely within it. This can be easily explained to young children. Yet this inconvenient truth is ignored by all large political parties who argue about whether growth needs investment or austerity, and we still have an economy based on ever-increasing, unsustainable consumption. There are about 1.8 hectares of workable land to support each human being on the planet. In rich countries like the US, the use is in excess of 4 hectares and growing. Not to mention the hundreds of millions of people in the newly developing middle classes in India, China, Brazil and others who are now joining the consumer party.

The key message is that we have to move away from a fixation on growth (getting bigger at any cost) and towards development – becoming happier, healthier, wiser, safer and with better relationships.

This is not a call for left-wing politics. Far from it. Socialism and industrial age capitalism have both failed. Capitalism, for all of its fundamental shortcomings is the best way humans have come up with to organise ourselves to produce the things we need. But we need a very different capitalism.

The cooperative movement – businesses based on ownership of members (be that customers, employees or other stakeholders in the community) offer an alternative to maximising shareholder value. Instead, they use capitalism to maximise social outcomes – in other words, the things that really matter to humans and the planet now and for future generations. This is the concept of development rather than growth in action.

This view of capitalism is remarkably well established. Cooperatives world-wide have 1BN members and the largest three manage assets in excess of 1.6TN (and guess what, they have been extremely resilient through the recent economic turmoil because they did not engage in the insane activities like shareholder-owned banks.) It’s extremely worrying that despite the size of the cooperative movement and the promise it holds in playing a part in a development rather than growth based new economy, there is no representation of the cooperative movement on the B20 – the business forum that advises the G20. Business as usual, the old model is there in abundance.

We have an economy and consumption that cannot grow indefinitely. We are close to irreversible climate change together with huge natural resource depletion and energy shortages. We have to act now to protect the planet for future generations, and we need to start by creating a new economy, and fast before it is too late.

4 thoughts on “The state we’re in and the call for a new economy

  1. Pingback: Disadvantages of cooperatives and how to overcome them | Tom Nixon

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  3. Pingback: Why I started The Brightoneers, and what I hope it will do | Tom Nixon

  4. Pingback: My first year back in the UK. Here’s what happened. | Tom Nixon

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