{"id":82596,"date":"2016-11-28T12:00:11","date_gmt":"2016-11-28T12:00:11","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=82596"},"modified":"2016-11-06T17:13:30","modified_gmt":"2016-11-06T17:13:30","slug":"well-being-economy-a-scenario-for-a-post-growth-horizontal-governance-system","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2016\/11\/well-being-economy-a-scenario-for-a-post-growth-horizontal-governance-system\/","title":{"rendered":"Well-being Economy: A Scenario for a Post-Growth Horizontal Governance System"},"content":{"rendered":"

3 Nov 2016 – This paper is one of many proposals for a systemic alternative<\/a> we have published or will be publishing here at the Next System Project. We have commissioned these papers in order to facilitate an informed and comprehensive discussion of \u201cnew systems,\u201d and as part of this effort we have also created a comparative framework<\/a> which provides a basis for evaluating system proposals according to a common set of criteria.<\/em><\/p>\n

\"well-being-economy-lorenzo-fioramonti\"<\/a><\/p>\n

Introduction: A well-being economy? <\/strong><\/p>\n

For the past half century, western societies have used a narrow definition of economic growth\u00a0as the route to development. Growth has become an end in itself. As a result, the true meaning\u00a0of development has been lost. Rather than an end goal, development should be viewed as\u00a0a process towards an improved state of existence for humanity and the ecosystem.<\/p>\n

The concept of well-being, with its multidimensional character, is far better suited to describe\u00a0this improved state. Good, enjoyable, and fulfilling lives cannot be achieved through industrial\u00a0output alone. Indeed, such output can easily endanger human well-being, leading to the deterioration\u00a0of the social relationships and environmental balance upon which well-being depends.<\/p>\n

The question is: How do we build economies designed to achieve holistic\u00a0well-being? Can we find better channels for our pursuit of well-being than the\u00a0destructive model of growth-driven development on which we are hooked? To\u00a0do so we must redesign our social organization, starting with a restructuring of\u00a0the economy that will trigger profound changes in both political institutions and\u00a0society at large.<\/p>\n

From a governance perspective, the economy is a decision-making system. The\u00a0economic \u201crules of the game\u201d shape behaviors, define incentives, and guide collective\u00a0action. They ensure predictability, acceptability, and compliance. As such, the\u00a0economic and political systems are closely enmeshed. And, since the economic\u00a0rules frequently dictate political decision-making, one can think of the economy\u00a0as the ultimate rules-making system for the creation and maintenance of social\u00a0order. For instance, by dividing responsibilities between producers and consumers,\u00a0organizing the distribution of goods and services, and designing a monetary\u00a0system for exchange, the economy becomes the arbiter of social organization.\u00a0Its rules and roles are so ingrained that order is easily maintained, even in the\u00a0absence of an overarching political authority. Therefore, if we can successfully\u00a0alter those economic governance rules, we stand a real chance of reorganizing\u00a0society, both politically and socially.<\/p>\n

From the old to the new: what changes and what scope <\/strong><\/p>\n

Our current model of social organization, of which the economy is such a fundamental\u00a0component, can be described as a vertical structure in which wealth created\u00a0by growth at the top of the pyramid is \u201cexpected\u201d to trickle down to the lower\u00a0layers. The separation of production and consumption roles leaves \u201cconsumers\u201d on\u00a0the receiving end of the growth process. The model is reinforced by the predominant\u00a0economic growth measurement, which is gross domestic product (GDP).\u00a0Through its statistical design, GDP adopts a narrow definition of production and\u00a0assets that unduly restricts the range of flows and stocks that can be considered\u00a0of economic value. For instance, the vertical economy only recognizes the contribution\u00a0of formal economic activities to the national income, while ignoring the\u00a0important contribution of the so-called informal and non-money economies.<\/p>\n

Because GDP measures only \u201cpriceable\u201d output, the vertical economy overemphasizes\u00a0the performance of large corporations at the expense of small businesses,\u00a0for whom production levels are relatively lower in terms of market prices.\u00a0In rewarding economies of scale by portraying them as cost effective, it disregards\u00a0negative externalities such as overproduction and environmental destruction,\u00a0which are not deducted from the GDP measurement of economic growth.<\/p>\n

In the vertical economy, natural wealth has no value unless owned and exploited.\u00a0To contribute to development, nature requires top-down control (ideally via\u00a0a large company, which can maximize output) and must be commercialized\u00a0through market channels. Neither the preservation of natural beauty to enhance\u00a0the welfare of ecosystems, nor the management of natural resources for the common\u00a0good, allows the vertical economy to grow. The reverse is equally true. As\u00a0the World Resources Institute observes: \u201cA country could exhaust its mineral\u00a0resources, cut down its forests, erode its soil, pollute its aquifers, and hunt its\u00a0wildlife and fisheries to extinction, but measured income would not be affected\u00a0as these assets disappeared.\u201d2<\/sup><\/p>\n

Policies designed to support the vertical economy replace informal systems (such\u00a0as street vendors, small-scale farming, local markets, family businesses, and the\u00a0unpaid productive work that people carry out for themselves, their families, and\u00a0their communities) with formal structures such as shopping malls, industrial-scale\u00a0farming, and large infrastructure projects. Natural resources are commercialized\u00a0and sold off: the higher the volume, the better for the economy, regardless of the\u00a0social and environmental costs, which GDP does not deduct from a society\u2019s\u00a0overall economic performance. Growing trees does not add to economic growth,\u00a0but cutting and selling them off does. While some can take advantage of this\u00a0\u201ccreation\u201d of monetary wealth, many are left behind.<\/p>\n

There are two main reasons for this. First, top-down management is by definition\u00a0limited to a few gatekeepers. Second, as open resources are brought under proprietary\u00a0control, the communities that used to access them freely can no longer do\u00a0so. The Organization for Economic Co-operation and Development (OECD)\u00a0has confirmed the close link between rising inequality and the growth of the\u00a0vertical economy across the world, an effect amplified across much of Africa and\u00a0Asia, where the informal economy provides a fundamental safety net to many\u00a0poor households.3<\/sup> The economist Thomas Piketty has provided time-series data\u00a0over two centuries to show how income inequality rises in the absence of corrective\u00a0policies, progressive taxation, and redistribution mechanisms.4<\/sup> The reality of\u00a0the so-called \u201ctrickle-down effect,\u201d a key characteristic of the vertical economy\u00a0often used to make the social case for the economic policies of the twentieth\u00a0century, does not pass the litmus test of hard data in the twenty-first century. The\u00a0old adage that \u201ca rising tide lifts all boats\u201d no longer applies (if it ever did!).<\/p>\n

If we can successfully alter economic governance\u00a0rules, we stand a real chance of reorganizing\u00a0society, both politically and socially.<\/em><\/strong><\/p>\n

An economy designed to promote well-being will be adaptable, integrative, and\u00a0empowering. Adaptable because the new economy will operate like a network,\u00a0abandoning the conventional vertical structure to expand horizontally and build\u00a0resilience against external shocks through a system of nodes. Integrative because\u00a0it locates systems of production and consumption within the broader biosphere.\u00a0And, empowering because its users will take control, rather than performing the\u00a0passive role of \u201cconsumers.\u201d<\/p>\n

The convergence of crises, including environmental degradation, rising inequality,\u00a0mass migration, and resource depletion, is making self-evident the unsustainability\u00a0and gross inefficiency of the current model. And it is also triggering corresponding\u00a0innovation. Pockets of experimentation are mushrooming around the globe, where a\u00a0technological revolution in peer-to-peer software and hardware, 3D printing, decentralized\u00a0renewable energy systems (microgrids), and agroecology is advancing a new\u00a0economic model based on collaboration rather than reductive competition. These\u00a0possibilities for scale and impact of innovation at the global level are unprecedented.<\/p>\n

In geopolitical terms, we are likely to see a slowdown and ultimately a reversal in\u00a0the current rush to globalization. The first reason for this is the need to avoid catastrophic\u00a0climate change. Following the Paris climate deal at the United Nations\u00a0Conference of the Parties (COP21) in 2015, the world will need to introduce\u00a0regulations to curb carbon emissions, which will certainly have an impact on\u00a0global markets and long-distance transportation systems. Energy projections also\u00a0seem to point in this direction. The International Energy Agency (IEA) believes\u00a0that conventional crude output from existing fields will fall \u201cby more than 40\u00a0million barrels per day by 2035.\u201d5<\/sup><\/p>\n

As a consequence, out of the 790 billion barrels\u00a0of total production required to meet projected demand, \u201cmore than half is\u00a0needed just to offset declining production.\u201d6<\/sup> As for natural gas, a nonrenewable\u00a0resource often touted as the magic bullet to deal with shrinking oil reserves, the\u00a0IEA forecasts some growth in the next decade (mostly in North America), with\u00a0uncertainty about \u201cwhether gas can be made available at prices that are attractive\u00a0to consumers while still offering incentives for the necessary large capital-intensive\u00a0investments in gas supply.\u201d7<\/sup> Even if we dispute such projections and firmly\u00a0believe fossil fuel energy will grow in the foreseeable future, the climate change\u00a0imperative will still make it unlikely for these polluting resources to continue\u00a0powering globalization (NB: natural gas generates methane, a greenhouse gas\u00a0much more polluting than CO2). At the same time, renewable energy systems\u00a0like solar, wind, hydro, and geothermal (which are expected to grow exponentially\u00a0in the coming years) can hardly come to the rescue of globalization, as they are\u00a0not easily amenable to long-distance transportation.<\/p>\n

Pockets of experimentation are mushrooming around the globe, where a\u00a0technological revolution is advancing a new\u00a0economic model based on collaboration rather than reductive competition.<\/em><\/strong><\/p>\n

Against this backdrop, the\u00a0IEA believes the world economy requires an immediate reduction in energy-related\u00a0emissions if the world is to stand even the smallest chance of remaining\u00a0within the 2\u00b0 Celsius margin, given that the climate compatible carbon budget\u00a0will be exhausted by 2040.8<\/sup> This prospect is likely to be challenged by oil-producing\u00a0states and companies, which have already integrated the sale of proven\u00a0reserves in their financial balance sheets. Should they succeed at derailing any\u00a0meaningful efforts to curb climate change, ultimately, weather conditions will\u00a0stay economic globalization. If not carbon taxes, polluters-pay-schemes, natural\u00a0capital accounting, environmental profit and loss provisions, and soaring insurance\u00a0costs for worldwide freight and transportation due to climate variability, will \u00a0make transport-intensive produce prohibitively expensive, as compared to today\u00a0and to local production.<\/p>\n

While the current form of globalization will not be able to continue in this scenario,\u00a0a network economy that scales horizontally will thrive in a climate-compatible economic\u00a0system. The localization and blending of production and consumption will\u00a0result in a better circular system, with less waste and negative externalities. Moreover,\u00a0adaptability to local conditions will ensure a better connection between supply\u00a0and demand, minimizing environmental and social impacts. Instead of striving for\u00a0ever-growing scale, businesses will seek \u201cthe right size,\u201d just like cells in an organism.\u00a0Environmental and social considerations will become an integral part of their\u00a0business strategy, as customers will no longer be on the receiving end of the production\u00a0process, but, rather, will play an active role in it.<\/p>\n

This type of economy is also likely to continue operating transnationally, challenging\u00a0the potential inward-looking nationalistic trends that may be triggered\u00a0by the global economic contraction. For, while production and consumption will\u00a0be increasingly localized, exchange will happen across the nodes of the network\u00a0with scant regard for political borders. This effect will be particularly strong in\u00a0regions like South America, Europe, Africa, the Middle East, and East Asia,\u00a0where common languages and culture, as well as similar ecological conditions,\u00a0favor cross-border interaction.9<\/sup><\/p>\n

How to get there? A theory of change <\/strong><\/p>\n

The key to change lies in shifting institutional frameworks, which will free up\u00a0space for bottom-up business models to challenge the status quo. Since the economy\u00a0is a rules-making system, the best chance to effect change comes through\u00a0altering some of the key policies, thus deflecting the economy onto a new course.\u00a0The starting point is also the most fundamental: the rules that dictate how we\u00a0understand and measure economic success.<\/p>\n

Gross domestic product (GDP) is not simply an economic metric, but a performance\u00a0assessment tool for society that goes well beyond its superficial objective\u00a0of summarizing attainments. I have discussed the political and policy implications\u00a0of GDP at length in two of my previous books.10<\/sup> From the perspective\u00a0of institutional economics, GDP is an institution in its own right, controlling\u00a0behaviors and decisions to ensure compliance by establishing the overarching\u00a0framework for policymaking. It follows that to go \u201cbeyond GDP,\u201d redirecting its\u00a0institutional leverage through the introduction of new performance assessment\u00a0tools, is likely to trigger a cascade effect throughout society.<\/p>\n

The key to change lies in shifting\u00a0institutional frameworks, which will free\u00a0up space for bottom-up business models to\u00a0change the status quo.<\/em><\/strong><\/p>\n

For instance, an institutionalized system of accounting that emphasized the costs\u00a0associated with highly centralized, polluting, and wasteful production would\u00a0reveal that many large corporations are taking wealth away from society rather\u00a0than adding value, thus reducing their acceptability and political influence. Such\u00a0a system would also highlight the economic contributions and external benefits\u00a0of forms of production that GDP either downplays or ignores. If the unpaid\u00a0activity of households and the social benefits to be derived from small, distributed\u00a0businesses are fully accounted for, nonconventional economic actors will\u00a0gain a much stronger voice in society. Civil society will also benefit: its activities\u00a0will no longer be perceived as marginal (implicit in definitions such as \u201cnonprofit\u201d\u00a0and \u201cthird sector\u201d), but rather as key drivers of well-being.<\/p>\n

In the same way, looking beyond GDP in economic performance has the capacity\u00a0to disrupt the balance of opposing forces in a number of key sociopolitical\u00a0disputes. Opponents of fossil fuel industries and others fighting climate change\u00a0will find their moral and ethical arguments underpinned by solid economic indicators,\u00a0as will groups mobilized against austerity policies or international trade \u00a0agreements such as the Transatlantic Trade and Investment Partnership (TTIP)\u00a0and Trans Pacific Partnership (TPP). Current arguments for unfettered free trade\u00a0rest almost entirely on GDP measurements that promote volume over quality\u00a0in economic activity and do not account for international trade\u2019s negative environmental\u00a0and social externalities. Further, austerity policies currently dividing\u00a0Europe and other regions of the world enforce punitive debt-to-GDP ratios that\u00a0prevent social investment.<\/p>\n

The list of beneficiaries of a shift beyond GDP includes families, communities, \u00a0cooperatives, informal and small businesses, organic farmers, fair trade networks,\u00a0and many similar groups. Even high-tech companies, and especially those providing\u00a0online services, from Google to Facebook, have much to gain. From a\u00a0GDP perspective these companies\u2019 only value is through selling advertising space,\u00a0while their overall societal impact in terms of connectivity, social networking, and\u00a0information sharing has no economic value in GDP terms because it is provided\u00a0free of charge or at a marginal cost close to zero. This means that the contribution\u00a0to economic dynamism and well-being of information-sharing technologies,\u00a0some of which provide public goods from free phone calls to global maps to\u00a0library services, is grossly underestimated by the vertical GDP model.<\/p>\n

The \u201cbeyond GDP\u201d debate is now high on the agenda. Many international agencies,\u00a0including the United Nations (UN), the OECD, the World Bank, and the\u00a0European Union, are actively engaged, as are a number of national governments.\u00a0Moreover, the UN 2015 Sustainable Development Goals, although at times\u00a0contradictory in their objectives, provide at least an entry point for institutional\u00a0change at a global level. As more social actors become aware of how a move\u00a0beyond GDP can assist their causes, it is to be expected that grassroots social\u00a0pressure will also grow, connecting bottom-up movements for change with topdown\u00a0political reform. The pace is quickening, and radical change within the next\u00a0decade can be anticipated, provided pressure is maintained.<\/p>\n

Ideally, GDP should be replaced by a \u201cdashboard\u201d of indicators capable of integrating\u00a0the key dimensions of human and ecological well-being. This integration\u00a0would need to be done carefully, so as to combine both monetary measurements \u00a0with non-monetary ones. For starters, the economy should be measured in terms\u00a0of genuine progress, which will require introducing monetary units for dimensions\u00a0that do not involve formal transactions, such as natural and social capital.\u00a0This would make both ecosystems and household contributions valuable for\u00a0economic success. At the same time, the operating boundaries of the economy\u00a0should be determined by non-monetary measurements of social and environmental\u00a0well-being, indicating the upper and lower limits (that is, the ecological ceiling\u00a0and the social floor) that cannot be exceeded without endangering well-being.\u00a0This would make sure that sustainability is fully respected in its \u201cstrong\u201d version,\u00a0not allowing econometric calculations to simply offset losses in one field with\u00a0gains in another (what economists call the \u201cperfect substitutability\u201d of different\u00a0types of capital). In this accounting system, continuous improvements in well-being\u00a0need not be achieved at the expense of social and ecological conditions.<\/p>\n

Economics, politics & society in the well-being economy<\/strong><\/p>\n

In a well-being economy, production and asset boundaries differ greatly from those\u00a0imposed by the GDP framework. While the latter recognizes only assets and productivecapacity that are under the institutional control of a proprietor, the well-being\u00a0economy takes a holistic approach, taking account of the external impacts (both\u00a0positive and negative) of economic activity. It also values \u201cgoods\u201d (such as those\u00a0related to the biosphere) which, while not owned by anyone in particular, make a\u00a0significant contribution to human and environmental well-being.<\/p>\n

While proprietorship will continue to have its place, the role of public, collective,\u00a0and shared ownership will increase significantly in recognition of the centrality\u00a0of the nurturing of common resources to human well-being. By introducing\u00a0genuine progress indicators, as well as their corporate applications, both in terms\u00a0of natural capital accounting and environmental profit and loss metrics (which\u00a0report the ecological impacts of corporate activities in monetary terms), certain\u00a0economic activities that enjoy respect and support in the GDP economy will be\u00a0actually revealed as not profitable. This is certainly the case of fossil fuel companies,\u00a0whose negative impact on society and the environment largely exceeds the\u00a0profits shown in their balance sheets, as recently revealed by a series of studies\u00a0conducted by the environmental consultancy company, Trucost. Against this\u00a0backdrop, it is not surprising that polluting industries have traditionally opposed\u00a0any reform in economic accounting methods, opposing the deduction of environmental\u00a0losses from GDP back as early as the 1990s, when the US government\u00a0attempted a reform.11<\/sup><\/p>\n

As new measurements are followed by their relative rewards and sanctions, some\u00a0business models will have to change to stay profitable and socially acceptable, while those most impactful in terms of negative effects will need to be phased\u00a0out. Limited liability\u2014a foundation of the GDP economy and a powerful instrument\u00a0in the creation of giant, unaccountable corporations that seek economies\u00a0of scale without reference to social or environmental consequences\u2014will have to\u00a0be reconsidered in light of the new parameters of well-being. In the future, limited\u00a0liability status may only be granted to companies supporting improvements\u00a0in well-being while complying fully with social and environmental responsibilities.\u00a0Patterns of ownership will change accordingly, with social enterprises and\u00a0hybrid organizations that connect for-profit with nonprofit activities becoming\u00a0increasingly common, as well-being is incorporated into economic accounting,\u00a0and social capital becomes a clear driver of economic prosperity. This will build\u00a0on existing regulatory innovations, such as the introduction of L3Cs (low-profit\u00a0limited liability companies), which have become more and more common in\u00a0the US, allowing organizations to draw on foundation and nonprofit funding to\u00a0operate as socially-oriented businesses.<\/p>\n

As new measurements are followed by their relative rewards and sanctions, some\u00a0business models will have to change to stay profitable and socially acceptable, while those most impactful in terms of negative effects will need to be phased\u00a0out.<\/em><\/strong><\/p>\n

With the blurring of the distinction between entrepreneurial profit and well-being,the parallel difference between producer and consumer (and the transactional,\u00a0profit-driven activities that seek to separate them) will begin to fade. The\u00a0emergence of this new phenomenon of \u201cprosumer\u201d will change the very meaning\u00a0of work, as well-being accounting shows how human beings can be productive in\u00a0ways that transcend the traditional framework of paid employment. According\u00a0to the Inclusive Wealth Index\u2014a \u201cbeyond GDP\u201d tool developed by the United\u00a0Nations\u2014the real wealth driving development across the world is not produced\u00a0capital (which is what GDP measures), but human and natural capital (which GDP ignores).12<\/sup> To reflect this reality, the new economy will embrace and value\u00a0the whole range of an individual\u2019s activities: as teacher, caregiver, parent, maker,\u00a0community leader, and in many other roles carrying both monetary and social\u00a0rewards (well beyond the reductive category of \u201cjobs\u201d). The importance of socially-\u00a0useful leisure activities, particularly in relation to maintaining physical and\u00a0mental health, will be fully acknowledged, while women, upon whose unpaid and\u00a0undervalued contribution to personal and social well-being the GDP economy\u00a0has been free riding for so long, will emerge as the true champions of well-beingbased\u00a0development.<\/p>\n

With households integrated in economic performance accounting (as traditionally\u00a0has been the case with firms), families will play a central role in the new\u00a0economy and the time spent therein will be perceived as adding not only to society\u2019s\u00a0public good, but also to its economic dynamism. Moreover, the blurring of\u00a0professional and leisure activities holds the potential of liberating both women\u00a0and men from their traditional social roles. The household will become a locus\u00a0of collaboration rather than segregation. It will also become a focus for activity\u00a0within local economic communities for whom the arbitrary divisions between\u00a0state, market, and civil society will be increasingly irrelevant. While state institutions\u00a0will continue to have a role in terms of planning and legislation, families,\u00a0communities, and small businesses will become the real drivers of development.\u00a0Their political power will grow accordingly.<\/p>\n

With the emergence of a new economy based on the prosperity generated by collaborative,\u00a0\u201chorizontal\u201d entrepreneurial initiatives, a new well-being politics will\u00a0develop to promote sharing and cooperation in political processes. Breaking with\u00a0the production and consumption cycle, individuals will have more time to devote\u00a0to well-being enhancing (and therefore economically valuable) activities. Representative\u00a0forms of participation, such as traditional party politics, may change\u00a0profoundly, giving way to local governance structures based on direct participation,\u00a0which integrate seamlessly with the new, socially responsible economic\u00a0frameworks. Over time, the primacy of the nation-state will be eroded. As powers\u00a0are increasingly devolved to the local level, cities may emerge as pioneers in the\u00a0transition to well-being economics. More broadly, the established economic and\u00a0political distinctions between \u201ccapitalists\u201d and \u201cworking class,\u201d \u201cproprietary\u201d and\u00a0\u201cpublic,\u201d as well as \u201cmarket,\u201d and \u201cpublic sphere\u201d will become redundant, as the\u00a0activities of the new economy increasingly straddle these traditional fault lines.<\/p>\n

This new approach may ultimately lead to a profound reorganization of our\u00a0money system. Although monetary theory generally describes money as a unit of\u00a0account, a currency, and a store of value, money is primarily a tool of social organization. Money coordinates economic activity, making transactional outcomes\u00a0predictable while lowering their cost, especially in societies where there is limited\u00a0interpersonal trust and reciprocity. Money systems, however, are not neutral, and\u00a0invariably favor some forms of production and consumption over others. The\u00a0currently dominant system, like the economy it serves, is highly centralized and\u00a0narrowly controlled. It gives enormous power to private banks (both commercial\u00a0and investment), devolving to them control over the supply of money through\u00a0the issuance of debt, leaving citizens with the short end of the stick.<\/p>\n

In a well-being economy, the money system will need to follow the same distributed\u00a0model of governance as the economy itself, in order to provide appropriate\u00a0levels of economic stimulus and control at local, national, and international levels.\u00a0Local currencies would underpin prosperity and economic resilience at a regional\u00a0level, straddling arbitrary national borders to reflect economic and social networks.\u00a0A national network of currencies could replace the national currency to allow\u00a0communities to trade with each other. In Germany, for instance, a network of\u00a0local currencies called Regiogeld (regional money) connects over seventy nonprofit\u00a0local currency projects, emitting the equivalent of 800 thousand euros in value.\u00a0Alternatively, a national currency could continue side by side with local currencies.\u00a0At a global level, a complementary system of cryptocurrencies would facilitate the\u00a0worldwide interchange of ideas and knowledge (the so-called \u201clight economy\u201d).<\/p>\n

In a well-being economy, the money system will need to follow the same distributed\u00a0model of governance as the economy itself, in order to provide appropriate\u00a0levels of economic stimulus and control at local, national, and international levels.<\/em><\/strong><\/p>\n

In theory, the GDP economy can only operate within the boundaries of social\u00a0acceptance and planetary resource capacity. As an extractive system, affording\u00a0no value to unexploited resources, and making no judgment as to the qualitative\u00a0value of production and consumption, its growth must ultimately conflict\u00a0with natural and social equilibria. In practice, these boundaries have not been\u00a0respected, creating the conditions for the rampant inequality, social dislocation,\u00a0and environmental destruction with which the world at present is beset.<\/p>\n

In contrast to this destructive path, the well-being economy model is designed\u00a0specifically to strengthen social and natural capital while generating human\u00a0development. A \u201cvirtuous circle\u201d is created whereby value, measured in terms\u00a0of well-being, feeds the improvements in the human and natural capital upon\u00a0which the creation of value depends. The negative impact on the environment\u00a0will be greatly reduced as the \u201ccircular economy\u201d model of resource recycling\u00a0and systems for upcycling are integrated into mainstream business models. The\u00a0services that the GDP model considers to be provided free of charge by nature\u00a0(so-called \u201cecosystem services,\u201d which include, for example, a myriad of fundamental\u00a0\u201ceconomic\u201d functions ranging from rainfall to pollination, carbon sequestration,\u00a0irradiation, which are essential to any form of production) will become\u00a0fully valued components of society\u2019s infrastructure, supported by new, horizontal\u00a0structures of governance that connect people more closely to the natural ecosystems\u00a0in which they live and work. Economic \u201cgrowth\u201d in this model lies not in\u00a0the exploitation of natural and human resources, but in improving the quality\u00a0and effectiveness of human-to-human and human-to-ecosystem interactions,\u00a0supported by appropriate enabling technologies.<\/p>\n

Conclusion: can this really happen?<\/strong><\/p>\n

The convergence of transformative technological innovation with a systemic crisis\u2014\u00a0as evidenced by global warming, mass migrations, and rising inequality\u2014\u00a0demands and creates the conditions for a profound restructuring of the economic\u00a0system at the global, national, and local level. The key to unlock this process lies\u00a0in the framework of measurement by which the economy is controlled. The existing\u00a0framework, based on GDP, is increasingly questioned by experts and citizens,\u00a0by international institutions, and by national political leaders. The currents of\u00a0change are beginning to flow and, as the social, political, and economic pressures\u00a0build, the opportunity is emerging for convergence upon a new economic paradigm:\u00a0the well-being economy.<\/p>\n

Pockets of this future system are already well embedded. Local currencies have\u00a0been growing across the globe since the 2008 financial crisis, connecting through\u00a0networks and involving hundreds of thousands of users. Technologies are breakingdown industrial monopolies at an accelerating rate, especially across the\u00a0Internet, where nonprofit initiatives such as Wikipedia and Mozilla have outcompeted\u00a0traditional centralized forms of production. For-profit and nonprofit\u00a0\u201csharing economy\u201d ventures, pioneered by providers such as Uber and Airbnb, are\u00a0entering the mainstream, as are business models inspired by the concepts of the\u00a0circular economy and upcycling. As noted by technology commentators such as\u00a0Jeremy Rifkin and Chris Anderson, this technological revolution is moving from\u00a0software to hardware, with production value chains being shortened and localized\u00a0while maintaining high efficiency levels and low costs.13<\/sup><\/p>\n

As the social, political, and economic\u00a0pressures build, the opportunity is emerging\u00a0for convergence upon a new economic\u00a0paradigm: the well-being economy.<\/em><\/strong><\/p>\n

Natural capital accounting, environmental profit and loss, and ecosystem services\u00a0valuations are being promoted by the UN (through projects like The Economics\u00a0of Ecosystems and Biodiversity, TEEB), the World Bank (through\u00a0initiatives such as Wealth Accounting and Valuation of Ecosystem Services,\u00a0WAVES), the OECD (through its Better Life Index), and many third sector\u00a0institutions. Well-being indicators are being integrated in the statistical systems\u00a0of both regional institutions and national governments, particularly after the proceedings\u00a0of a 2009 commission chaired by Nobel laureates Joseph Stiglitz and\u00a0Amartya Sen, as well as French economist Jean-Paul Fitoussi. Centralized formsof business are increasingly under attack, not only because of their high social\u00a0and environmental costs, but also because their business model pits productivity\u00a0against employment, leading inevitably to joblessness. Decentralized systems \u00a0for the production and consumption of renewable energy through solar, wind,\u00a0and geothermal technology are available to millions of users, often also through\u00a0grassroots action plans like the so-called \u201ctransition initiatives\u201d in Europe and\u00a0North America and the \u201csmart villages\u201d in the developing world. The very notion\u00a0of a corporation may be soon altered by the convergence of regulatory systems,\u00a0accounting methods, and new technologies, which will open up the possibility\u00a0for the massive diffusion of a model that University of Michigan\u2019s Gerald Davis\u00a0calls \u201clocavorism.\u201d14<\/sup> In Davis\u2019 words<\/p>\n

Locavorism has taken hold in many places, as an indigenous-but-networked\u00a0movement\u2026Technologies for \u201clocavore power production\u201d from\u00a0solar, wind, and other sources are also likely to prompt the creation of community-based power grids\u2026Legal forms that serve as alternatives to the\u00a0corporation have experienced a swell of innovations and global competition.\u00a0Several states have adopted Benefit Corporation enabling legislation\u00a0that allows corporations to be chartered with explicit social benefit goals,\u00a0giving safe harbor to skirt the perceived requirement to serve primarily\u00a0shareholder interests, while increasing the standards for providing other\u00a0social goods.15<\/sup><\/p>\n

The well-being economy is a vision that unites all these and many other streams\u00a0of governance innovation into a coherent narrative, placing fundamental change\u00a0within our reach.<\/p>\n

ENDNOTES:<\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
1.<\/td>\n\u2191<\/td>\nI would like to thank my colleague Martin Whitlock for his comments and precious editorial\u00a0assistance.<\/td>\n<\/tr>\n
2.<\/td>\n\u2191<\/td>\nRobert Repetto et al., Wasting Assets: Natural Resources in the National Income Accounts\u00a0<\/em>(Washington,\u00a0DC: World Resources Institute, 1989), V.<\/td>\n<\/tr>\n
3.<\/td>\n\u2191<\/td>\nOrganization for Economic Co-operation and Development (OECD), \u00a0Divided We Stand: Why Inequality Keeps Rising<\/em>\u00a0(Paris: Organization for Economic Co-operation and Development,\u00a02011); Organization for Economic Co-operation and Development, Growing Unequal? Income\u00a0Distribution and Poverty in OECD Countries<\/em>\u00a0(Paris: Organization for Economic Co-operation\u00a0and Development, 2008).<\/td>\n<\/tr>\n
4.<\/td>\n\u2191<\/td>\nPiketty, Thomas, Capital in the 21st Century<\/em>\u00a0(Cambridge, MA: Harvard University Press, 2014).<\/td>\n<\/tr>\n
5.<\/td>\n\u2191<\/td>\nInternational Energy Agency (IEA), World Energy Outlook 2013: Executive Summary<\/em>\u00a0(Vienna:\u00a0International Energy Agency, 2013), 4.<\/td>\n<\/tr>\n
6.<\/td>\n\u2191<\/td>\nInternational Energy Agency (IEA), World Energy Outlook 2014: Executive Summary<\/em>\u00a0(Vienna:\u00a0International Energy Agency, 2014), 3.<\/td>\n<\/tr>\n
7.<\/td>\n\u2191<\/td>\nInternational Energy Agency, World Energy Outlook 2014<\/em>, 3.<\/td>\n<\/tr>\n
8.<\/td>\n\u2191<\/td>\nInternational Energy Agency,\u00a0World Energy Outlook 2014<\/em>, 2.<\/td>\n<\/tr>\n
9.<\/td>\n\u2191<\/td>\nLorenzo Fioramonti, \u201cA Post-GDP World? Rethinking International Politics in the 21st Century,\u201d\u00a0Global Policy<\/em> (2015), doi: 10.1111\/1758-5899.12269.<\/td>\n<\/tr>\n
10.<\/td>\n\u2191<\/td>\nLorenzo Fioramonti, How Numbers Rule the World: The Use and Abuse of Statistics in Global Politics\u00a0<\/em>(London: Zed Books, 2014); Lorenzo Fioramonti, Gross Domestic Problem: The Politics Behind the\u00a0World\u2019s Most Powerful Number<\/em>\u00a0(London: Zed Books, 2013).<\/td>\n<\/tr>\n
11.<\/td>\n\u2191<\/td>\nFioramonti, Gross Domestic Problem<\/em>.<\/td>\n<\/tr>\n
12.<\/td>\n\u2191<\/td>\nUnited Nations University International Human Dimensions-Programme (UNU-IHDP) and\u00a0United Nations Environment Programme (UNEP), Inclusive Wealth Report 2014: Measuring\u00a0Progress Toward Sustainability<\/em>\u00a0(Cambridge: Cambridge University Press, 2014).<\/td>\n<\/tr>\n
13.<\/td>\n\u2191<\/td>\nJeremy Rifkin, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and\u00a0the Eclipse of Capitalism<\/em>\u00a0(New York: St. Martin\u2019s Press, 2014); Chris Anderson, Makers: The New\u00a0Industrial Revolution<\/em>\u00a0(New York: Crown Publishing Group, 2012).<\/td>\n<\/tr>\n
14.<\/td>\n\u2191<\/td>\nGerald Davis, \u201cAfter the Corporation,\u201d Politics & Society<\/em>\u00a01, 2 (2013): 283-308.<\/td>\n<\/tr>\n
15.<\/td>\n\u2191<\/td>\nDavis, \u201cAfter the Corporation,\u201d 300.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

____________________________________<\/p>\n

\"fioramonti-lorenzo\"<\/a>Lorenzo Fioramonti is full professor of political economy at the University of Pretoria (South Africa), where he directs the Centre for the Study of Gover- nance Innovation (www.governanceinnovation.org). He is also senior fellow at the Centre for Social Investment of the University of Heidelberg and at the Hertie School of Governance (Germany) and associate fellow at the United Nations University. Lorenzo is the first and only Jean Monnet Chair in Africa, a prestigious recognition awarded by the European Commission to distinguished academics. He also holds the UNESCO-UNU Chair in Regional Integration, Migration and Free Movement of People. In 2012, he received the UP Excep- tional Young Researcher Award and in 2014 he became the first president of the European Union Studies Association of Sub-Saharan Africa. He is the author of over fifty scientific articles and eight books. His most recent books are How Numbers Rule the World: The Use and Abuse of Statistics in Global Politics (Zed Books 2014, http:\/\/zedbooks.co.uk\/node\/13242)<\/a> and Gross Domestic Problem: The Politics Behind the World\u2019s Most Powerful Number (Zed Books 2013, http:\/\/ zedbooks.co.uk\/node\/12010). Both books deal with the political interests behind economic statistics and the GDP ideology. Lorenzo\u2019s research interests range from alternative economic paradigms to the governance of the commons, global political innovations, and new forms of supranational regionalism. His opinion pieces have been published by The New York Times, The Guardian, Foreign Pol- icy, Harvard Business Review, TruthOut, Die Presse, Das Parlament, Der Freitag, The Mail&Guardian, and www.opendemocracy.net,<\/a> amongst others. He has a monthly column in Business Day, South Africa\u2019s foremost daily financial news- paper. He is the author of two film documentaries, The Age of Adaptation (http:\/\/ globalreboot.org\/videos\/) and Presi per il PIL (in Italian, http:\/\/www.presiperil- pil.org\/ilfilm.html). Lorenzo is the founder of the Action Research Network for a Wellbeing Economy in Africa (WE-Africa, www.we-africa.org) and blogs at www.globalreboot.org<\/a>.<\/em><\/p>\n

Go to Original \u2013 thenextsystem.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

For the past half century, western societies have used a narrow definition of economic growth as the route to development. Growth has become an end in itself. As a result, the true meaning of development has been lost. Rather than an end goal, development should be viewed as a process towards an improved state of existence for humanity and the ecosystem.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[238],"tags":[],"class_list":["post-82596","post","type-post","status-publish","format-standard","hentry","category-paradigm-changes"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/82596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=82596"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/82596\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=82596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=82596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=82596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}