The economy isn’t working - for people or the planet. It's time for a new narrative.

28 June 2024 - Predictably, economic growth takes centre stage on the election trail. But few politicians question what sort of growth we want, how much or the purpose of the economy[i]. But could our current undesirable outcomes for people[ii] and nature[iii] have their roots in our economic model and its narrative? If so, don’t our politicians need a new vision and purpose for the economy? CISL’s Director of Business Strategy, Ben Kellard, discusses.

Flaws in the current economic narrative

“How quickly nature falls into revolt

When gold becomes her object!”

Shakespeare[iv]

Dominant stories we tell ourselves about what the ‘point’ or purpose of the economy is, tend to major on making money. Heavily influenced by neoliberal, or free market, thinking[v] we use financial income as a proxy for success. The story goes that financial income should be maximised at both the economic (GDP) and firm (profit) level through efficient markets, while rational self-interested individuals express their preferences through consumer choices and maximise their income to do so. The state maximises the private domain of choice, leaving the choice of ends to individuals, and only steps in to fix market failures.

So what’s the problem? Firstly, because the state doesn’t set common goods for society or the private sector’s contribution, businesses can easily drift from meeting society’s needs. As a servant can’t serve two masters, businesses are incentivised to prioritise their financial income[vi] over the needs of society[vii]. Financial institutions – the owners and stewards of capital - reinforce business incentives to maximise financial income in the moment. 

Secondly, business as usual relies on ignoring external social and environmental costs[viii], like pollution, to remain competitive and increase financial income. Nature and society are assumed to be infinite and stable. 

This would all be bad enough, but is worsened by growing patterns of industry consolidation[ix] which have led to powerful oligopolies[x] able to shape not just markets, but society through political lobbying, structuring labour markets and marketing. Brands become tools to maximise financial income by maximising sales volumes, spending $647bn[xi] on marketing annually, designed to drive up demand for ‘external goods’[xii], like products and property, that are pitched as being critical to wellbeing. Modern life is drenched with the pervasive message that if you don’t buy this product (whatever it is), then your life is poorer and more limited.

We end up with a high-waste, high-carbon form of growth with wealth unequally distributed. Putting the determination of ends into the private (individual and market) domain creates a void, giving oligopolies near impunity. They shape society’s structure and prevailing values in their interests, towards the insatiable acquisition of external goods and externalising costs to maximise financial income. The relationship between means (the market) and ends (wellbeing) becomes at best blurred, and arguably inverted[xiii]. The free-market narrative shapes the role of economic actors, that in turn shape prevailing values and deliver suboptimal wellbeing outcomes.

Based on prevailing values that promote external goods, sustainability is seen as a deprivation.  We must give up acquiring things, that would otherwise make us happy. But is this true?

Wellbeing evidence

‘The true perfection of man lies, not in what man has, but in what man is’[xiv].

                                                                           Oscar Wilde

There is significant evidence for what enables human flourishing, or wellbeing.  The components typically focus on ‘internal goods’[xv] such as the health, relationships, good character, education and the arts.  External goods enable internal goods.

There is empirical research that seeks to identify the components of wellbeing, such as Harvard’s Human Flourishing Program[xvi], Gallup[xvii] or the Skidelskys’[xviii] book. They identify components like a sense of purpose, health, good character, strong relationships and security.  There is also Needs Theory led by Max-Neef[xix] that identified fundamental human needs. These are classifiable and consistent across cultures and time.  Finally, there is the historical writing of sages: indigenous cultures, religions, and philosophies.  They share an emphasis on internal goods, such as good character, as central to the best human life.  They also point to how focusing on external goods, such as wealth and power, distract us from this.  There is also growing evidence of both our reliance[xx] on nature and its benefit to our wellbeing[xxi].

The idea that wellbeing is equivalent to the accumulation of financial and material wealth is neither true[xxii], nor possible for nine billion people. The risk is no one wins. The supposed billionaire ‘winners’ lose as financial wealth alone doesn’t make them happy[xxiii]; the rest of us lose as we burn out in a materialistic rat race that won’t deliver wellbeing either and nature loses as it's liquidated for financial income. Is there an alternative economic model that could deliver wellbeing?

The emerging wellbeing economy

A wellbeing economy[xxiv] engages society in setting wellbeing outcomes (the ends), based on the common goods needed for flourishing, and then shapes the market (the means) to deliver them. While there isn’t space to do justice to the complexity of the role of economic actors and policy in this economic model, it’s worth signposting the significant advancements already made.

Mariana Mazzucato describes a mission economy where the state identifies common goods and then shapes markets[xxv] to deliver them in innovative new ways across public and private sectors. Jon Alexander sets out how citizens[xxvi] can be engaged to identify their priorities and how to deliver them. Kate Raworth sets out an alternative to GDP model within safe social and natural parameters[xxvii]. 

Participatory democracy can complement representative democracies at the national and local level to set common goods through plural, transparent and contested dialogue, drawing on the best of civilisations’ heritage and research. These would shape society’s prevailing values and inform effective government policy that shape markets and incentivise organisations to be purpose-led[xxviii], delivering products and services that meet society’s needs and create meaningful work.

The need for a new narrative

While there are lots of areas of progress, like the pieces of a jigsaw puzzle, we lack a compelling, positive alternative story, like the picture on the front of the jigsaw puzzle box, that make sense of all the pieces and our role in it. There is the opportunity for a wellbeing narrative that captures how we are all connected: interdependent on each other and nature to thrive. That we share an interest in ensuring both human flourishing and that of nature and that this is enabled by abundant internal goods.  People are purposeful, social, caring, creative and rational and find a sense of personal agency and purpose, informed by society’s debates on wellbeing, that they achieve through competition and co-operation.

A wellbeing economy that emphasises internal goods has the potential to enable all to flourish, not just the rich few. Unlike finite external goods, internal goods are abundant and much less materially intensive. Given rising regional tensions and the polycrisis, basing international politics on identifying common components of wellbeing - based on evidence and our heritages - and the means to achieving them, could provide common cause.

Will our leaders embrace this opportunity for a new economy, or default to more of the same?

To find out more about this work, please contact ben.kellard@cisl.cam.ac.uk

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