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Why our economy is too important to leave to the experts

The jargon-heavy economic commentary reinforces our belief that we are unqualified to have an opinion on how our economy should be shaped, but it is time to democratize the economy and demand an economy that works for the people and the planet works

Opinion: Imagine a day when you turn on the financial news and the announcer reports:

“Equities markets have fallen to historic lows overnight and a growing number of the world’s mega-corporations have lost investor confidence. Investors are instead flocking to promising social enterprises, citing pressure from grandchildren who would rather inherit a livable planet than a private jet.

“In New Zealand, the Domestic Happiness Index (DHI) continues its strong upward trend and our national contribution to the Planetary Overshoot Index (POI) is trending down. This reflects global trends, and leading green economy commentators are optimistic, predicting we could still have a livable planet in 2050.”

Introduce yourself.

This scenario may not be as far-fetched as we first think. But for that to happen, we must be part of reshaping an economy fit for the 21st century.

“How can we do that?” pleas e ask your question. “We are ordinary citizens – not economists. How can we make a valuable contribution?”

We’ve been told so, and the jargon-laden inscrutable economic commentary reinforces our belief that we are unqualified to have an opinion, let alone make any contribution to how our economy is constructed or works.

But most economists are not experts in 21st-century economics either. The economic system we have is designed as a closed loop, breaking away from the reality that it is entirely dependent on inflows of energy and resources from the earth for its capacity to produce and generate wealth.

* A way out of the environmental collapse
* The future must use less energy and have more of the things that really matter
* Give progress a chance: Embrace degrowth

Not only that, our economy must continue to grow or it will collapse – into a recession or worse. And that growth is exponential, so even a seemingly modest growth rate of, say, 3.5 percent means the economy will double in 20 years—and double that economy again in another 20 years. And if growth is not decoupled from resource use and environmental damage, this means a doubling of global resources and damage over the same period.

Conventional economic thinking makes no provision for an economy to function in post-growth conditions – that is, where growth is stagnating or even declining. For many economists and politicians alike, this is beyond the imagination. The economy is expected to continue growing exponentially despite the glaring reality that resources are finite on a finite planet simply because that is all we know of the post-industrial world.

But this story of a socioeconomic system based on exponential growth is only an outlier in the context of human civilization. We have long had market economies – the buying and selling or exchange of goods and services needed to live. But an economy fed by ever-increasing exploitation of the earth’s finite resources is entirely new; The explosive growth of the “Great Acceleration,” fueled by fossil fuel exploitation, is usually dated to the 1950s.

Not only that, our economy also prioritizes the production of gross domestic product, despite warnings from the creator of this metric that it should not be used to measure a nation’s economic progress. Economist Simon Kuznet warned that while GDP is a measure of monetized economic activity, it is blind to whether that activity is beneficial or destructive. And as we know in New Zealand, a catastrophic earthquake or flood can be devastating for human and social well-being, but the recovery period is fantastic for GDP – nothing more than the whole rebuilding of homes, buildings and infrastructure to boost the economy!

GDP also counts non-monetary economic activities, even if they are essential to human life and well-being. If you grow your own food, care for children or aging parents, or contribute to your community or environment through volunteer activities, it doesn’t count. It only matters if we pay companies to do it. And of course, GDP doesn’t take into account costs to the environment or human well-being – those are externalities.

Across the political spectrum, people are beginning to question the viability, desirability, and morality of an economy whose central goal is GDP. The Treasury developed the Living Standards Framework, which provides a range of well-being metrics, but while GDP remains the central goal of our economy, it is likely that inequality, social and environmental harm will only increase, not decrease. This is because our economic system distributes wealth unequally and encourages and supports economic activities that are detrimental to human well-being and the environment.

But institutional economists or politicians are unable to offer the alternative – growth is all they know. (Although influential international institutions such as the Organization for Economic Co-operation and Development are beginning to explore degrowth scenarios, this does not indicate a change in policy direction any time soon.) We are being told to address the environmental damage caused by past growth, we need more growth. But by generating more wealth through growth, we cause more damage, which by this logic we have to offset with more growth. This thinking is extremely irrational.

Ah, but this is where “green growth” will come in, we rest assured. A green growth policy means we can still have growth, but that growth will be decoupled from harmful resource extraction and carbon emissions. Sounds great, but the only problem is that all the evidence points to it not happening — at least not on a scale or at a rate fast enough to limit global warming to 1.5°C.

So where does that leave us? We may not be experts in monetary policy or macroeconomics, but the economy is collectively ours – it serves (or should) serve the collective good, not those who have accumulated the most capital. We are the experts when it comes to what we need in life: nutritious food, healthy and warm homes, good relationships with family and friends, feeling valued and connected in our community, and time to move, play and… To have fun. So why not design our economy to meet those needs, rather than creating wealth by producing things we don’t need that harm the planet and degrade our commons (the planet’s natural systems)?

Scholars like the economist Dr. Kate Raworth offer alternative economic models such as the donut economy and were recently presented to the New Zealand Treasury. New Economics has gained widespread support in the UK as a viable alternative to the neoliberal system, while steady-state economics has its roots in the scholarship of Herman Daly, the father of ecological economics. And degrowth offers a compelling alternative that governments in Europe are focusing on as the green growth promise loses its luster.

Let’s democratize the economy and tell politicians, policymakers and economists that we want the economy to work for people and the planet, not the other way around.

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