An Inclusive Economy
In its January 2017 global risk report, the World Economic Forum identified economic inequality and societal polarization as two of the three most important dangers facing the globe. The world’s top business executives and government leaders joined a growing chorus of international development officials, economists, and policy advocates calling for countries to pursue more inclusive economic development strategies.
Creating More Inclusive Economies: Conceptual, Measurement, and Process Dimension (1)
Chris Benner, et al, March 2018
Canadian governments are currently applying economic policies that are grounded in environmentally destructive, faith-based economic principles about free markets, global trade, low taxes, minimum wages, the middle class, equal opportunity, and the myth of never-ending growth. This dogmatic list of platitudes and generalities is long, short on meaning, and not as beneficial to people as their governments would like them to believe. The notable exceptions are the most economically advantaged and the political actors who use these articles of faith to their electoral benefit and to avoid necessary political and structural reforms that would benefit everyone.
Developing an economic policy that benefits most Canadians and does not, to their detriment, unduly favour the most privileged requires, first, deciding what outcomes a political party wants from the economy for citizens. It’s those outcomes that citizens should consider; that’s what affects them directly.
Participation, Equity, Stability and Sustainability
In 2016, the Rockefeller Foundation published, The Five Characteristics of an Inclusive Economy: Getting Beyond the Equity Growth Dichotomy. In keeping with the Animal Protection Party of Canada’s (APPC) recognition of the importance of ‘best practices,’ the Rockefeller Foundation publication is a useful starting point for developing economic policies, consistent with APPC values.
From the paper, but edited for brevity, “the five characteristics of an inclusive economy are defined by the Foundation as the following:”
- Participation: People are able to participate fully in economic life and have greater say over their future…
- Equity: More opportunities are available to enable upward mobility for more people…
- Growth: An economy is increasingly producing enough goods and services to enable broad gains in well-being and greater opportunity…
- Stability: Individuals, communities, businesses, and governments have a sufficient degree of confidence in their future and an increased ability to predict the outcome of their economic decisions…
- Sustainability: Economic and social wealth is sustained over time, thus maintaining inter-generational well-being. Economic and social wealth is the social worth of the entire set of assets that contribute to human well-being, including human…and natural capital. In the case of natural capital, human use must preserve or restore nature’s ability to produce the ecosystem of goods and services that contribute to human well-being…
These are desirable characteristics, except one. The exception is “Growth.” We do need an economy that is “producing enough goods and services to enable broad gains in well-being and greater opportunity,” but “Growth,” as it is currently understood, is not the right means to achieve it.
“Sustainability” and economic growth are antithetical. Growth (again as it’s commonly understood) will inevitably destroy the economy upon which we rely because it is devastating the environment which is the foundation of every economy. Most political parties have faith in “Growth” to deliver the other four characteristics of an inclusive economy. This faith is a mistake for which we—and the animals and plants with which we share this planet—are paying a very high price.
The best scientific evidence available informs us that our current type of economy is exceeding the “natural capital” that’s available, and rapidly depleting it. Not only must we not grow today’s economy but we must also contract and transform it.
“Natural capital,” let us never forget is the millions of interdependent species of non-human life that have the same intrinsic right to life that we enjoy, and upon whom we depend for our existence.
A “Steady-State” Economy
To have any hope of realizing an inclusive economy, the way forward is what economists call a “steady-state economy.” What is a steady-state economy? It is an economy that,
“aims for stable or mildly fluctuating levels in population and consumption of energy and materials. Birth rates equal death rates, and production rates equal depreciation rates.”
“Sustainability is achieved when the human economy fits within the capacity provided by Earth’s ecosystems. Economic activity degrades ecosystems, interfering with natural processes that are critical to various life support services. In the past, the amount of economic activity was small enough that the degree of interference with ecosystems was negligible [in the absence of technology]. (2)
The current economic system, based largely on advertising-driven consumer consumption(3) and planned obsolescence, (4) has not alleviated poverty as is claimed, (5) and is exacerbating the wealth and wage gap between the rich and the rest of humanity. The widening gap is also undermining democratic rights, as the wealthy—individual and institutional—have inordinate political power which they wield to serve their own interests.(6) Integral to a steady-state economy and an inclusive economy is an equitable distribution of wealth, all within local and global ecological limits, and equitable distribution of political power.
Doughnut Economics author Kate Raworth points out that current economics has resulted in deepening inequality in many countries and is pushing the world towards ecological collapse.
“Humanity’s 21st century challenge is to meet the needs of all within the means of the planet. In other words, to ensure that no one falls short on life’s essentials…while ensuring that collectively we do not overshoot our pressure on Earth’s life-supporting systems, on which we fundamentally depend.”(7)
Identifying the problems and deficiencies with the current economic system and proposing an economic system that would address them is very straightforward, entailing little more than researching current studies and analyses. The political challenge is transitioning from the current system to one that is inclusive and, in particular, sustainable without creating extreme, short-term disruptions to people’s livelihoods and well-being that, for some, would cause more harm than good. The prevailing economic model with its enormously destructive and blithely accepted “business cycle”(8) offers regular tragic examples of how harmful to people’s lives extreme disruptions can be. Every effort must be made to avoid them when transitioning to a steady-state economy, and where disruptions do occur, implement government programs to support people as they go through them.
Roadmap to a Steady-State Economy
First steps towards a steady-state or “doughnut” economics might include, but would not be limited to, the following:
- increasing taxes on the wealthiest,
- phasing in basic income programs,
- expanding protections for workers in the private sector,
- providing low-cost government financing for smaller businesses and co-operatives,
- establishing a ‘sovereign’ fund that invests in shares of major Canadian corporations,
- eliminating tuition and other costs for post-secondary education,
- establishing a government-owned retail banking corporation,
- enhancing the Canada Pension Plan, funded with royalties from non-renewable resource development,
- creating a consumption tax regime that takes into account a good’s effects on sustainability,
- phasing out subsidies on economic activity that impedes sustainability, such as those supporting oil and gas development,
- developing a world-leading, globally competitive “Canada Quality” standard of excellence that would encourage Canadian industry and artisans to develop consumer products that put quality, leading artistry and design, finest materials, long life, repairability, ‘best practices’ labour standards, and environmental sustainability ahead of planned obsolescence and low cost, and
- promoting the voluntary choice of smaller family sizes with the benefit of more societal resources available to focus on fewer children, and reducing demand for the earth’s limited resources.
Transitioning to a steady-state economy would be a long-term process, much like transitioning from fossil fuels to renewable energy or, in the past, the Industrial Revolution.
(2) Steady State Economy Definition, Center for the Advancement of the Steady State Economy: https://steadystate.org/discover/steady-state-economy-definition/
(3) Anup Shah, Effects of Consumerism, Global Issues, August 2005: http://www.globalissues.org/article/238/effects-of-consumerism
(4) The Battle Against Planned Obsolescence, Sustainablity for All; https://www.activesustainability.com/sustainable-development/battle-against-planned-obsolescence/
(5) Jason Hickel, The true extent of global poverty and hunger: Questioning the good news narrative of the Millennium Development Goals, Third World Quarterly, February 2016: http://dx.doi.org/10.1080/01436597.2015.1109439
(6) Martin Glens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,Perspectives on Politics, September 2014; https://doi.org/10.1017/S1537592714001595
(7) Raworth, Kate; What on Earth is the Doughnut? https://www.kateraworth.com/doughnut/
(8) Business cycle, Wikipedia, https://en.wikipedia.org/wiki/Business_cycle