How structural change is transforming the rules within economics, politics and society – and what really matters now
It's no secret. Innovation has a key impact on growth. In the 18th century, it was the invention of the steam engine; in the recent past it has been the development of digital technology that has transformed, and will continue to transform, our methods of production and our lives. The quest to not only maintain, but also increase, the rate of growth results in more severe negative impacts – whether that be the depletion of natural resources and the associated environmental problems, or debt and inequality, which lead to polarised societies. Radical structural change is transforming the rules within economics, politics and society noticeably. In many instances, though, the focus continues to be purely on production itself and the consumer, and not as hoped on society as a whole and its “responsibility”. This approach is not necessarily conducive to the wellbeing of us all as individuals, and may lead to economic instability and societies that are deeply divided. The debate around “inclusive growth” makes this clear. The current coronavirus pandemic has brought sharply into focus the ways in which our economies and societies have changed.
At the same time, due to a slowdown in the growth of productivity, as well as environmental deterioration, market saturation and demographic changes, it is becoming more difficult to achieve desirable “growth” according to the former definition of the term. Thus growth can remain an illusion for many. But why is this, and what are the general changes that need to be discussed?
“Societies have a duty to establish sustainable economies and thus bring societal aspects into line with the concerns of both enterpriseand the environment”
The practice of using GDP to measure growth was never intended to measure a society’s wellbeing. GDP is purely a performance indicator. Goodhart’s Law helps us to understand this – when a measure becomes a target, it ceases to be a good measure. Furthermore, there is no clear correlation between GDP, wealth and satisfaction. Seneca the Younger, a Roman philosopher who lived at around the time of the birth of Christ, argued that virtue brought true happiness. Is that the opposite of today’s understanding of growth?
Growth is not a given. The question that needs to be asked is whether growth is necessary for a successful society. The answer is yes and no, not necessarily. Social and environmental indicators should be given higher priority in decision-making. This would be in keeping with the standard that a society in the 21st century should hold itself to. Differences in the development of individual economies need to be taken into account in any assessment so that, from the start, economic development and the creation of a “better” life are firmly based on material foundations. For this reason, any new definition of growth must take into account the level of progress in a particular society. Conscious, systematic decision-making is more than just a means to an end in order to achieve an overarching, positive goal within the Purpose Economy. The additional consideration is aimed at ensuring that, when looking at equitability of impact, a distinction is not merely made between labour- and capital-intensive activities. Rather, impacts should be considered in relation to the following three aspects:
1. IMPACT OF INDIVIDUALS
(incl. individuals and companies)
2. IMPACT OF POLITICS
(incl. governments and institutions)
3. IMPACT OF NATURE
(incl. nature and resources)
All factors have in common that they have an impact in economic terms and are not mutually exclusive. Nature makes an enormous contribution and is therefore hugely significant. Societies have a duty to establish sustainable economies and thus bring societal aspects into line with the concerns of both enterprise and the environment. Only in this way will we be in a position to determine the impact of growth at a social and environmental level. Having the courage to commit to sustainable change is key.