Module 2: Why a wellbeing economy?
Extractive, polluting and unfair
Global GDP is now over 10 times bigger than it was in 1950 [1]. That increase has brought prosperity to billions of people. However, the current design of our economies has also led to large-scale environmental breakdown and deep divides in our societies.
The highly extractive and polluting design of our economic systems have generated large-scale environmental breakdown that is rapidly destabilising the planetary health on which all of our lives depend [2] [3]. Meanwhile, the unfair sharing of the fruits of economic growth - with many of the gains being ‘hoovered up’ rather than ‘trickling down’ - have resulted in high levels of income and wealth inequality within countries, creating large divides within our societies and leaving vast numbers of people unsure about how to meet their basic needs.
Going forward, environmental pressures are likely to further exacerbate inequalities as they pose significant risks especially for people who have already been disadvantaged by our economic systems. For example, climate change is increasing food insecurity and is reversing efforts, particularly in lower-income countries, to reduce poverty and increase prosperity [4].
Meanwhile, studies have confirmed what most people would guess intuitively: once people have what they need to live a decent life, increased income adds little value [5]. Instead, the competitive market ethos, consumerist values and pressures and large inequalities work to undermine people's health and the social connections, sense of fairness and communal solidarity that are vital to wellbeing [6] [7].
Even from a purely monetary perspective, our current economic systems are highly inefficient. In pursuit of economic growth, a lot of avoidable harm is caused to people and the planet. Governments then need to spend money to respond to these harms – which in turn becomes a justification for why we need more economic growth. This is also referred to as ‘defensive expenditure’ or ‘failure demand’.
Did you know that:
In 2020, the average annual income of the global top 10% was 38 times higher than the average income of the bottom 50% [4].
Between-country income inequality has been decreasing since 1980, but remains much higher than in 1820 [4].
Data on wealth shows that, since 1995, people have gotten wealthier overall, but the rich grow richer much faster than the poor: Between 1995 and 2021, the top 1% of wealthiest people captured 38% of the global increment in wealth, while the bottom 50% captured only a meagre 2% [4].
Evidence is clear that more unequal societies are less politically stable, more violent, and less happy and healthy than more equal ones [5].
Click on the card to learn more about ‘defensive expenditure’ or ‘failure demand’.
References
[1] Roser, M. Arriagada, P., Hasell, J. Ritchie, H. & Ortiz-Ospina, E. (2023. Economic Growth, Global GDP over the long run. Data adapted from World Bank (2023); Maddison Project Database 2020 (Bolt and van Zanden, 2020); Maddison Database 2010 (Maddison, 2009). Retrieved from https://ourworldindata.org/grapher/global-gdp-over-the-long-run.
[2] IPCC (2023). Summary for Policymakers. In: Climate Change 2023: Synthesis Report. Geneva: IPCC.
[3] Richardson, K., Steffen, W., Lucht, W., Bendtsen, J., Cornell, S., Donges, J., Drüke, M., Fetzer, I., Bala, G., Rockström, J. et al.(2023). Earth beyond six of nine planetary boundaries. Science Advances, 9 (37).
[4] Chancel, L., Piketty, T., Saez, E., Zucman, G. et al. (2022). World Inequality Report 2022, World Inequality Lab, wir2022.wid.world.
[5] Pickett, K. & Wilkinson, R. (2011). The spirit level: Why greater equality makes societies stronger. Penguin.
[6] Dasgupta, S. & Robinson, E.J.Z. (2022). Attributing changes in food insecurity to a changing climate. Scientific Reports, 12 (1): 4709.
[7] Easterlin, R.A. (1974). "Does economic growth improve the human lot? Some empirical evidence." In P.A. David and M.W. Reder (Eds.), Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. New York: Academic Press.
[8] WHO (2017). Depression and Other Common Mental Disorders: Global Health Estimates. Geneva: World Health Organization.
[9] Jackson, T. (2017). Prosperity without Growth (2nd ed.). Abingdon. Routledge.