Module 2: Why a wellbeing economy?
Prioritising wellbeing
Putting wellbeing at the heart of our economies involves deep economic systems change. As Kate Raworth puts it, today we have economies that need to grow whether or not they make us thrive. What we need, especially in the richest countries, is economies that make us thrive whether or not they grow. It is time to redesign our economic systems so that they prioritise social and ecological wellbeing rather than GDP growth.
In a wellbeing economy, aggregate GDP growth is not a core policy goal. Instead, economic policy would take a much more nuanced approach, leading to the expansion of economic activities in some areas, such as the green and care sectors, and shrinking economic activity in others [3]. On balance this might produce overall GDP growth in some countries and under some circumstances, most likely in GDP-poor countries, but it would lead to overall reductions in GDP in other countries and contexts, most likely in GDP-rich countries with outsized environmental footprints [4]. Importantly, both of these outcomes would be the result of economic policies that focus on enhancing the wellbeing of people and the planet.
“The deep challenges facing economies today will not be addressed simply by incremental changes to existing policies. Reforms to achieve the new goals need to be built into the core structures and dynamics of economies.”
— OECD (2020), Beyond Growth: Towards a new economic approach [1]
The challenge is that - even though GDP growth is not fundamentally required for increasing the wellbeing of people and planet - within our current economic systems, low or diminishing GDP growth rates can cause negative social impacts, such as increasing unemployment and business insolvencies, collapsing financial institutions or reduced tax revenues for the government. This is because our economy and public institutions have been designed to be dependent on a growing economy. It is one of the major design flaws of our economies and a fundamental barrier to developing lasting solutions to the environmental and social challenges that societies are facing [5].
Building a wellbeing economy that serves people and the planet will require a profound redesign of our economic systems to enable all four sectors of the economy (markets, the state, households and the commons, see Module 1) to prioritise social and ecological wellbeing, independent of what is happening to GDP.
The answer to almost every problem is ‘more economic growth’. The problem is unemployment; only growth can create the jobs. Schools and hospitals are underfunded; the answer is faster growth. We can’t afford to protect the environment; the solution is more growth. Poverty is entrenched; growth will rescue the poor. Income distribution is unequal; the answer is more growth.
If the answer to the problem is always more growth, then who dares ask the question: What if the problems are caused by economic growth?
— Clive Hamilton (1998) [6]
Did you know that:
Growth rates of labour productivity, which measures GDP per worker, have been declining in high-GDP countries for decades, reaching very low levels in recent years . The reasons for such a consistent decline are unclear. But if this trend continues, it will limit the potential for further GDP growth in high-GDP countries, whether or not it is a policy goal, because growth in labour productivity is a necessary condition for growing GDP per person [2].
References
[1] OECD (2020), Beyond Growth: Towards a New Economic Approach, New Approaches to Economic Challenges. Paris: OECD Publishing, https://doi.org/10.1787/33a25ba3-en.
[2] Jackson, T. (2019). The Post-growth Challenge: Secular Stagnation, Inequality and the Limits to Growth. Ecological Economics, 156, 236–246. https://doi.org/10.1016/j.ecolecon.2018.10.010
[3] Hardt, L., Barrett, J., Taylor, P. G., & Foxon, T. J. (2021). What structural change is needed for a post-growth economy: A framework of analysis and empirical evidence. Ecological Economics, 179, 106845. https://doi.org/10.1016/J.ECOLECON.2020.106845
[4] Kallis, G. (2018). Degrowth. Newcastle upon Tyne: Agenda Publishing.
[5] Jackson, T. (2017). Prosperity without Growth (2nd ed.). Abingdon: Routledge.
[6] Mair, S. (2024). Language, Climate Change, and Cities beyond Capitalism. Journal of City Climate Policy and Economy, 2(2). DOI:10.3138/jccpe-2023-0012