Committee on Economic and Monetary Affairs I
Economic Experimentation: In light of increasing inequalities, the intensifying climate crisis, and many questioning current economic models, what role can alternative economic approaches play and how can they be implemented on a large scale?
The Topic in Depth
written by Jaša Levstik (SI)
According to the United Nations (UN) data, approximately 8.6% of the world population was living in extreme poverty in 2019. Although there has been a rapid, constant decrease in recent years, calculations are showing that it will not be able to decrease further than 6%. Therefore, reaching this SDG target to eradicate extreme poverty by 2030 using established means seems very difficult.
The current process of eradicating extreme poverty has been mainly driven by the widely popular concept of growth, which has been the most important aspect of western economics in the last 70 years. The success of countries and their economies, and by extension the eradication of poverty, is tied to the term Gross Domestic Product (GDP) which is tightly related to growth. This indicator is the most referred to attribute of a country when discussing welfare and prosperity, both in media as well as in academic debates. However, many critics have been arguing that high GDP and therefore “successful growth” can be generated at great costs, social, ecological and human, which are not taken into account by the models and figures used to determine GDP.
Tightly tied to the aforementioned paradigm of growth and GDP is also the problem of climate change and the ecological state of the world. GDP itself does not provide any insight into the environmental impacts of growth. A good example of this is China, the country with the second-highest GDP in the world as well as the country in 120th place in regards to its environmental performance and the worst air polluter in the world. Its economic success has effectively helped millions of people rise from poverty, but the ecological effects, and resulting health impacts, could be catastrophic.
In an attempt to directly resolve societal problems of current economic models, scholars have theorised the idea of Universal Basic Income (UBI). By providing every citizen with a basic sum of money, regardless of their working status, it is meant to tackle growing poverty as well as establishing good (pre-)conditions for those that are willing to work. UBI has already had some medium-sized field trials, e.g. in Finland in a small test, as well as in Alaska and Kenya where some sort of UBI is already in action, with the success or failure still not fully assessed. The UBI can also be perceived in many countries’ universal COVID-19 relief funds, but as they are catastrophe-based, they have little long-term implications. While large scale implementation leaves many kinks to still work out the main question goes unanswered: How would UBI affect the purpose and position of work in society? Some argue that we would evolve into a society of laziness, where not enough people are willing to work. Others fear for the position of those neediest, as this system could see them grounded at one standard of living.
A-growth and Degrowth are approaches that look to change the idea of growth as the leading paradigm. Profit-making as the primary objective is obstructing the otherwise natural emergence of marketing practices that pursue social and environmental well-being. One approach that would solve this is a-growth which would involve the not-for-profit sector as the leader against the profit-making premise and would aim to ‘ignore’ or ‘de-emphasise’ the idea of growth. For this, the first step would be rethinking the usage of GDP for comparing countries. Unlike a-growth, degrowth recognises that humankind cannot simply ignore growth at this point of its history. Degrowth favours the decline of GDP and aims at the reduction of society’s output. The goal is a society not based on economic competition and GDP but rather on the well being of people and the environment. As it has been tough to turn away from GDP as the yardstick for success, some fear that stagnating - or worse, declining - GDP must mean that jobs are being lost, and people risk falling into poverty again.
At the same time, it has become obvious that maintaining the current system of growth will leave detrimental effects on the planet by the time everyone has been lifted out of poverty, showing an urgent need to move from thought experiments to living more sustainably.
created by Margit Kienzl (AT)
Food for Thought
Should we continue to pursue growth-driven economies?
How drastic should the measures of reducing poverty be and to what extent should environmental protection be considered?
How can we transition to alternative large scale economic approaches without causing harm?
How can we create enough political will for such long-term measures?
Animated lecture of Slavoj Žižek on the ethical implications of charitable giving: S. Žižek (2009). First as Tragedy, Then as Farce. The RSA. https://www.youtube.com/watch?v=hpAMbpQ8J7g
Short infographic on UBI and automation: L. Kingma (2016). Universal Basic Income: The Answer to Automation? Futurism. https://futurism.com/images/universal-basic-income-answer-automation
An in-depth explanation of the theory of UBI: T. Straubhaar (2017). On the Economics of a Universal Basic Income. Intereconomics. https://www.intereconomics.eu/contents/year/2017/number/2/article/on-the-economics-of-a-universal-basic-income.html
A short explanation of degrowth: Grist (2015). Degrowth, explained. https://www.youtube.com/watch?v=0MXP2E09dJQ
A short segment of J. B. Peterson’s explanation of the importance of capitalism: J. B. Peterson (2017). The Pros of Capitalism. Jordan B Peterson Clips. https://www.youtube.com/watch?v=aFpf0w2VlbI
An article on the economic approaches to a more sustainable future: J. Beckford (2019). Basic Income and Degrowth: Creating an Alternative Ecological Future? UBI Lab Sheffield. https://www.ubilabsheffield.org/blog/the-moral-argument-for-basic-income-yl7wn