Symposium: Prosperity in the 21st Century
English and German with translation
In the pandemic, doubts have grown that the way we have been doing business and dealing with risks up to now is sustainable in the long term. Corona is a wake-up call and catalyst for a restructuring of the global and German economic model. Even the German government said so. And the recent ruling by the Federal Constitutional Court on the lack of consideration for the interests of future generations suggests that more far-reaching decisions will soon be forthcoming.
But what does that mean? What does a different way of doing business look like? How indispensable is the goal of constant growth? And what would be the alternative? What is the state of research and practice on measuring prosperity in ways other than gross domestic product? Which countries are already doing this? Is it possible to manage the economy in a way that regenerates natural resources – which would be just as urgent as stopping climate change? How can concerns about social decline be managed in an unstable world? And what does all this mean for the next federal government?
Forum New Economy and THE NEW INSTITUTE have commissioned a series of fundamental studies from internationally renowned experts. The results will be discussed at a full-day symposium on prosperity in the 21st century.
The Symposium “Prosperity in the 21st Century: Securing Future-Proof Economies After Corona”, co-hosted by the Forum for a New Economy and The New Institute on 31 August 2021, provided lively and constructive discussions, ranging from concrete measures for societal wellbeing beyond GDP to the question of new economic paradigms that can adequately address the pressing social and ecological challenges our of time.
The symposium started off with scientific input by Johan Rockström, Professor in Earth System Science at the University of Potsdam and Director at the Potsdam Institute for Climate Impact Research (PIK), who has coined the term of planetary boundaries together with colleagues at the Stockholm Resilience Centre since 2009.
In his keynote address at the symposium, the expert made clear that this decade is decisive in containing the climate crisis. He explained that the planet is already on the edge of reaching its ecological boundaries, particularly in terms of biodiversity loss, CO2 emissions and the biogeochemical cycles of nitrogen and phosphorus. He placed extreme weather events such as the recent floods and heat waves in the northern hemisphere in the larger context of climate change and clarified that even a temperature increase by 1.5°C would mean at least two meters of sea level rise by the end of the century.
He urged the audience to take note of the nine main interconnected ecological systems that are showing signs of reaching tipping points and that some of them, such as the Amazon rainforest, are already turning from carbon sinks into carbon sources.
The new geological age of the Anthropocene, shaped by human geophysical influence on the planet, is characterized by a high scale, speed and interconnectedness of system changes. According to Rockström, one example is the exponential increase in zoonotic diseases such as Covid-19, which is connected with the dramatic loss of biodiversity – in the last 50 years, more than two thirds of the wildlife population has already died out and about one million species are currently threatened with extinction.
In order to guarantee societal and economic wellbeing for future generations, a combination of mass movements, political progress, market forces and technological disruption is needed. Mr. Rockström conveyed the urgency of following science-based targets so as to keep both climate and nature intact. It became urgently clear that, on the way to a zero-carbon future, we need to rethink economics and contribute to its “Copernican turn”.
In the first session of our Symposium on Prosperity in the 21st Century, organized in cooperation with The New Institute, Dr. Nicola Brandt and Lara Fleischer from the OECD provided insights into best practices for measuring prosperity beyond GDP from around the OECD. Currently, around half the organization’s membership measures wellbeing, either led by government ministries or statistical offices.
The researchers presented four different approaches in implementing wellbeing policies: vision setting (e.g., through National Development Strategies and the UN SDGs), shaping budget decisions (e.g., the “Wellbeing Budget” in New Zealand), setting up new institutional structures (e.g., the British “What Works Centre for Wellbeing”) and accountability mechanisms (e.g., the Welsh “Future Generations Commissioner”). One of the important lessons learnt was that creating legislation and involving parliaments as well as citizens can provide accountability in the implementation process. Another point was that leadership by the central government can help to avoid silos. However, there is no “one size fits all” answer and open questions remain, such as why, in the case of Germany, the initiative “Gut leben in Deutschland” has not been fully integrated into policy yet.
Dr. Katherine Trebeck (WEALL) advocated for a reimagination of the economy. She argued that aiming for green or sustainable growth, i.e., the approach of „putting nice adjectives on growth” was not commensurate in addressing the social and ecological challenges of our time. We also needed to move away from an old social-democratic idea of economic justice and redistribution which still relies on growth. Instead, we should reflect on the purpose of the economy. Among those should be the principles of fairness, dignity, redistribution, prevention (of social and ecological damages), respecting the planetary boundaries and global justice. In her view, GDP sets perverse incentives, which is why alternative measures need to take intuitive sense for the population to be able to hold their politicians to account.
Prof. Dr. Sebastian Dullien (IMK) presented the concept of the “new magic rectangle of economic policy” (das Neue Magische Viereck der Wirtschaftspolitik), which encompasses social, ecological, financial sustainability besides GDP. He acknowledged that this concept has not been taken up by policy makers in a decisive manner yet.
Prof. Dr. Dennis Snower (THE NEW INSTITUTE) introduced his “SAGE” approach on holistic wellbeing as the sum of four aspects: solidarity (S), agency (A), material gain (G) and environmental sustainability (E). In an analysis of over 150 countries, he found that GDP did not move in line with the three other concepts.
From a practitioner’s point of view, Jakob von Weizsäcker (BMF) pointed out that the goal must be to strike a balance between input and output indicators. It is true that material prosperity is the basis for social progress and certain forms of solidarity. The shortcomings of GDP as a measure are well known. Therefore, it should not be over-interpreted, but it could not be completely dispensed with either. He advocated an approach of “beyond GDP and not instead of GDP”. With the increasing number and complexity of indicators (e.g. the 17 UN SDGs and their 169 sub-goals), there is a danger that they can no longer be communicated to the population.
With general environmental indicators on decline, a planet arriving at a state of emergency and rising inequality rates, the heated debate around the future of economic growth doesn’t run out of fuel. In an effort to shed light on a decade long conflict in economics, Michael Jacobs from SPERI and Xhulia Likaj from Forum New Economy presented insights into the growth debate from their soon to be published Forum working paper at our recent symposium on prosperity in the 21st century. The event took place in collaboration with The New Institute.
Xhulia Likaj started the session off by explaining the motivation for the paper – to move closer to the center stage of economics a debate which, for all its faults and ideological warfare, addresses the most pressing issue humanity is faced with today. From a historical perspective on the growth debate, to the creation of the growth paradigm and first critiques of growth as a goal in and of itself in the 1970s, to an overview of different growth-critical and growth-agnostic approaches, the paper provides an in-depth overview of the different arguments which have been made, and the different conclusions reached, in the debate about the possibility and desirability of economic growth.
Those arguments then laid the ground for the discussion to follow. Most importantly, Michael Jacobs emphasized, GDP growth does not create social benefit in an automatic sense, as is often assumed. If we want to achieve environmental sustainability and social wellbeing, we need to focus on those things directly, rather than on growth alone. At the same time, he stated, attacking growth is not an effective political strategy because growth is so deeply embedded into our political system. Rather, economists, politicians and society generally should focus on the things we desire directly. This position forms part of a larger body of research and scholarly debate, embraced under the umbrella term of post-growth. On the 50th birthday of the Club of Rome report, this is what the growth debate, according to Jacobs, should move towards.
Nils aus dem Moore, professor at RWI Essen, added that we cannot successfully defuse the growth debate without adding to it the important question how planetary boundaries and a ‘good life’ can be defined – and how that definition can then be socially dispersed.
Katharina Beck, from Bündnis 90/ Die Grüne, agreed, but emphasized the importance of decomposing the latest insights into the growth debate into concrete political measures. Growth, she said, is not inherently good or bad – what matters, is the question how we can achieve the goal of living well with everyone within planetary boundaries.
Karen Pittel from ifo stated that reaching high levels of prosperity, rather than growth should be the goal. To determine how we can design policies that meet this goal, is the true challenge, more so than the debate around growth. By focusing on growth, she said, we focus too much on beliefs, where it is actions that matter.
Finally, Michael Jakob from MCC Berlin, welcomed the fruitful discourse and partial synthesis of proposals originating from different spectrums of the growth debate. At the same time, he critiqued that even post-growth concepts that claim to be agnostic to growth, rely on the very term. Instead, he proposed the term ‘sustainability transition perspective’.
Prof. Dr. André Reichel (ISM) & Dr. Jana Stöver (THE NEW INSTITUTE, CAU-Kiel) presented “regenerative cultures” as a possible new paradigm. Instead of growth, this paradigm focuses on the restoration (regeneration) of ecological resources as well as human and social vitality. In this way, the growth debate about sustainable growth, degrowth and post-growth could be overcome. Instead, a radical rethinking of the economy is necessary. The struggle for terms and indicators is indispensable, because: “The limits of our language are also the limits of our world”. The economic logic of cost-benefit analysis could not work in the context of planetary boundaries. One example is the difficulty of the economic valuation of ecosystem services.
In the subsequent panel discussion, Prof. Dr. Peter Messerli (University of Bern) emphasised that the concept of “regenerative cultures” makes it clear that positive feedback loops are needed to accelerate the transformation. At the same time, he also pointed to the question of global justice and the right to economic development. Furthermore, it must be possible to translate welfare indicators into local realities. He criticized the fact that SDG rankings are often used in politics. This ignores the interconnectedness of the individual goals.
Prof. Dr. Julia Steinberger (UNIL) advocated for moving beyond measuring wellbeing and to put current consumption and production habits at the centre of the discussion. She argued that one of the drivers of unsustainable growth is the entrenched idea in society that wellbeing depends on consumption, when research clearly shows that material wealth beyond a certain minimum level does not guarantee wellbeing. In her view, scientists should more openly question the role of powerful sectors and actors of the economy and empower citizens to act in the favor of future generations.
Prof. Dr. Tom Krebs (Mannheim University) was open to possible alternatives to GDP. It was conceivable, he said, that one could develop a combination of 3 indicators, namely material prosperity, ecological sustainability and social justice. He also advocated the establishment of a uniform decision-making calculus and explained consequentialism as the related philosophical basis.
Janine von Wolfersdorff (THE NEW INSTITUTE) pointed out the existing misaligned incentives in the tax system. On the one hand, environmental risks are not yet reflected in accounting, which is a fundamental problem for the ecological transformation of the economy. On the other hand, companies are increasingly expressing the wish to adapt the tax system to the ecological problems. This was also shown in a recent study commissioned by The New Institute.
The conclusion that could be drawn from this session is that further indicators beyond GDP are needed, but that these do not absolve us of our responsibility to act and, if we question growth, we must also question those who benefit from the economic system.
Climate crisis, financial instability, high turnover in the labor market, health crisis, and rising rates of inequality – societies are exposed to a variety of socio-economic risks. Different proposals circulate that promise to mitigate and minimize some of these risks. Their nature, potential and shortfalls were subject of debate at the final session of our symposium “Prosperity in the 21st Century”, organized in cooperation with The New Institute.
One of the more recent proposals promising to shield people from socio-economic risks was presented by Anna Coote (New Economics Foundation), one of the leading scholars on Universal Basic Services (UBS) research. The goal of UBS: to achieve planetary boundaries while respecting human dignity. This is supposed to be achieved by granting everyone access to basic universal services in accordance with their needs. This ‘social guarantee’ is intended to act as the social pillar of the EU Green Deal. According to Coote, a UBS scheme would leave more room for fiscal manoeuvre compared to the competing idea of a Universal Basic Income (UBI).
Jannik Landwehr then introduced insights from an upcoming Forum New Economy working paper on the effect of job guarantee programs. At its heart, job guarantee programs argue that the government should provide a job to everyone who is able and willing to work for a living wage. Pilot projects in countries like France and Argentina, but also in Berlin, showed improved levels of social inclusion, motivation and mental health among the affected, Landwehr argued.
The perhaps most famous proposal is the one of a UBI, where all citizens of a given population receive a regular financial grant by the government, irrespective of their circumstances. Marcel Fratzscher from DIW Berlin shared first insights from a pilot project in Germany where a monthly stipend of 1200 euro is paid to 120 randomly selected people for three years. Fratzscher in particular emphasized the enabling rather than sanctioning effect of a UBI.
Discussants were Achim Truger from the German Council of Economic Experts, Dirk Ehnts (TU Chemnitz) and Jens Suedekum (DICE), who among other things commented on the lack of practical relevance of the selected proposals, their possible adverse effects and financing opportunities.