Here at Small Giants we exist to move people and capital to the next economy. Our vision for this future is one that supports human prosperity while living in harmony with the natural world. But what does the next economy actually mean? What does it look like? What does it feel like? How will we know if we’ve arrived there? And what economic paradigm are we leaving behind?
A curiosity about these questions, and an ambition to be a small part of this transition, led me to a Masters in Economic History. I have always felt drawn to exploring our history as a way of understanding how we can best influence our future. Perhaps the most important lesson I’ve learnt is that economic ideologies and frameworks are not inevitable or necessarily long-lasting. In fact, seismic economic change has occurred at least twice in the last 100 years, first with the emergence of Keynesian economics in the 1930s, and then with the rise (and total dominance) of neoliberal economics in the 1980s.
Keynesian economics, which most simply put is the belief that consumer demand is the primary driving force for economic growth, took hold in the aftermath of the Great Depression and ushered in a new era where governments played a much greater role in stimulating the economy, especially in response to crisis and downturn. This economic philosophy persisted for decades in the Western world, including during the recovery from the second World War when the US and others spent heavily to kickstart their economies and pursue full employment. But by the 1970s, and in particular around the oil shock of 1973, Keynesian theories began to be openly questioned. And by the 1980s neoliberal economics had achieved unrivalled primacy in almost all Western countries, aside from Scandinavia. Driven by principles of market supremacy, deregulation, free-trade, globalisation, a reduced role for government and a sole focus on economic growth, this model drove economic growth but also dramatically increased inequality. The period reached a climax with the Global Financial Crisis in 2008, and staggeringly, despite governments intervening to prop up the economy all over the world, the shock did little to dent the ideological supremacy of small government, neoliberal economics.
In the context of our ever-present neoliberal economic paradigm, it is worth pausing to remember the words of Bobby Kennedy more than 50 years go. Whilst running for President in 1968, Bobby laid out the clear limitations of our focus on economic growth as the only measure of success (listen here):
“... the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile.”
We have known for a long time that economic growth as the sole focus of public policy is a horrendously narrow prism. And the severe costs of this singular measure of success are now fully apparent, with increasing inequality, a mental health crisis, a collapse in trust in institutions of all kinds, political fragmentation, and of course our climate and biodiversity crisis.
Two things are crystal clear. First, our current economic paradigm is at breaking point. And second, we have transitioned before, and we can do it again.
The question is, where are we transitioning to? What is the next economy? There have been many conversations around the world that have sought to address these questions, including those gathering under the banners of Conscious Capitalism, BCorporations, Social Capital Markets, the Skoll Centre for Social Entrepreneurship, the BTeam, the Wellbeing Economic Alliance, and even Gross National Happiness in Bhutan. At a community scale, Frome in the UK and Kingston in New York provide two extraordinary case-studies of next-economy communities. All these examples are worth exploring to begin developing your own perspectives on the principles that our next economy should be built on. But all these models share the view that a singular focus on profit at the business level, or GDP at the national-level, creates negative impacts that can no longer be ignored. Instead, we need to put human wellbeing and environmental sustainability at the very core of our economic philosophy. Only from this starting point can we explore the role of individuals, markets and the state.
The most all-encompassing and accessible reframe of our economic paradigm has been Doughnut Economics by Kate Raworth. Now a global bestseller, the book outlines a new economic framework to guide decision-making and public policy which places the social foundation of a good life (education, health, food, water, energy etc) at the centre, and the ecological ceiling as an outer ring (see header image). Our job as individuals, organisations and governments is to work towards living, operating and thriving in the safe and just space for humanity that exists between these two parameters. Our decision making, our investments, and our public policy needs to lead us towards a sustainable doughnut economy.
For all the economic models, frameworks and theories, it ultimately comes down to our human experiences in the system we live in. So what does the next economy actually feel like? For me, it feels like we live in a community not a marketplace. It feels like our economic lives operate in service to each other and society. It feels like our businesses serve their customer’s long-term wellbeing (not short-term desires) and support their employees to find their true purpose. It feels like our government serves the wider wellbeing of its people, not just the productivity and economic growth that they produce. It feels like we honour and are an interconnected part of our natural world. And it feels like we share a deep sense of our interdependence with one another, with our community and with the world at large. When these feelings permeate our lived experience of work and community, then we will know we’re living in the next economy.
Amidst all the pain and suffering of this global pandemic, COVID-19 has brought many of these feelings to the fore. We feel the deep connectedness with our neighbours and our community. We are grateful that our government in Australia has abandoned economic ideology, followed the science and embraced their role to protect our health and wellbeing. And we are grateful for the environmental renewal that has begun with the reduction of emissions and pollution. But perhaps most importantly, the radical steps that our governments have taken show us that we have so many policy choices to explore. Our future is not an inevitable extension of our current economic paradigm. We can and should be designing a new economic model. One that values more than profit and growth; one that values human prosperity while living in harmony with the natural world.
