The Great Transition
This report argues that nothing short of a Great Transition to a new economy is necessary and desirable, and also possible. Business as usual has failed. Yet prime ministers, finance ministers and governors of central banks are still running around – perhaps a little less frantically than they were – trying to allay fears and convince us that this is not the case.
The genie is out of the bottle though, and it is hard to see how it can be put back in.
The financial crisis exposed deep flaws in the approach to economics that has dominated policy-making for a generation. It turns out that letting markets rip does not always lead to the best outcomes for societies. Government intervention, far from being inherently inefficient, turned out to be essential to prevent system-wide collapse. A return to blind faith in markets to deliver a future of endless, rapid growth is impossible to imagine now.
This promise was always illusory, even on its own terms. Economic liberalisation has not delivered rapid growth on a consistent basis, but has been characterised by booms and crashes. Fewer and fewer have benefited from the booms as wealth and incomes have become increasingly concentrated, while those who suffered most from the crashes saw few if any benefits in the good times. Inequality has risen to record levels in many developed countries – not much has been ‘trickling down’.
But the promise was also an illusion at a more basic level. Essentially, orthodox economic theory assumes the infinite consumption of finite resources. Growth, in the sense of using more and more stuff, is obviously impossible when there is only a certain amount of stuff. We can use what we have more efficiently of course, but this, too, has hard limits.
The world is warming. The atmosphere cannot absorb the levels of CO2 being pumped into it for much longer without triggering irreversible climate change. The majority of the planet’s ecosystems are being pushed to breaking point. Our ‘footprint’ in the developed world has grown too heavy, and we are showing no signs of our being able to tread more lightly.
Measures of life satisfaction in developed countries are flat. Overwork for many combines with widespread worklessness for others. Set alongside those who have far more than they need are those who do not have enough. Falling social mobility sees these patterns repeated from one generation to the next, while unsustainable levels of debt affect all parts of society. As real incomes have fallen, many have had to take o n debt to fund the essentials of life. For the more affluent, status-driven consumerism, often fueled by debt, is the norm.