the other school of economics

‘after the era of excess’

In response to ‘after the era of excess’ published by mckinsey in ‘whatmatters‘

Article, which is calling for more thinking. It is asking for a Strategic change…

Yet the majority of the answers & comments we read mention technical explanations/solutions (albeit very ’sharp and clever’): debt, interest rates, GDP, government action etc. No doubt these dimensions are important: we will have to address them. However a piece of thinking is missing from what we are reading at the moment: we should be challenging our system at the next level of abstraction to truly shift the paradigm. Talking in yesterday’s language (growth) will only lead us to think like yesterday and lead to the same problems.

What is a strategy to stop the era of excess?

Let’s take a look at the history books: since 1700 the economic model has been predicated on Growth. It was necessary at the time to lift Europe out of a primitive state and more or less succeeded albeit a lot of collateral damages on the way. However what got us here today will not work anymore going forward. The limited World we live in (planet, ecosystem, biosphere – call it whatever you want at this stage) can only accommodate a model for growth during a limited timeframe. Once the limit is reached, expansion has got to stop. Or else created wealth needs to be destroyed, to be rebuilt again…

Isn’t it the role that wars have played? The current model has required wars to re-equalize, spread the wealth – or poverty – and grow again. The problem with this model is that the price to pay is getting too high as we are realising we have too much to lose.

So where to from here?

We have to think differently and put the ‘known parameters’ aside. We have to design an economy of non-growth. We have tried to call it ‘sustainable’ in the past decades but it has not worked because it was still lame attempt to patch tactical solutions without address the core issue of Growth. The true shift will be to re-think incentives and design a framework to run a new Economy.

For instance:

- Growth could still exist but not in volume of ‘matter’, rather in quality of ‘services’.

- The current ‘Law’ of Economics needs to be turned on its head to SHIFT INCENTIVES: “Today I pay for what I consume; tomorrow I should be payed for what I am not consuming”. This will have to be applied to identified goods, products and services that are taxing the system. A trivial heuristic would be: “today I pay the electricity I burn. Tomorrow I will have a target suited to my live style. I am smart enough not to burn it all, I will get rewarded”.

Therefore the next step is (a) to design such a framework: ie. research, debate, policy design, regulation (as shape the ‘laws’ and ‘rules’)

A second step is (b) work out a roadmap to take us from where we are today to this new economy: ie political will and action.

By the way (a)+(b) = democracy at work…

So that we can read in the history books something along the lines:
– 3000BC: invention of writing.
– 1700-2050: capitalist intense period of Growth, Bubbles and Crises
– 2050+: post-capitalist wisdom era