By Gary Stevenson

In 2008, I started a job predicting interest rates and the strength of the world’s largest economies.  In the thirteen years since then, financial markets, economists, and global central banks, predicted a recovery for both interest rates and the economy in every single year from 2009 to 2020.

Despite these twelve consecutive years of predicted recovery, now, in 2021, interest rates all over the world, much like the global economy, remain at emergency levels.  This was true even before the onset of the Covid-19 economic crisis.

So why have economic forecasts, as well as the recovery of economies, been so disappointing since the 2008 crisis?  I have devoted the last twelve years of my life to figuring this out.

The logic behind these optimistic predictions has been as follows:

The economic collapse of 2008, as well as the prolonged “Great Recession” that has followed it, were both what economists would call “demand crises”.  That means that, at their core, they are caused by society, as a whole, not spending enough money.  When people don’t spend enough money, businesses can’t sell their products, and they respond by closing down, shrinking, or stopping hiring.  That pushes up unemployment and pushes down wages, leaving people with even less money to spend, making the problem worse.

Modern economics is well familiar with this kind of problem, and has two broad solutions which can be used.  The first, often referred to as “fiscal stimulus”, refers to the government boosting spending and employment directly, either by giving money to people, or large scale spending and investment projects.  The second, often called “monetary policy”, refers to making large amounts of low interest rate loans, via the banking system, in the hope that companies and individuals will use the cheap loans to increase their own spending and investment.

After the 2008 crisis, at first, both of these policies were used in large amounts.  Soon afterwards, however, with the election of an austerity-focused government in the UK, and the emergence of the sovereign debt crisis in Europe, direct spending from many governments was cut back, and “monetary policy” was left to take centre stage, with increasingly larger and larger amounts of money lent, rather than spent, into the economy via the financial system.

Despite cutbacks in government spending across the world, financial markets, central bankers and economists continued to predict that these aggressive “monetary policy” interventions, such as zero or even negative interest rates, and “quantitative easing” would be enough to kick start the economy.  The fact that these supposedly temporary measures are still in place today, shows that they were wrong.

So why didn’t this policy work, and why were economists still predicting a recovery as recently as early 2020, before the Covid crisis hit?

These were the questions about which I obsessed in 2010 and 2011.

At that time, I was an interest rates trader at Citibank in London.  My job was to predict when interest rates would recover, and I had witnessed markets incorrectly predict a recovery for the previous three years.  I was also, at that time, still living in my family home, a small terraced house squeezed in between a railway track and a disused factory in Ilford, East London.

I had studied Economics at the London School of Economics, and I knew that economic theory suggested that the huge amount of cheap loans being lent out by the Bank of England should stimulate the economy.  But I could not see any trace of a meaningful effect on the people who grew up with me in this working-class corner of East London.

At the same time, I was working on an enormous trading floor, in a glittering skyscraper in Canary Wharf.  I was immersed in financial markets, which had been rocketing despite the despondent economy, and was working shoulder to shoulder with millionaires, who got richer each day that financial markets rose.

It started to become apparent to me that “monetary policy” had an achilles heel.  No matter how much money global central banks poured into the economy, cheap loans were only available to the rich.  Not only that, but the rich were not spending the money – they were using it to buy assets, such as stocks and property, which did nothing to boost the economy.  Inequality was the missing link.  Unless the money was channeled to ordinary and poorer working families, rather than just the wealthy, it would never boost the economy, only asset prices.

My conclusion from this was inescapable, but depressing – since inequality was at the heart of the crisis, but was not being addressed, the economic crisis would be interminable: wages would stay low forever, and new money would constantly be pushed, via wealthier individuals, into stock and house prices.  The economy would never get a boost.  Upon realising this, in 2011, I started to bet that there would be no end to the economic recession.  By the end of that year, I was Citibank’s most profitable trader in the world.

This is a bleak economic forecast, and I believe it is true.  But it also provides profound opportunity for improvement and change.  Our current tools have not been working to boost the economy, but that is only because we have been failing to address this key issue.  Richer people tend to save their money, whereas ordinary working families spend almost everything they make.  When too much wealth accumulates in the hands of very wealthy families, it causes problems of underspending in society, and oversaving, pushing down wages and interest rate and crushing the economy, whilst simultaneously making housing unaffordable and pushing stock markets up.  All of these problems can be resolved, and both the economy and collective wellbeing can be improved enormously, if we only start treating wealth inequality as a serious issue and policy goal.

I have personally made millions by betting that failing to tackle wealth inequality will keep our economy in a slump forever.  I firmly believe that wealth, well paid work, and good quality, secure housing could be a realistic possibility for all if we deal with wealth inequality as a society.

The only realistic path to reduced wealth inequality is a serious change to the way that we tax the super rich.  Reducing wealth inequality is not about increasing tax on hard working, well paid workers and professionals.  These people may be relatively high income, but they generally do not hold huge amounts of wealth.  Billionaires and multi-millionaires, increasingly sitting on large amounts of inherited, family wealth, do not earn their incomes from working and, as a result, do not pay income taxes.  Instead, they pay other, lower taxes, which are often completely avoidable.  If we allow this situation to continue, it is inevitable that wealth inequality will increase, and our economic and societal problems will get worse.  We must amend the tax system so that the richest pay higher rates of tax than the rest of us, not lower rates than their cleaners, as they often do now.

It will not be an easy task, undoubtedly.  The super rich have the best tax lawyers and often the ability to amplify their voice in the media. They will proclaim that leaving them untaxed is essential for the economy.  I have made a career and a fortune by betting that isn’t true.

If you want to know more about the damage that wealth inequality does to our economy and society, please feel free to watch and share my videos on Youtube, or to read the full theory on my website.

A prosperous, dignified future can be available to all of us.  But only if we fix wealth inequality.

Photo by Simran Singh Mohan

by: Marco Senatore

Many have said that after COVID-19, the world will have to embrace a totally new path. We will need new instruments to make this happen.

The main reason why our current market economies do not serve human beings is, in a nutshell, the following: the means have become the ends. That is to say, what is supposed to be a means to deliver wellbeing (namely money), becomes the goal in itself.

Consider environmentalism. It is of course extremely important to stress the economic and political cost of inaction against climate change. But focusing almost exclusively on the monetary aspects of acting or not acting on climate change overlooks the inherent value of nature for human wellbeing, even without a monetary value attached to it. 

A new political, social, and economic order must be based on values: what is intrinsically good and worthy to be pursued. The values of dignity, nature, connection, fairness, and participation are key for reorienting the economy and putting people and the planet at the centre of it. 

For this purpose, I propose a Market for (moral, organisational, and cultural) Values.

How could we keep a market economy functioning, while putting values at its centre? 

In a ‘Market for Values’, instead of exchanging money, firms, individuals and local communities would exchange documents through a centralised platform. 

Instead of just reflecting economic worth (like money does), these documents would reflect economic worth in terms of the benefits experienced by their previous owners, categorised by high level values, including social justice, environmentalism, inclusivity, propensity for innovation, and multiculturalism. 

For each given value e.g. social justice, the State would define a list of quantitative indicators to measure progress toward it e.g. equal pay for equal work. ‘Documents’ would then be worth more or less based on how well they scored on these indicators.

Each document would not be exchanged with money, but only with other documents and with goods and services. These documents would be a complementary means of exchange with money.

But, unlike money, which is value-neutral, and which does not foster any reflection on the moral and cultural benefits of transactions, these documents would make economic transactions possible and contribute to progressively building a collective awareness about the importance of some values. 

How would growth in a ‘Market for Values’ take place?

In order to enhance the worth of in a document in terms of the value of environmentalism, for example, indicators to act upon with might include:

  • For local communities: a minimum percentage increase in green areas over a period of time. 
  • For companies: a minimum reduction in CO2 emissions and a given level of investment in negative emissions technologies. 
  • For individuals: to volunteer for green charities. 

After taking actions to enhance the environmental value of the ‘document’, these documents can be sold on the centralised platform for higher value goods and services or other documents.

Reconciling Economics with Ethics

Since the centralised platform would be open and transparent, even after having sold these documents, it is likely that companies for example would continue to practice environmentally responsible practices, to maintain their reputation. 

A Market of Values would foster a culture of prioritising the ends e.g. social justice, before deciding on what the means should be, such as the jobs we create, the cities in which we live, and the skills that we may want to acquire. Existing Wellbeing frameworks, such as the ones adopted in Iceland and Scotland, rely on quantitative indicators for desired policy outcomes or outputs at the national level. By contrast, in a ‘Market for Values’, quantitative indicators would measure inputs, the collective actions of all people. This would also foster a spirit of community, as I have highlighted in my book Exchanging Autonomy. Inner Motivations as Resources for Tackling the Crises of Our Times.

If in the Market, we saw that the worth of documents promoting certain values is growing faster or greater than the worth of ‘money’, we would know that we are making progress toward an economic system that centres wellbeing.

You can read more about the mechanics of a ‘Market for Values’ in several articles on the World Bank’s blog, London School of Economics’ Business Review, openDemocracy, Berlin’s Forum for a New Economy, New School’s Public Seminar and the Sheffield Political Economy Research Institute.

What do you think of the idea of a Market for Values? Please share your thoughts!

Marco Senatore works at the Ministry of Economy and Finance of Italy. Marco formulated this proposal for a ‘Market for Values’ in his book, “Exchanging Autonomy. Inner Motivations As Resources for Tackling the Crises of Our Times” (Xlibris, 2014). This article represents only his personal views. You can connect with Marco on Twitter, Facebook, and LinkedIn.  

Marco Senatore works at the Ministry of Economy and Finance of Italy. Marco formulated this proposal for a ‘Market for Values’ in his book, “Exchanging Autonomy. Inner Motivations As Resources for Tackling the Crises of Our Times” (Xlibris, 2014). This article represents only his personal views. You can connect with Marco on Twitter, Facebook, and LinkedIn.  

The Faces of the Wellbeing Economy Movement is a series highlighting the many informed voices from different specialisms, sectors, demographics, and geographies in the Wellbeing Economy movement. This series will share diverse insights into why a Wellbeing Economy is a desirable and viable goal and the new ways of addressing societal issues, to show us how to get there. This supports WEAll’s mission to move beyond criticisms of the current economic system, towards purposeful action to build a Wellbeing Economy.

by: Sandra Waddock

There is a lot of talk today about bouncing ‘back’ or returning to what passed for normal before the COVID-19 pandemic disrupted the world and everyone’s lives. But there is a huge problem with that idea. 

By the nature of complexity and wicked problems in social systems, complex systems simply cannot return to prior states once change has been triggered. 

Despite many calls to ‘bring back’ the system as it was, and efforts by governments and business leaders to do so, many economic, work, educational, and social systems have already changed in unpredictable ways that make a complete return to pre-pandemic conditions unlikely. 

Something else important is happening, too. The pandemic has raised awareness that the economic drivers that shaped the prior ‘normal’ have created many problems—including existential crises like climate change, species extinction, and inequality. Some observers have even laid the COVID-19 pandemic at the feet of overly aggressive exploitation of nature. 

So the real question is, what will our economic and social systems look like after the pandemic if we can indeed do what WEAll suggests and ‘build back better’ or ‘bounce beyond’ today’s economics? 

Today’s dominant economic drivers include beliefs, or what the late systems theorist Donella Meadows called mindsets, that form an economic paradigm. That paradigm— neoliberalism —has been used to justify growing inequality, ignorance of environmental impacts, and a drive towards ‘efficiency’ that justifies layoffs, abusive conditions in many companies’ global supply chains, and cutthroat competition. The most vocal proponent of this flawed set of beliefs was the late Milton Friedman

Neoliberalism claims that markets are and need to be ‘free’, that people are self-interested profit maximisers—and so are companies. That the best governments are the ones that exert the least regulatory or legal influence on the powers of business. That endless growth is the goal of economies and companies. That companies’ only social responsibility is to maximise profits for one group of stakeholders—the shareholders, as Friedman put it in a famous and influential, yet problematic, New York Times article in 1970

Neoliberalism’s flawed and problematic orthodoxy (a generally accepted theory, doctrine, or practice) remains deeply embedded in both business practice and governmental focus on flawed measures like GDP. The thing is, as my recent paper ‘Reframing and Transforming Economics around Life’ (published in Sustainability) argues, what the world really needs now is not another attempt at reforming the current framing, but a completely new economic orthodoxy.

The world needs an economics that favors life in all its aspects. One that fosters wellbeing for all humans, as well as non-humans. That economics needs to be built on powerful precepts— ‘memes’ or core building blocks of culture—that resonate broadly yet are considerably more holistic than those of neoliberalism.

Such memes support today’s new / next economies initiatives—such as Amsterdam’s recent adoption of Raworth’s ‘doughnut economics’and other wellbeing economies.

My paper argues for six synthesised precepts or building blocks, for Wellbeing Economics, drawn from a wide range of literatures. 

1. Stewardship of the Whole

Stewardship of the whole is foundational. Simply put, this means that leaders, governments, communities, businesses, and other institutions and, indeed, all of us, have shared responsibility for ensuring that the ‘whole’ system, including the planet itself, is healthy and supporting all of life for the foreseeable future. Living systems, including communities, organisations, and Earth itself, are healthy when all of their parts work together productively—when the ‘whole’ is considered, not just the parts. 

2. Co-creating Collective Value

Economic activity can be positive or negative (think the clear cutting of forests). This is why the focus of today’s economics on the growth of money as the sole way of assessing wellbeing is incredibly narrow-minded. Many other values, though perhaps not as readily measured as monetary outcomes, are important to humans, including health, relationships, community, meaningful work, and belonging, among others. Thus, another precept that underpins health, life, and wellbeing is co-creating collective value. Scholars Donaldson and Walsh argue that generating collective value should be the core purpose of businesses. Many important societal values that lend ‘life’ to human systems can be included in such a metric, as the Genuine Progress Indicator demonstrates. 

3. Cosmopolitan-localist Governance

Another core precept is cosmopolitan-localist governance. Given today’s technologically connected world, it is possible to create local governance systems in which citizens can have voice, input, and impact, and connect those to the global system. Cosmo-local governance, as it is sometimes called, relies on this connectivity, while decentralising decision making as much as possible, and allowing for communities to create and share ideas, knowledge, skills, technology, culture, and ecologically sustainable resources. 

4. Regeneration, Reciprocity, and Circularity

Cosmo-localism is complimented by an approach to production of goods and services that emphasises regeneration, reciprocity, and circularity. The idea here is to produce goods and services in alignment with the natural environment’s capacity to regenerate them, to operate in accord with nature’s own principles, in which exchanges are reciprocally balanced as inputs and outputs, and avoid toxic by-products (or products). Circularity avoids the take-make-waste approach too often used today, and instead adopts the idea of ‘waste equals food’, as some ecologists put it— which suggests that what is waste for one part of the system, needs to be reused as ‘food’ (inputs) in another part. 

5. Relationship and Connectedness

In contrast to neoliberalism’s strong bent towards individualism and individual responsibility, economics for all of liferecognises the idea of relationship and connectedness as foundational to what it means to be human—and what it means to exist in a complex world where physicists tell us, everything is connected. Human beings thrive in the context of relationship—and indeed, cannot survive on their own. The South African principle of Ubuntu, the idea that ‘I am because we are’, and the Lakota principle of Mitikuye Oyasin, or the idea that ‘all are related’ (sometimes translated as ‘All my relations’) reflect the core principle of relationships and connectedness. 

6. Equitable Markets and Trade

Since we are all connected, equitable markets and trade needs to replace the flawed idea of free markets and trade—because how we treat each other in markets and trading situations matters. Equitable or fair markets/trade offer fair and fully costed products and services, with all costs internalised, because otherwise, they are absorbed by and harm societies and the natural environment. It also means producing goods and services that are actually needed by customers and recognising the importance of good—and participative—governance over their fairness. 

There’s much more that could be said about each of these principles. 

The key idea here is that to make progress towards a Wellbeing Economy, many more progressive initiatives need to come to agreement about what the core ideas are, that would drive such an economy. 

My paper is intended as a start on that conversation, though by no means is it the end point. 

Dr. Sandra Waddock is the Galligan Chair of Strategy, Carroll School Scholar of Corporate Responsibility and Professor of Management at the Carroll School of Management at Boston College. Sandra has published well over 100 articles on corporate citizenship, sustainable enterprise, difference making, wisdom, stewardship of the future, responsibility management systems, corporate responsibility, management education, and related topics. Her research interests are in the area of macro-system change, intellectual shamanism, stewardship of the future, wisdom, corporate responsibility, management education, and multi-sector collaboration. 

Connect with Sandra on her website, blog and on Twitter: @SandraWaddock and @IntellectShaman

Faces of the Wellbeing Economy Movement is a series highlighting the many informed voices from different specialisms, sectors, demographics, and geographies in the Wellbeing Economy movement. This series will share diverse insights into why a Wellbeing Economy is a desirable and viable goal and the new ways of addressing societal issues, to show us how to get there. This supports WEAll’s mission to move beyond criticisms of the current economic system, towards purposeful action to build a Wellbeing Economy.

by: Erinch Sahan

A fundamental change is sweeping across the business world. Big ideas are spreading, new slogans being echoed, and the very purpose of business being questioned. A host of concepts and initiatives are driving this conversation. From BCorps to Social Enterprise, Cooperatives to Shared Value, the market-place of ideas is heating up.

These are all, by-and-large, positive developments. But how do these enterprise design ideas compare? Here’s an attempt to compare their essential structural features and assess the extent to which shareholder dominance and profit primacy remain embedded in enterprise design. In other words, the framework below compares the minimum in structural design that is required by these concepts.

It’s worth noting that we are comparing a mixture of legal forms, certifications and management concepts. For instance, many jurisdictions allow legal registration as a CooperativeSocial Enterprise or Benefit Corporation. Others are certifications to validate claims of being a Social Enterprise or BCorp. Meanwhile, new concepts like Shared Value or Triple Bottom Line are infiltrating MBA programmes, to guide a new generation of corporate leaders. They all (at least implicitly) deviate from shareholder primacy.

Turning away from Friedman? The answer lies in enterprise design.

In 1970, Milton Friedman penned, in the New York Times Magazine, the article ‘The Social Responsibility of Business is to Increase its Profits’. While proclaiming this today would seem short-sighted (and a public relations own-goal), it is an honest account of shareholder primacy. This remains baked into the DNA of most companies – a persistent straight-jacket that most executives must wear.

The economic imagination has since moved away from this singular obsession with profits for shareholders as the exclusive purpose of business. But enterprise design hasn’t. 

While trapped in shareholder primacy, a growing chorus of business leaders declare their discovery of enlightened self-interest, where their long-term profitability relies on being socially responsible. Inconvenient trade-offs are swept aside and questioning how profits are shared remains taboo (the largest shareholders always get the biggest dividend cheques). Yet, some executives pronounce that the purpose of their company is ‘people and planet before profits’ – a far cry from Friedman’s doctrine and the prevailing corporate model that financial markets hold firmly in place. Nonetheless, the narrative has moved, substantially.

How the narrative has shifted

This means enterprise design has become central as we explore purpose and impact. It has crept up on us all. It probably started a few decades ago, with new corporate goals like minimising or eliminating the worst harms of corporate behaviour (usually where a PR-disaster beckoned). Think sweatshops and poisoned rivers. It then evolved to focus on broader social and environmental impacts: human rights impact assessments, environmental impact reports, or indicators for how a business impacts sustainable development. This focus on impact largely happened over the last decade. 

But positive impact requires practices and investments that actively foster it. Without inclusive trading partnerships, workers in supply chains remain trapped in poverty wages and precarious employment. Without investment into water-treatment plants, local rivers remain polluted. Under shareholder primacy, if the cost-benefit analysis doesn’t add-up, people and planet take a back-seat (unless regulated by government).

To embrace ‘purpose’, a business must be designed to prioritise such investments and practices. 

This means enterprise designs that allow objectives other than profit growth to be a priority, and to give voice and power to stakeholders other than shareholders. Otherwise, doing good is only possible where it grows profits. 

A note here to not confuse profit maximisation with commercial viability. Staying in business is necessary for all businesses. Continuously growing profits isn’t.

Pursuing purpose while in a straight-jacket

The enthusiasm for corporate purpose is evidence that we are joining the right dots. However, unless business is designed to focus on people and planet, it chases ever more profits and ignores social and environmental impacts, where the financial rewards don’t suffice. And it is enterprise design that can unlock the practices and impacts that we all agree business must embrace.

Expectations of dividend growth and boards full of shareholder representatives lock-in the shareholder primacy design. This dominant structure ensures a focus on always increasing profits, and forces extraction of profits for the purpose of growing shareholder wealth. It’s a straight-jacket, within which inclusive and truly sustainable corporate culture is held in check, often relegated to projects and initiatives that don’t threaten the pursuit of growing profits. 

All businesses need to be profitable, but it’s the focus on maximising or growing profits that holds back authentic corporate purpose. Whether an enterprise is designed to deviate from this paradigm is the central question. 

In recognition, an increasing number of businesses are claiming to possess a more evolved design. But how can we know if a business is truly designed to put people and planet before (or alongside) profit? Ideas and movements like Social Enterprise, Triple Bottom Line, BCorp, Shared Value and Cooperatives are attempting to give the answer.

People, Planet & Profit: how far do ideas really go?

While on paternity leave, I’ve had some headspace to grapple with how enterprise design ideas compare. I threw up on Twitter some thoughts, and a discussion unfolded (see thread here):

What emerged is a framework that helps draw key distinctions between concepts like BCorp and Social Enterprise. The focus is on the most fundamental and structural features that determine enterprise design.

Based on my analysis, I believe the following claims are the best way to describe the concepts, certifications and legal forms assessed:

  • Shareholder Primacy: Only Profit Matters
  • Shared Value: People and Planet, if it Helps Profit
  • Triple Bottom Line and BCorp: People and Planet without undermining Profit
  • Social Enterprise and Cooperatives: People and Planet before Profit

There are nuances missing and exceptions within each category. A business with a shareholder primacy structure may be majority controlled by an altruistic shareholder, who uses their power to ensure it behaves like a social enterprise. I don’t account for such optional benevolent use of power. In cooperatives, members (therefore power-holders) could be an already empowered stakeholder (e.g. consumer cooperatives in developed economies) or truly marginalised communities (e.g. low-income workers). My framework doesn’t draw such distinctions. Many BCorps or companies embracing Shared Value will go well beyond what the table implies about their structure. This will not do them justice.

But the framework does help draw key distinctions in comparing the minimum in structural design required by these concepts. The differences are meaningful.

We should all applaud the narrative shift (and positive impacts) all of these ideas are driving. Equally, we need to compare and contrast the ideas that profess to fundamentally transform the business world. I hope this table helps achieve this.

Note to reader: I conducted this analysis in my personal capacity through October 2020 (while on paternity leave). To remain credible, I left out the Fair Trade Enterprise model (the global network I lead as Chief Executive of WFTO – see relevant report here and a talk about it here). Other ideas and concepts were also left out, where they lack concrete enterprise design features relevant to this comparison (e.g. Stakeholder Capitalism, Conscious Capitalism) or are broader concepts that capture multiple ideas (e.g. Fourth Sector/For-Benefit).

Erinch Sahan is Chief Executive of the World Fair Trade Organization. He has spent over a decade on enterprise development, campaigning for responsible business, lecturing on sustainability and researching new business models. His career spans Oxfam, Procter & Gamble and the Australian Government. He holds degrees in law and business, and an honorary Doctorate.

Connect with Erinch on Twitter: @ErinchSahan and on LinkedIn

Faces of the Wellbeing Economy Movement is a series highlighting the many informed voices from different specialisms, sectors, demographics, and geographies in the Wellbeing Economy movement. This series will share diverse insights into why a Wellbeing Economy is a desirable and viable goal and the new ways of addressing societal issues, to show us how to get there. This supports WEAll’s mission to move beyond criticisms of the current economic system, towards purposeful action to build a Wellbeing Economy.