Failure Demand: Counting the true costs of an unjust and unsustainable economic system

What should be the purpose of the economy, and the goal of public spending: promoting the wellbeing of people and the planet, or reacting to immediate, avoidable problems? Put this way, the answer seems obvious, yet the prevailing economic model forces governments towards the latter.

WEAll’s new report, “Failure Demand: Counting the costs of an unjust and unsustainable economic system”, written by Mark Anielski, Anna Chrysopoulou and Michael Weatherhead, examines two case studies of Scotland and Alberta, Canada to demonstrate that in pursuit of economic growth – a stated goal of almost all governments – harm is caused to people and the planet. Governments then need to spend money to respond to these harms – which in turn becomes a justification for growth.

In other words, we are caught in a cycle of paying to fix what we continue to break. This is known as ‘failure demand’.

Of course, governments will always need to be reactive to immediate needs. There will always be unavoidable demands on public spending. That is not in dispute. This report is concerned with demands that are avoidable: damages incurred through economic choices – the purpose and structure of the economy. These are damages that necessitate deployment of a government’s financial resources, but which could have been avoided in a Wellbeing Economy scenario.

The report asks the questions: is this the best we can hope for? Is it good enough just to help people survive and cope with the current system? And what about value from our taxes? Are payments that allow us to survive all that we should be using our taxes for, rather than investments and configurations that help us to thrive?

The research focuses on three key interlinked sectors that illustrate the impact on the financial resources of a state, directly and indirectly. Those sectors are: paid work, the housing sector, and the environment, with Scotland, a devolved part of the UK and the province of Alberta, Canada used as the two territories to articulate the story of failure demand. Even within just these sectors, the report considers just a small subset of the true picture and makes conservative estimates.

It finds that in Scotland:

• Due to the existence of low pay, the state provided over £596 million in 2014/15, over £635 million in 2015/16, over £890 million in 2016/17, over £840 million in 2017/18 and over £774 million in 2018/19 in welfare payments, free-school meals and work-related ill health 

• The total excess cost (failure demand) of healthcare for people who have ever experienced homelessness is over £900 million

• The failure demand costs for various levels of government due to the effects of global warming in Scotland can be estimated at £771 million and £956 million due to air pollution per year.

Whilst in Alberta, Canada:

• In 2019 an estimated 310,363 Albertans lived in poverty (or 7.1% of the population) with an estimated societal cost of poverty of $9.1 billion

• The average cost of homelessness in Alberta is estimated at $142,500 per homeless person per annum. This suggests the societal cost of homeless in Alberta was $1.05 billion in public programmes and other supports

• Weather related disaster costs increased by over 2,500% to approximately $9 billion with the Alberta government incurring an estimated $2.3 billion from 2010 to 2016.

Co-author Michael Weather explains: “Of course, the primary driver for changing towards a better way of doing things is the reduction of harm to people and the planet. Fiscal implications are secondary, but this report seeks to demonstrate that taking a Wellbeing Economy approach also makes financial sense, reducing avoidable demands so that public spending has a longer-term positive impact.”