‘Civic capitalism’: Towards an alternative currency of global economic success

Colin Hay - Director of SPERI

Tony Payne - Director of SPERI

Above all, this means focusing on the steps required to build a civic capitalism that is environmentally sustainable.  And this, in turn, means thinking about growth in a rather different way and posing some disarming and troubling questions.  The first is exceptionally simply stated: is environmentally sustainable growth possible?  Yet what is remarkable is how seldom that question is ever directly posed.  In a sense it haunts progressive political economy — which, for the most part, would like to think of itself as green and yet at the same time seems decidedly (if often implicitly) pro-growth.  We tend to assume (conveniently) that we can have environmentally sustainable growth and (even more conveniently) that, when we talk of growth (and of the strategies to attain or restore it), this is the kind of growth that we have in mind.  But that won’t do any longer.  Not least because, as we have shown in earlier posts, humanity is now at an environmental crossroads, having exceeded in an alarming number of ways the planet’s carrying capacity.

The story of our environmental crisis is the story, amongst other things, of symbolic breaches.  On 10th May 2013, the Earth Systems Research Laboratory (an environmental observatory and part of the US National Oceanic and Atmospheric Administration), perched 11,000 feet up atop the Mauna Loa volcano in Hawaii, recorded its first ever average daily carbon dioxide level in excess of 400 parts per million (ppm) – the latest such breach.  CO2 levels last reached such levels some 5 million years ago!  400 ppm, just like every other such symbolic ceiling, was long considered an unattainable figure, a level we could simply not allow ourselves to hit – a kind of doomsday portend and the point at which we would need to become (if we were not already) very, very scared that the damage we had inflicted on the planet was likely to prove irreparable and irreversible.

But it came and went, just like all the others, and most of us no longer give it very much thought.  Indeed, we are becoming increasingly immune to such symbolic breaches – they lose their shock value as we become ever more familiar with the process of environmental and ecological grieving.  The truth is, however, that we can’t carry on like this and, at heart, most of us now know that – even perhaps those who seek a kind of temporary solace in climate-change denial (though maybe that is too generous to them).

So where does this analysis take us?  Well, a potentially fruitful way to think about this is in terms of the ‘carbon footprint of growth’.  If we acknowledge that all growth has a carbon footprint – and that is perhaps as close to a truism as anything in this extended thought-experiment – then that suggests three potential types of response. We might seek to offset the carbon footprint (though, of course, that cannot work at a planetary level); we might seek to reduce the carbon footprint (by making our growth less environmentally damaging than it might otherwise be); or we might strive to reduce our dependence on growth and to promote other measures of economic success.

Of these, it is the third, we think, which holds out the most prospect of realisation, although, interestingly, it is the least discussed.  Growth, in a way, is a convention for measuring economic success.  Indeed, it has become the global currency of economic success.  And it is not difficult to see why.  But all conventions can be re-thought – and there is a very strong moral and ecological argument for suggesting that growth should no longer be tolerated as the global standard by which economic performance is gauged.  Things could and can be different.  But what we almost certainly cannot do is to replace GDP growth at a stroke with some other measure of economic success; the transition would need to be managed carefully and cumulatively, and coordinated globally.

The basic idea for this was set out in an earlier post.  There we sought to describe how an alternative compound index (what we termed the Social, Environmental and Developmental (SED) index) might slowly come to replace GDP as the international standard of economic performance and development.  Here we explain in a little more detail — in five simple points — the underlying logic, what this might entail and how the transition might be made.

1. GDP is a simple but perverse measure of economic performance, especially in a context in which the planet’s very carrying capacity is being exceeded.  For it encourages environmental resource depletion and rewards population growth whilst giving no consideration either to the environmental externalities of output growth or the capacity of an economy to meet the needs of its citizens.  In this latter respect, even GDP per capita is an improvement.  But, ultimately, neither can be tolerated much longer as the global currency of economic success and the most basic measure of economic performance.

2. But, if we are to replace GDP with an alternative and more sustainable measure of economic performance, it must be a more complex or compound index – an index, in effect, comprised of the weighted aggregation of a series of different indices.  For it is only in this way that we can hope to capture in a single measure the various respects in which different and distinct national capitalisms can and must be made to answer to the needs and aspirations of their citizens.  This is what we mean by civic capitalism.

3. Some of those elements – and hence some of the measures within the index – are integral to the very notion of civic capitalism in so far as they relate to core collective public goods and the satisfaction of basic human needs.  Amongst these we would immediately identify measures of social inequality (rewarding reductions in Gini coefficients, for instance), measures of health and basic welfare (rewarding, perhaps, improvements in life expectancy and reductions in the spread of life expectancies within a nation), changes in per capita energy use (rewarding increased energy efficiency and sustainability), changes in per capita carbon emissions and other planetary boundary statistics (rewarding the greening of economic activity) and perhaps a range of more basic development indices (rewarding improvements in literacy and numeracy rates and so forth).  Yet, in the spirit of the civic capitalism we are seeking to build, other elements might more appropriately emerge out of consultation and domestic deliberation involving citizens themselves.  The point is that there is space for quite a lot in a compound SED index of this kind.

4.  Yet this must, in the end, become a global index.  Whilst individual political economies might well, in the first instance, wish to develop their own SED to measure and capture progress with respect to the values they are seeking to incorporate within their own civic capitalisms (and should actively be encouraged to do so), GDP needs to be replaced at a global level.  This requires international coordination by new, or newly enabled, agents of global economic and environmental governance (either a revamped IMF or World Bank or a new agency designed for the purpose).  In that sense what is required is the development of such indices domestically by governments willing and able to make the case for them as global indices on an international stage.

5. Crucially too, we must acknowledge that the transition from GDP to SED as the global currency of economic success cannot be instantaneous or rapid.  It needs to be managed carefully and coordinated internationally.  We have some time perhaps to get this right, but we do need to start very soon.

What, finally, will be the consequences of such a transition for ‘growth’ as we know it now?  Well, that will depend in part on the specific contents of the SED index we settle on.  But it is important to stress that the transition from GDP to SED does not mean a complete end to growth in conventional terms – even if it does mean an end to the fetishisation of such growth as an end in itself.  Indeed, for many poorer ‘developing’ economies in Africa, Asia and Latin America to progress at all in SED, they will need to grow significantly as well in GDP and GDP per capita terms.  What it does almost certainly require, however, is a more equitable distribution of the dividends of any such global growth.  That, ultimately, is the test of whether civic capitalism can become global civic capitalism.