The cycle of prosperity
Economic crises often generate morally-grounded responses, in order to prevent the same mistakes from happening again (overspending, wrong allocation of priorities, confusion between ends and means, excessive risk appetite). Environmental crises may generate existential responses, bringing about a complete reassessment of our world.
The current pandemic crisis offers an opportunity to engage in serious reflection on the nature and boundaries of human well-being and environmental sustainability.
The cycle of prosperity comprises three main stages, complex and multidimensional: economic growth, social development and human progress. In theory, these stages follow each other in a logical sequence, though in practice they overlap and take place concurrently. Further, the direction of causality among them is far from clear.
Growth generates more of everything; it is a purely quantitative stage that entails resource consumption and waste generation, and a host of externalities. Growth is generic (it may affect different individuals differently), unorganized (it doesn’t involve an explicit strategy for how to plan and control it) and blind (despite the pretense that markets are inherently efficient and fair). Capitalism has traditionally focused on growth as the vital element of prosperity, based on the belief that development and progress will naturally ensue (the proverbial trickle-down economics). Understandably, after millennia of slow growth many people regarded explosive economic growth as the key to human progress. The truth is, growth requires a clear framework and concrete development strategies, with precise progress goals regarding human well-being and environment sustainability. Growth for growth’s sake is meaningless and, literally, a dead end since resources and the ability to absorb waste are limited — even if we increase resource productivity, trying to decouple the economy from nature, or curb demand, trying to decouple well-being from consumption. However, the idea that we could prosper without some sort of growth or that growth is intrinsically incompatible with progress and sustainability — increasingly popular in developed countries — may be fundamentally flawed and also meaningless — particularly with regard to developing countries, which may see this idea as a new form of exploitation. Growth generates the resources needed to finance and bring to fruition development strategies and projects; it is a means to an end, not an end in itself.
Development involves the conscious planning and implementation of distinct strategies designed to shape and improve the country (civil rights and equality, institutional framework, education, healthcare, housing, infrastructure, environment, natural resources, public services, employment, financial system, competitive industries, …). It is a transformative stage, organized and specific, with explicit policies and objectives that cannot be left to the market alone. Socialism has traditionally focused on development as the vital element of prosperity, but without a clear idea of how to fund the required projects and programs. Socialism aimed at reducing or eliminating inequality by transferring economic decision-making from markets to governments, with very poor results. Open and democratic societies are more likely to generate growth and decide on appropriate development strategies, without necessarily resorting to direct and forceful government intervention. Development strategies enable countries to realize human and social progress.
Progress represents the final step in the sequence, a qualitative stage, in which the advancements achieved so far are enjoyed by all individuals (improvements in health and life expectancy, literacy and access to education, employment and income, civil rights and liberties, …) and society at large (improvements in the institutional framework, culture and values, inclusion and cohesion, environment sustainability and resilience, …). Utopians have traditionally focused on progress as the vital element of prosperity, but without a firm grasp of the social and economic route to follow in order to reach the desired destination.
Hence, we might wonder whether human progress, the last stage, is what we truly aim at. The answer is not quite as straightforward as that. Instead, we ought to focus on prosperity, which involves all three stages and a never-ending cycle that connects them. Economic growth is needed in the form and amount required to fund and support development; development is needed with the priorities and strategies appropriate to achieve progress; progress is needed to effectively improve human well-being and environment sustainability and, critically, to further the understanding of the cycle — forging a more integrated and long-term perspective, bearing in mind that human well-being and environment sustainability are inextricably and dynamically interconnected — and be able to put forward new growth models to carry on and implement new development strategies and achieve new progress goals. In this context, standard and aggregate economic measurements alone — like GDP, that only considers market activities — will no longer accurately describe a nation’s path to well-being and progress, though they may still be useful to monitor traditional economic activity.
The virtuous cycle of prosperity is fueled by constant innovation — technological, institutional and cultural changes have a significant effect on growth models, pushing the cycle forward — based on knowledge generated by a learning society — knowledge enhances the understanding of the cycle and the causality among its stages, clarifying the way forward in an ever more complex world.
A learning society will revolve around generating and disseminating knowledge, considered a public good and not a monopoly supported by intellectual property, and permanent innovation, across society and the economy, will transform knowledge into real opportunities for a better world, keeping the cycle of prosperity going and increasing human well-being and environment sustainability.
Open and democratic societies are better at promoting an environment conducive to learning and producing new ideas and innovations. However, the necessary metamorphosis of society is far more involved than the simple ideation of a learning society. It requires a whole mindset shift and the revision of views and priorities (environmental, social, economic and political), attitudes and behaviors — crucially among them, the decoupling of personal happiness and identity from consumption — , a highly demanding path that could become a significant ‘entry barrier’.
Though a joint effort between multiple stakeholders — governments, institutions, corporations, associations, … — will be imperative to address the challenge in a top-down fashion, the scale of the transformation and its necessary dissemination makes the process a bottom-up affair; everyone has to take part and contribute their views and ideas. As a result, the individual occupies center stage and the humanistic component of progress — basic values and principles — is preserved.
Knowledge will further the understanding of human well-being and environment sustainability, enabling objective measurements and metrics — essential to appropriately design and assess new strategies and signal potential problems ahead — , and innovation will facilitate the devising of new methods, economic activities and institutions with which to foster prosperity, breaking unwanted social and economic inertias and contributing to a positive indeterminacy of society, in a dynamic and evolving process, open to discussion and revision.
Within this perspective, the new paradigm will be ever-increasing prosperity, in terms of human well-being and environment sustainability, not unlimited growth. Ultimately, the cycle of prosperity will bring about a better world, more sustainable, resilient and fair for all.
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When societies focus on producing, individuals focus on buying.
When societies focus on learning, individuals focus on innovating.
