In response to the 2023 Beyond Growth Conference, this piece is the sixth in a weekly series that has been published together on 8 May in a special issue magazine, “Imagining Europe Beyond Growth”, developed in partnership with Belgian de-growth think tank Oikos. The magazine, curated by our Senior Policy Officer for Systemic Change Nick Meynen, features 18 articles from diverse actors in the “beyond growth” sphere: from thought leaders such as Kate Raworth and Timothée Parrique to political figures and a variety of green civil society allies and EEB staff passionate about system change. Stay tuned for 1 article every week for the next eight weeks!
The legacy of the Cold War has shaped our economic thinking in such a way that the public debate is trapped in a false dichotomy; that there are only two ways to organise an economy. Therefore, we must choose either the profit-driven market economy (tempered to varying degrees by the state) or the state-planned economy. However, economic models are not like a light switch. The diversity of existing businesses and markets points to a wider range of options. Jennifer Hinton reports.
Reporting back from a sustainable economy in 2040
Imagine it is 2040, and we have made all the necessary changes for a healthy, sustainable economy. Here is a thought experiment on how that might look and feel.
Our definition of success, prosperity, and progress has radically changed. Everything has been reoriented from focusing on making money and buying stuff to meeting our needs in the healthiest ways possible. And we have found that it happens through connection, sharing, and caring. So now there is a big focus on maintaining strong connections and caring for ourselves, each other, and nature.
Now there is a widespread ethic of “enough.” As long as each of us has enough material stuff to live a comfortable life, that leaves space for others to have enough and for nature to recover from all the damage we caused. Every community has created its sharing networks and communal spaces to ensure that we all have enough. We are growing food together in different little plots throughout each neighbourhood, on building roofs, in parks, and even in the centres of cities. We’re keeping as much wild nature intact as possible and even restoring natural habitats, which benefits the wildlife, but it also benefits us to have easy access to nature. Most of us regularly go to the beach, the river, or the forest, where we can relax, play, learn, recharge, and reconnect.
Each neighbourhood also has communal spaces for making and repairing things. These are key places for meeting friends, family, and neighbours. Just down the street from me is a place where I can use a sewing machine when I want to mend my jeans, and there’s a tool shed where I can borrow tools to fix things around my apartment when I need to. There is an electric bike and car sharing scheme, so I can borrow a bike for daily use or a car when I need to make longer trips that are not easy with public transport. There’s a weekly clothing swap where I can leave my tired clothes and pick up something new (at least “new” for me). Sharing these things with my neighbours reduces our environmental footprint because we’re using less stuff collectively, giving us a greater sense of connection. We’re meeting more of our needs with less stuff.
Businesses and markets still exist, but they take up less space in our lives and communities. Ironically, I saw my job as an economist as not to grow the economy but to shrink it, to make more space in society for the things that really matter, like health, love, and creativity. Now businesses and markets exist to give us access to something that sustainably increases our wellbeing, but those things cannot be sourced from immediately around us.
The purpose and ownership of business have fundamentally changed. All businesses are not-for-profit, meaning they all have a core social benefit mission and use any financial surplus for social benefit. Investments are made for social and environmental returns rather than financial returns. In this way, all the money and resources in the economy go where they are most needed. And crucially, the surplus of the economy is no longer accumulating in the hands of a few business owners because there are no private business owners.
So, now there are much higher levels of equality, and nature is slowly but surely recovering.
The government still exists in much the same way as it used to. However, people tend to be more engaged in decision-making than before. We have the time and energy to be more involved due to the shorter working week.
An essential function of governments in maintaining our healthy society is providing universal public services like healthcare, education, waterworks, public transportation, museums, and public parks. The government also still plays a vital role in regulating the market. But rather than trying to reign in the greed of a for-profit market (as used to be the state’s central role), the government and businesses now have the same goal: to meet people’s needs in the best way possible. And this transformation has changed everything. This makes it natural for businesses and governments to work together to benefit their communities. Crucially, all businesses and governments must be transparent about how they use their resources and are held accountable by communities for delivering social benefits.
So, it is through this decentralised system of community networks, not-for-profit markets, and different levels of government that our needs are met. This makes our system balanced, resilient, and adaptable. This is in great contrast to the capitalist and state-planned economies of yore, which systemically led to the concentration of wealth and power in the hands of a few, making them very prone to corruption and social upheaval.
The destructive dynamics of a for-profit economy
We must understand our current economy more clearly before fully appreciating why we need the not-for-profit businesses and markets described above. Today, we have a for-profit economy made up predominantly of for-profit businesses. The business’s core purpose in this economy is to enrich private owners and investors. Businesses achieve this by generating as much financial surplus (i.e., profit) as possible and distributing it to their owners and investors.
Organising businesses and markets this way might sound logical to most of us. However, profit-oriented markets are doomed to fail at equitably and sustainably meeting needs. To generate more surplus for their owners, for-profit businesses are incentivized to sell as many products and services as possible. They use a variety of strategies to convince consumers to keep buying more. This results in more profit, overconsumption, and environmental degradation (like the climate crisis, biodiversity loss, and pollution). Furthermore, the core aim of private financial gain drives inequality because it incentivizes businesses to keep wages as low as possible to derive more profit for owners. Inequality naturally increases as wages stagnate and a handful of business owners accumulate the economy’s surplus over time. Moreover, the largest businesses are those that are most likely to be profitable, so profit-driven investments go to the largest, most visible businesses. As these businesses gain more investment, they can grow even more significantly by increasing advertising, merging with other businesses, and buying up smaller businesses. This allows them to take over a larger market share over time, leading to the high levels of market concentration we see in every sector of the global economy today. Lastly, profit-seeking businesses and their owners have an inherent incentive to influence policy in a profitable way. Therefore, it is rational for them to lobby policymakers for tax cuts and subsidies and to lobby against costly regulations and taxes that might benefit workers, local communities, and the environment. Thus, overconsumption, inequality, market concentration, and political capture are systemic features of the for-profit economy. They cannot be remedied without a systemic transformation.
The healthy dynamics of a not-for-profit economy
Fortunately, businesses and markets do not have to be profit-driven. A brief look at the diverse types of markets throughout human history reveals that most markets have existed to meet communities’ needs rather than make business owners rich. Our for-profit economy is an anomaly in the long arc of economic history. And even today, many businesses treat profit only as a means to achieving social and environmental benefits. These are not-for-profit (NFP) businesses. Although they share the same legal structure, they differ from traditional charities in that they generate most or all of their income by selling goods and services on the market rather than relying on grants or philanthropy. They differ from for-profit businesses regarding their legal purpose and ownership structure. Instead of pursuing financial gain for private owners, they have a core social benefit purpose, and their profit must support that purpose. No profit may be distributed to private owners.
An example is the YHA in the UK, which sells the services of recreation and accommodation and uses all of its surpluses to help young people experience the countryside. The category of NFP businesses includes a diverse range of businesses that you can probably find throughout your local community, such as charity shops that sell second-hand goods; community-supported agriculture schemes; foundation-owned restaurants and cafés; renewable energy cooperatives; mutual insurance companies; credit unions and cooperative banks; consumer cooperative grocery stores; cinemas and theatres owned by NFP associations; municipality-owned transport companies; hostel associations that provide accommodation; sporting associations that provide recreation services; and the list goes on.
The not-for-profit legal structure is an ideal foundation for a sustainable postgrowth economy. A market comprising NFP businesses would have very different dynamics than a market composed of for-profit businesses. In such an economy, there are no private financial owners to receive the economy’s surplus; instead, all of the profit goes to meeting social and environmental needs. This leads to higher levels of equality. Because this kind of economy is oriented towards social and ecological goals rather than enriching private investors, there is no inherent pressure to keep growing production and consumption or to suppress wages. This allows for a non-growing or shrinking economy. Furthermore, a market driven by producing positive social and ecological outcomes aligns much better with other sustainability principles, policies, and interventions. For instance, efforts to redistribute wealth, promote sufficiency-based lifestyles, protect ecosystems, protect workers, and alleviate poverty can all be much more effective in an NFP economy that ethically aligns with these aims as compared to a for-profit economy that is driven by financial gain for business owners and is in direct opposition to these aims.
That is not to say that an NFP market economy would necessarily be sustainable. It also needs to be circular, sufficiency-based, ecologically regenerative, and democratic, among other key principles. Businesses must only offer products and services that meet people’s needs. They must adhere to the principles of circularity, making products that last and can easily be repaired, reused, and recycled. They must try to assess and minimise detrimental impacts on people and the planet, using tools such as the Common Good Balance Sheet or the Future Fit Business Benchmark. That includes impacts on consumers, workers, the communities in which they operate, other supply chain actors, ecosystems, and society at large. They must do so transparently, making their annual financial, social, and environmental reports publicly available to be held accountable for how they conduct business. In terms of internal business governance, businesses must ensure that all the relevant stakeholders mentioned above have a say in decision-making.
This means including representatives of workers, consumers, and the local community in their boards and decision-making processes and frequently checking in with other supply chain actors.
Civil society actors and the state also have a critical role to play in governing sustainability-oriented businesses and markets. This includes informing businesses of society’s needs, guiding business activities via policy goals, constraining business activities via regulations, and holding businesses accountable for contributing to social benefit and ecological regeneration in clear and transparent ways.
Key transformative policies
What are the kinds of policies that can enable this crucial transformation? The overarching policy goal would be to phase out for-profit institutions while building up a robust NFP economy. This is an overarching policy goal that can be enacted by a package of policies that incentivize for-profit companies to shift to NFP structures, as well as guidance and support for new businesses to start up as NFPs.
Public procurement should favour not-for-profits and place a distribution constraint on for-profits (i.e., they cannot distribute their profits to private owners). This is easy to justify, as currently, private business owners are accumulating a significant amount of wealth from public spending, which reduces the amount of benefit that middle- and low-income communities receive from that spending.
Government support programmes for businesses should favour NFP businesses and help for-profit businesses transition to NFP structures (e.g., seed funding, mentorship and incubator programmes, and legal advice for start-ups). This can build on existing efforts, such as NFP business incubators like Nonprofit Ventures in the Netherlands, the Social and Solidarity Economy networks around Europe, and the Steward Ownership movement rapidly spreading worldwide.
Patagonia has shown that large, international for-profit companies can transition to NFP ownership. (There are further steps that Patagonia should take to become even more aligned with postgrowth aims, such as making its governance structure more democratic). Also, many large industrial foundations in Europe, such as IKEA and Bosch, are only a small step away from being NFPs.
Policies should eliminate barriers for NFP businesses. This includes removing non-competition rules and limits on business income for not-for-profit organisations.
Policies should make it harder and more expensive to start for-profit businesses (e.g., through taxes, fees, and increased transparency about financial flows). This includes taking away tax advantages and subsidies from for-profit companies (especially the largest incumbents). Governments could use the money generated from such fees and taxes to invest in sustainable NFP businesses.
Lastly, we must shift pensions away from the stock market into green and social bond markets, where the money can be used to build regenerative NFP businesses. Pensions will also be safer in such markets.
Moving away from the for-profit economy is necessary for a postgrowth economy. It is also feasible if we build on existing structures, institutions, and societal trends, like NFP businesses. It is not sufficient, but a not-for-profit market economy allows for other postgrowth propositions, such as a shorter working week and the redistribution of wealth, in ways that the for-profit economy simply cannot.
