Economic growth on terms of well-being but not at any cost
Our belief in the future is sorely tested by the well-argued weekly writing of experts dealing with weak economic growth and the disappearance of middle-class jobs. These developments cannot and should not be denied. They are consequences of the interactions of two strong megatrends: globalisation and technology development.
There is no reason for despair, however, because ways for sustainable well-being can still be found. Nonetheless, these require significant changes to our thinking and the methods we employ.
To start with, we must accept that economic growth is not the primary aim of our public policies but just a means to promote well-being. Moreover, it is important to realise that the conventional GDP is becoming less and less useful as a measure for real growth, let alone that of advancement.
Unlike the trade of physical goods, the widespread penetration of digital services through channels such as social media is not fully shown in statistics as GDP growth. Once the digital service has been developed, spreading it for the needs of new users does not increase total costs or production, but it does increase well-being. This so-called technological deflation explains to a great extent why, among other things, Japan’s living standards and people’s well-being during the last 20 years has changed for the better without a measurable growth in GDP.
Breaking the link between conventional economic growth and well-being
As a result, we have reached a situation where conventional economic growth measured by GDP and well-being are becoming disconnected in the same way as economic growth and the consumption of natural resources are, as a consequence of political measures and advanced technology. Digitisation enables both of these changes.
This is a comforting and motivating fact at a time when the world is heading towards both social and ecological crisis.
We can thus also increase well-being and ecological sustainability during periods of low economic growth, but what about work? Work of course, in addition to its economic value, promotes people’s subjective well-being as an intrinsic value. How can we ensure that there will be meaningful activities in sufficient amounts for all to participate in?
New jobs and professions are being created, and it seems there is no end to work. However, it is possible that there will not be traditional paid employment for everyone, at least not in sufficient amounts, to be able to provide for one’s family with the wage earned. Many recent studies (for example, Erik Brynjolfsson) have shown that there is nothing we can do about the polarisation of work and about the wage differences growing alongside. Nevertheless, with progressive innovation and social policies we can create new work and even out income differences without disturbing the markets and weakening companies’ competitiveness.
New sustainable growth and work
According to studies carried out by Sitra and the Club of Rome, over the next 14 years the circular economy could create up to 75,000 new jobs in Finland. These jobs will revolve around logistics and production activities related to the recycling of technological and bio-based materials, in tandem with a move away from ownership towards increased service provision. This would also create new business, which would reduce our dependence on energy imports from abroad. The circular economy is therefore an important new economic paradigm – and not just for the promotion of sustainable growth and economic sustainability. It can also influence the advancement of social justice by creating meaningful jobs and a sense of community that strengthens local vitality.
Basic income can help even out wage inequalities
Even though new jobs are being created through digitisation, the circular economy and other new business activities, we must look for and try new methods – such as basic income – to even out differences in income. Correctly designed, basic income can provide basic security at the same time as motivating people to earn extra income from open job markets. It is also clear that other mechanisms, such as taxation reform, are needed for levelling out income disparities.
Possibilities abound; we just need to venture out and get hold of them. Populism, turning inward or wishful longing for the past are not the solutions for overcoming the great challenges of our time. Instead, together we need to create a believable and inspiring vision. After that we must start building, step by step, the next stage of our welfare society. Its current values and aims are still relevant, but many of its operating models and operating principles need freshening up and changing. As a small, well-educated and open economy, Finland now has the opportunity to be a pioneer of sustainable development!