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Week 48: A new economic narrative
In this issue: ▸ Those who tell stories rule society ▸ People are not greedy individualists ▸ Well-being, dignity and a healthy planet ▸ Free market happiness? ▸ Who is serving whom?
Looking back at previous editions of ‘ESG on a Sunday’, I see that I have addressed a number of challenges and opportunities related to the transition to a (more) sustainable future.
What I sense, though, is that I need to elaborate even more on what is possible. And I need to provide concrete suggestions on what can be done if we, collectively, choose to do so.
In other words: There’s plenty of ground to cover in upcoming editions.
Those who tell stories rule society
Today, let’s focus on the narratives. I also touched upon it last week. It’s the ancient way of framing and interpreting reality, dreams and expectations for humans. Plato said: “Those who tell stories rule society.” As always, he was right.
Each of us have a story about who we are and the world we live in. At its essence, it is what we call consciousness. Changing consciousness can change social norms. If people act in line with what they perceive to be their true nature as individuals, the economic and social outcomes will be healthier.
The dominant economic model is based on a view of humans that is both erroneous and dangerous. The weight of evidence from the sciences (evolutionary biology, social psychology, and neuroscience) suggests that human beings are fundamentally cooperative, motivated by feelings of fairness and reciprocity, and driven by strong instincts for altruism. True self-interest is mutual interest, oriented toward an ethic of shared well-being.
The world has become unstable economically, environmentally, and socially. The demand for a new economic model is growing louder around the world. As populist movements demand the prosperity and quality of life they were promised, the need for a new narrative is clear.
People are not greedy individualists
The old narrative was based on assumptions that scientists now reject. Psychologists, evolutionary biologists and anthropologists and others find that most people are not greedy, rugged individualists. We seek to meet our needs, but more, people seek goodness, connection, and caring. We desire to be rewarded for meaningful contributions with a decent living, but are not primarily motivated by acquiring wealth.
Unlike the current economic model, which is based on an incomplete view of what it means to be human, a new economic model must balance our innate entrepreneurialism and individualism with a holistic view of humanity that recognises fairness and our desire to bond with others.
There is even a business case for this view. Organisations that respect dignity and implement more sustainable practices are better at engaging all stakeholders and enjoy increasing productivity. More sustainable brands (and ESG investments) deliver higher profitability.
There is a quality of life reason, as well. Science now tells us that life itself is interconnected and mutualistic, not separate, competitive, or based on random chance. Implementing more regenerative practices drawn from natural systems principles is the only way to achieve true freedom and a world that works for everyone.
Well-being, dignity and a healthy planet
The next generation seeks purpose, authenticity, opportunity, transparency and creativity that can only be found with local engagement in community. Community-based strategies focus on the well-being of the whole and protect intact ecosystems and resilient human communities.
Institutions, private and public, serve humanity best when they recognise individual dignity and acknowledge and enhance our interconnectedness. They preserve and restore the integrity of regenerative natural systems within which they operate, to enable Earth to support human (and other) life now and for future generations.
Organisations that respect dignity and implement more regenerative practices better engage workers, and all stakeholders, increasing productivity. Dignity for all is achieved through equitable access to education, health services, decent work and adequate pay, social inclusion and cohesion, basic material resources, and other factors that enhance well-being, flourishing, and prosperity for all.
Free market happiness?
Humans created governments to protect common space and goods; ensure safety, fairness and integrity of markets and internalises costs, while supporting thriving and resilient communities. Governments should protect vulnerable people and the ecosystems upon which all life depends.
Citizens in equitable societies live longer, have better mental health, and have better chances for a good education regardless of background. Community life is stronger where the income gap is narrower. When inequality is reduced, people trust each other more, there is less violence, and rates of imprisonment are lower.
Humans are happier when we know and value our local worlds (people, community, environment), in addition to our financial and business worlds. Resilient, happy communities enhance bio-regional economies that satisfy our need to belong.
Conversely, and ironically, those who acquire financial wealth are not happier than those who do not. According to the present research, the relationship between wealth and happiness flattens around the USD 75K mark.
The dominant economic narrative tells us that the sole goal of the economy and business is to generate financial wealth. And that the freedom of the individual (person or corporation) is the primary societal value. In that model government should be small, protecting individuals and their private property. If we just let the free market sort things out, all will be well.
But it is far from well. The global economy rests on a knife-edge of unsustainable business. We are struggling with growing income inequity and persistent poverty, the prospect of biophysical collapse and loss of ecosystems and climate stability. Loss of jobs that pay a living wage and provide dignity, rising levels of anger, fear, and intolerance and with an economy that serves itself and the .01%, at the expense of life.
A new economic narrative
Our economic story today is broken. The mental model that drives global economic thinking, has created vast financial wealth, but also inequality and environmental destruction.
Today, all major ecosystems are in decline. People across the planet struggle to make ends meet and find purpose in their lives. Sixty-five million, the greatest number since World War II, are refugees from climate change and war, while eight people have as much wealth as the bottom 3.5 billion poorest.
This isn’t working. We need to reframe the economic narrative around wellbeing, dignity and a healthy planet.
Who is serving whom?
The dominant narrative puts the financial system at the centre of human activity such that the real economy and society are servants of finance. The new narrative will position finance as the servant to the real economy and society.
We need to change the narrative of finance so that it is a tool to bring liquidity to the real economy, not the end in itself, and ensure that money is managed for long term sustainability.
We need to create incentives for long-term investing, not fractional trading. Create attractive sustainable options for the millennials to transfer the trillions they will inherit from harm to healing.
We need to expand the concept of Fiduciary Responsibility to include all stakeholders as well as replace the shareholder primacy myth.
This is our opportunity to reimagine and redesign what comes next. We can do it, together.
Finally, to answer that question that lurks in the background. Can you ever be rich and green? Well, it depends on how you define rich…
That’s all for this week.
Best regards, Sasja