Beyond consumerism and populism: Getting to the doughnut

We have two economic systems ruling our modern western world. One is the consumerist world. For this world, value is represented merely by what individuals want to buy. The other one is the public world, where value is represented by what is popular.

Consumerism on one hand, populism on the other, run our world order. We use about 50–70% of our resources on the first one, depending on the country you live in. Neither of the two, nor these two combined however seems to provide us a sustainable human existence. Kate Raworth’s Doughnut Economics, which also provided the basis for the SDGs, is a nice concept to strive for, however, we are lacking visions for how to get there.

Keynesian economics emerged after the big depression in 1930s, where the state led investments and regulations, shaping the economy. They then gave way in the 70s to the Friedman and Hayek’s neoliberal ideas, where state interventions were no longer deemed necessary, and a deal was cut with US democrats to shift their focus from economic liberalism to social liberalism.

Even after the crash of 2008, the main ideologies running our economies are unchanged. We are in lack of new visions for how to run economy any better. It is also a question if any exciting new visions could make it to power, given how power strongholds are control media, yet this is a theoretical question. We simply need new exciting visions for running our economies. How else could we organise it?

A basic understanding of decentralised governance, to the right, is how we run our markets. Markets in turn are focused on how to cater for individual needs, aka consumerism. When it comes to collective needs, we are stuck with the top-down, or, centralised decision structures.

One could argue that the collapse of the Soviet style communism showed that running the consumer economy with central planning was not easy, or satisfactory. There was simply too many factors to consider, which could not be centrally planned, and corruption became a major challenge.

So, we kept running our economies in these two branches, and expecting the centrally run populist government takes care of our collective needs, while the our consumerist free markets enable us to enjoy life with its comforting and addictive offerings. Indeed, from CocaCola to YouTube and Instagram, and from Yves-Saint-Laurent to Marlboro, we humans are not good at being rational for our individual well being, and addictive business models are highly profitable.

Where we arrived is a pretty frightening place: our consumer comfort economy has turned us into ever more addicted to stuff and things, while we are running serious issues with delivering on our collective interests, aka public goods. Even in Denmark, where things seem to work quite alright, public goods are threatened. Public health system is increasingly challenged, so is trust to politicians. The recent national health study found that the biggest risk factor for physical health is now not alcohol or cigarettes. It’s loneliness, which is causing serious mental health issues.

Loneliness is perhaps the perfect expression of what consumerism economy brings us to: our comfort maximization means we do not want confrontations with others, even if they are good for us in the long term. Whether it is netflix or our work that may be the addiction to numb the pain of lack of meaning, consumerism alone struggles to and cannot give us what we really need for a satisfactory life.

Because what we really need is a deep feeling of interconnectedness. It is feeling the agency in something bigger we create together. The collective, not only as a few dozens in a village, but a few millions and then a few billions creating a world of wonders. And that has to do with giving, as much as taking; it is not about consuming, nor about comfort. It is like being a cell in a body. A cell is not trying to consume more. Sure it needs the proteins and fats and other nutritions. But a cell alone does not have any function or purpose with all that nutrition. Nor does a small cell family. And we know what happens when a few cells take too much and decide to take over the rest — we call it cancer.

Once we realise we are a unit in a whole with millions of others around us, and it is the whole that we are connected to, and want to give to and interact with, then we reenter the realm of the collective. In that realm, we have a highly dysfunctional system. Even at the level of a medium sized city of about one million people, we have difficulty in finding our own agency for imagining how things in that city could be different. We don’t even think about it because we have stopped expecting our politics to work for us. At best, we imagine we can express our collective dreams through an art project, or by starting a new company or product. Because we have given up on representative politics being available for us with its representatives and elections as immense barrier to entry except for the insiders.

Our “free” markets are taking care of the consumer comfort (on the left), and are very effective at it creating innovations and unseen wealth accumulation. In the meanwhile centralised government whom we gave the job to take care of the collective interest (on the right) is hindered by populism and power struggle over creating results, and have done poorly in creating a better quality of life for majority of people

Unfortunately, our popularist structure of governance run problems with both skill and the will when it comes to achieving public goods. On the skill part, our governmental service delivery systems lack data-driven feedback loops enabling innovation, and effective allocation of resources. On the will side, they have an incentive to stick to status-quo as long as possible in order to not to risk becoming unpopular. Popularity, at the end, is a perception, not linked to any truth, and promotes a reality where spin-doctors and and public affairs professionals are more important than economists who can do policy analysis. It’s not anyone’s fault. We simply do not have a structure or practice in place for measuring who has done how much good, and assign value to their achievements. Thus, what any reasonable politician has to do is to manage perception as top priority, instead of achieving results.

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A decentralised system to take care of collective goods

Think about the idea of listing all the things that we care about collectively, in terms of measurable metrics. Then imagine that we price these metrics. That can be done in an exercise of everyone taking their share of public budget, and assign them to these metrics. Some could be prioritising environmental factors such as reducing CO2 emissions and biodiversity, while others may focus on social factors such as mental health, and social trust. Once everyone has allocated their share of public wallet on these metrics, we have the current level and how much we are willing to spend on them.

In order to assign value to collective goods, we can have a dynamic aggregation of citizens’ preferences on the most pressing challenges. Each challenge would have its key metrics to capture what is at stake, how it would be measured. As a result, companies can generate revenue from delivering on the challenges, or lose money for worsening these metrics — similar to how we run the CO2 emissions markets.

Then, we can open them to markets to help us improve these. The concept here is called impact markets. Essentially they are an expansion of CO2 emissions markets to all other public goods, so that every company stands to gain or lose financially based on the impacts of their products and services on the metrics we have identified.

What if we enabled market dynamics to cater for the interest of the collective goods? This is what CO2 markets are doing, narrowly for reducing CO2 emissions. Could we price all collective goals, and make them a part of the currently purely-consumer-driven economy, and hence making a centralised government obsolete?

Currently, in many European countries, there are centrally administered government functions from schools to hospitals and public transport. They can continue to exist in such a system, where they would continue to get funding based on their impact, essentially competing with all other services that companies are running.

All companies, and public institutions alike, could compete in an economy for delivering on public goods, which are classified and prioritized by the citizens.

Such a system would use data driven market dynamics to protect public goods. It would create a strong signal towards private businesses to not only care about consumer comfort, but also our collective needs, quickly changing business models, and leaving behind businesses who are not benefiting our society. It would mean we are no longer in the neo-liberal mindset, where companies are focused on consumer comfort in a so called free market setting. Neither are we in the centrally managed system where popularity of certain individuals or statements become the central point in deciding our collective interests. We no longer would spend money without knowing what result we get for it, away from any transparency and agency.

In summary…

The Keynesian understanding of the economy ran the visions of our dream society from 1930s through 1970s. That relied on public making investments, and interventions and strong regulations with a central management. 1970s through present has been the scene of neo-liberal capitalism, with the dream of as little intervention to free markets as possible, where markets have focused delivering comfort to consumers. As a side show, we ran our centrally managed public budgets to handle for public goods. Public goods over time have stagnated, given public administrations have struggled to innovate, and consumer driven economy has taken off with innovations of sorts exploiting increasingly what we value for our environment and society.

We now have the sentiment that this system cannot continue — it does not excite us to be on this path. There are increasing number of people expecting a catastrophe in the coming couple of decades, as a result of our way of handling planet and global society.

We need a new vision. The suggestion is to deploy data driven market logic to cater for the public goods. We will get rid off a double-sided economy, all value creation will concern itself both with what we need individually and also collectively.