Will Wellbeing Economics will save us?

Speech to New Economy Network Australia Life After Capitalism Conference – Will Wellbeing Economics will save us?

Kia ora, ngā mihi nui, kia koutou katoa. Kia ora.

I greet you in NZ’s first language Te Reo Māori. E whanau mai ai e te taha o te awa Tairawhiti Gisborne He-uri ahau no Wales, Scotland. Kei te noho, au kei Poneke Wellington. Ko Gareth Hughes toku ingoa.

I am Gareth Hughes, the Country Lead for the Wellbeing Economy am Gareth Hughes, the Country Lead for the Wellbeing Economy Alliance Aotearoa New Zealand.

I acknowledge Australia’s traditional owners of the land.

You have asked me – ‘Will Wellbeing Economics will save us?’ Wow that’s a BIG Question for so early in the morning!

I think it’s the right question we should be asking as we see brutal invasions in Gaza and the Ukraine, extreme weather events slamming into our towns and cities regularly, billions suffering in poverty in a world where billionaires are jetting off to space. Polycrisis seems a very apt word to describe the last few years. I wasn’t quite sure how to answer the question ‘will Wellbeing Economics save us’ – it is only five words but it is a lot to unpack.

At the risk of sounding like a high school debater lets break down that sentence. Will it save us? That sounds a little religious. Wellbeing Economics makes no promises of eternal salvation but it does offer positive and practical answers to the big question of our age – how to ensure civilizational survival in the face of climate change, biodiversity collapse and multiple planetary boundaries breached. The stakes are very high and it is the right question to be asking of our economic system.

Climate change, poverty, poor housing, food insecurity, species extinction and many other issues are all economic issues. They are all symptoms of our economic system.

Expanding out the question – will economics save us?

The short answer is no. Business-as-usual economics is driving us off a cliff. Focused on an odometer that only measures the quantity of economic activity and not the quality, we are ‘pedal to the metal’ racing for Gross Domestic Product (GDP) growth. We speed as fast as we can, consuming the worlds resources at an ever growing rate yet the passengers never seem much better off. Economics dominates our world and it feels like it’s in the driver’s seat, not us.

I’ve come to realise in my 25 years of advocacy for people and planet that even though I was campaigning to halt offshore oil exploration, save Maui dolphins or improve housing standards, I was really working on economic questions. Who has power and access to resources, what resources, where and why? Climate change, poverty, poor housing, food insecurity, species extinction and many other issues are all economic issues. They are all symptoms of our economic system.

As my one of my favourite economists Ha-Joon Chang says ‘The economy is too important to leave to economists.’

We have to engage with and change economics if we want to turn it from a tool driving destruction to a tool responding to the challenges of our age and building a better future.

For decades governments have put GDP growth first in a mistaken view it represented an improvement in quality of life. Even Simon Kuznets, who developed GDP as a measure warned against its use as a measure of wellbeing but since the Bretton Woods conference in 1944, GDP of Gross Domestic Product has been the main measure of progress in most countries. More growth is always the answer to whatever question. Stuck on a treadmill, we rely on more growth to fund more band-aids to patch up the costs caused by our relentless focus on pursuing growth. Epidemics of loneliness, ill-health, overwork and social discord can’t be separated from the economic treadmill people themselves feel trapped on.

For decades we’ve been told a myth that economic growth would trickle down.

Here’s a thought experiment, what do you think would happen to child poverty rates in a country whose economy was 50% richer? Surely material hardship rates for children would decline if wealth increased by 50%.

New Zealand did this experiment and even though between 1984 and 2014 real GDP per capita income grew by 50% (adjusted for inflation) the percentage of children living below the poverty threshold was the same in 2014 as 1984 – 15% and the number of children defined to be in relative poverty (as a ratio of average household income) actually doubled. That wealth didn’t trickle down, it was sucked up.

Old economics has focused on growing the pie and not how the pie is shared.

Using Statistics New Zealand’s 2020/21 Household Economic Survey, if the financial wealth of New Zealand was divided in to ten plates of food at a table for ten dinners, one would have five plates in front of him, four would have one plate of food each, but the other five at end would be sharing only a fifth of one plate between them. Old economics has focused on growing the pie and not how the pie is shared.

Now with 40 years of evidence we can conclusively say GDP is a poor proxy for wellbeing and growing the economy to afford the costs of the economy and hoping that wealth trickles down has been a failure. Child poverty and inequality aren’t just bugs in the system, they are features.

Our economic system is like the operating system on your phone – iOS or Android. It allows what programmes and apps will run and which won’t.

This is why we need to redesign our economic system and install one that measures a broader measures of progress than just GDP, a system that ensures everyone has enough to live with dignity and opportunity and asks what the real social and environmental contribution of a corporation is, not just their quarterly profit. It’s been forty odd years since the last major install and I take optimism from history that economic systems have changed before and will change again. Like in New Zealand, Australia has seen big economic system changes after initial colonisation from the Liberal reforms of the 1890s, welfare reforms of the 1930s and Neoliberal reforms of the 1980s. Economic systems are products of design and can be redesigned. This I believe is the most crucial question facing us – ensuring economics is pulling in the same direction as survival.

So let’s look at the full question you have asked me again – ‘will Wellbeing Economics save us?’ What is Wellbeing Economics?

Wellbeing economics is famously defined by Professor Amartya Sen as ‘the expansion of the “capabilities” of people to lead the kinds of lives they value and have reason to value’. Therefore the purpose of economic policy should be remove that which blocks and empower that which expands personal and communal capabilities.

I am part of the global Wellbeing Economy Alliance and we define it more simply as ‘an economy designed to serve people and planet, not the other way around.’ In a Wellbeing Economy, the rules, norms and incentives are set up to deliver quality of life and flourishing for all people, in harmony with our environment, by default. A Wellbeing Economy puts dignity, nature, purpose, fairness and participation at the core of its activities.

It’s a vibrant time around the world exploring replacements for old economic ideas and Doughnut Economics, Common Good, Core, Feminist, Solidarity, Buen Vivir and Degrowth all have much in common with Wellbeing Economics. The first question people always ask me ‘is what does it exactly look like and how do we get there?’ I think it’s interesting – everyone I meet is asking what’s next, from cabinet ministers, city councillors, community leaders and ordinary citizens – hardly anyone is defending the current broken system, everyone wants to know what comes next. It reminds me of the Antonio Gramsci  quote “The old world is dying, and the new world struggles to be born: now is the time of monsters.”

The journey to a Wellbeing Economy is kind of like oceanic exploration – we don’t have a precise detailed map to get there but we’ve got the big stuff mapped out and we are filling in the detail and blank spaces. I think we can see the major islands of a Wellbeing Economy clearly on the map.

• Purpose – we need to move beyond GDP growth as a measure of progress,

• Prevention – we need to focus on preventing systemic problems not just spending vast sums after they occur,

• Pre-distribution – we need to ask the economy and businesses to do more of the heavy lifting for example paying a living wage to employees,

• People-powered – we need an economic system where human values are expressed and citizen voices can be empowered.

This past winter I drove around New Zealand in a donated camper van as part of what I called an Economics Listening Tour. On this tour, people recommend a fifth P to add to that list – place. Place to reflect our deep connection to nature and identity as a South Pacific nation. My Economics Listening Tour was an attempt to redress the fact we seem to only ever hear about the economy from bank economists and read about it in the business section. I wanted to go out and listen to ordinary people’s perspectives on the economy so I organised a series of workshops in towns large and small across the country with a representative group of New Zealanders and asked them what they thought about the economy. When ordinary people are asked how to describe the values of our current economic system they use words like ‘extractive, individualistic and short-term.’ Yet the values they want expressed are an economy of care, of everyone having enough and of restoring nature. I find it baffling we have a collective economic system none of us say we want individually.

This is backed up internationally by polling data. In a 2020 global survey over half of the world’s population believe capitalism is doing more harm than good and in 2021, 74% of people in G20 countries, believe the economy should work in a way that prioritises the health and wellbeing of people and nature rather than focusing solely on increasing profits and wealth.

Wellbeing Economics offers a realistic and hopeful alternative to business-as-usual economics. This is where the Wellbeing Economy Alliance works, connecting the local and global through new economic knowledge, narratives and connections. We are a global collaboration that brings together organisations, individuals and governments to transform the economic system into one that delivers shared wellbeing for people and the planet.  Our ambassadors include Kate Raworth, author of Doughnut Economics, Tim Jackson, thought leader and Director of the Centre for the Understanding of Sustainable Prosperity and Jason Hickel, author of The Divide: A Brief Guide to Global Inequality and its Solutions and Less is More: How Degrowth Will Save the World. These deep thinkers and many others are mapping out a redesigned economic system. We have hubs operating in multiple countries including Australia and New Zealand, a global policy makers network and the Wellbeing Economy Governments Partnership (WEGo) initiated by WEAll is now composed of six governments, including New Zealand as a founding member.

So how will we get there?

A way to envision how we can move to a Wellbeing Economy – can be illustrated in Bill Sharpe’s Three Horizon model. Some of you may be familiar with this model, it’s quite elegant and simplistic Imagine the X axis is time and the Y access is viability. We are currently in Horizon 1 with Neoliberal capitalism dominant but we know we need to move a future new normal, we can call Horizon 3. We need to transition and ramp down H1 as we move up towards H3. This is where H2 comes in – this is the phase where we experiment, disrupt and innovate. Some changes in this H2 space can actually just prolong the current H1 BAU which we can call H2- and some speed us along toward a new normal, which we can call H2+. What’s interesting is that this future state H3 isn’t abstract or hypothetical – we can already see examples of a new Wellbeing Economy today.

I can’t speak for Australia but I can see green shoots sprouting up everywhere in Aotearoa.

We see green shoots of a new Wellbeing Economy in the business world. On my Economics Listening Tour I met with business leaders who have put purpose for people and planet at the forefront of their companies mission from the high-tech world of Kea Aerospace to Pic’s Peanut Butter in Nelson. Numerous B-Corporations and social enterprises are balancing profit with purpose as part of a movement to change our economic system.

Staying in the far south I visited Headwaters, the award winning eco lodge in Glenorchy, operated in line with the philosophy and principles of the Living Building Challenge the most stringent environmental building design certification in the world and whose profits are returned to the community through a local trust.

Successive New Zealand governments have been developing new approaches – such as the Treasury’s Living Standards Framework (LSF) which looks beyond GDP and measures our individual and collective wellbeing, the health of our institutions and governance and the wealth of Aotearoa from financial to natural.

The LSF helped provide better advice that contributed the New Zealand’s Wellbeing Budgets. Traditionally budgets looked at a limited set of economic indicators but as the incoming Labour Government said in the Speech from the Throne in 2017 “We need to move beyond narrow measures and views of value and broaden the definition of progress. The economic strategy will focus on how we improve the wellbeing and living standards of all.”

In 2023 New Zealand had a change election, the extent of that change is still unknown as three parties negotiate the government formation but I am optimistic this architecture will remain as likely Finance Minister Nicola Willis says “Very few people think a strong economy alone can solve these issues, and increasingly few think simply spending more will solve them either…It seems obvious that Government policies should seek to build fences at the top of cliffs rather than funding ever more ambulances to pick up the pieces at the bottom.”

From a Māori and Pasifika perspective the Treasury’s He Ara Waiora framework has embedded spirit and environment at the centre of the framework with the values of Kotahitanga (unity), Whanaungatanga (positive relationships), Manaakitanga (care and respect), Tikanga (protocol) and Tiakitanga (guardianship or stewardship) at the heart of how the public management system should operate. I note our Productivity Commission in their inquiry into persistent disadvantage has recommended He Ara Waiora be greater used to guide the values of our system.

He Ara Waiora

The Treasury’s tikanga based framework to inform public management

If there’s one thing, New Zealanders can agree across the political spectrum is our lack of long-term thinking. However we can take inspiration from Wakatū, a large employer and exporter owned by 4000 families descended from original Māori landowners in the Nelson region who have laid out a 500 year intergenerational vision, Te Pae Tawhiti.

On my Economics Listening Tour I heard people proudly talking about their local kai (food) projects, repair sheds, tool libraries, cooperative businesses and regenerative farming families. We are already moving from H1 to H3.

Looking around the world we can see green shoots sprouting as a result of citizen assemblies, juries and participatory budgeting. We can see cities such as Preston in the UK and Cincinnati in the US building prosperity through Community Wealth Building approaches. We can see the impact of Wales’ Wellbeing of Future Generations Act (2015) driving real change such as halting new motorways being constructed in that country.

A new economic system with wellbeing for people and planet as its purpose is inexorably building up before our eyes. The clock is ticking however and we have an urgent need to speed up the transformation and ensure it is just.

Thank you to the New Economy Network Australia for the opportunity to speak at your conference today. I’m glad I could participate remotely and save about a ton of carbon. Today from your simple five word question I have looked at the stakes facing us, the state of current economics and the opportunity of Wellbeing Economics which I believe offers the positive, practical pathway forward.

Can I acknowledge Dr Katherine Trebeck, WEAll global co-founder who is in the audience and everyone in the room today working to transform our economy.

Yes, a Wellbeing Economy can save us, but first we need to save economics from itself.