The Economics of Growth, Wealth and Real Values: Towards a New Economics for a Global Society

Over the past few weeks a number of you have sent me emails regarding your work and thoughts on economic wealth and growth. It was heartening to hear from you and I welcome the encouragement that you have given me in pursuing the issue further. I am very keen that the C of R take on the issue of a new approach towards changing our existing economic models, frameworks and assumptions. In many respects getting economics “right” represents a fundamental building block for shifting investment and policy decisions towards sustainability and for making markets work for societal betterment and real wealth creation. I would welcome your advice on how we might do this.

I am struck by how the elements of a new framework for economics are emerging but, as yet, they have not been pulled together in a coherent manner and we have not yet been able to distil either the sequencing of steps that would allow change to be introduced nor some of the practical consequences of doing so. The literature more recently appears to revolve around a number of fields that are obviously inter-connected:

• Financial economics and re-adjustments to our market instruments to create real wealth.
• The role of markets in the provision of public goods and their regulation for the common good.
• Natural Capital and its relationship to Growth and Welfare.
• Climate Change Economics and risk management.
• Other capital constraints (social, cultural etc) and their incorrect measurement.
• Limits to Growth and Limits of Growth (including no-growth/steady state theorists).
• Green Growth and employment.
• Development Economics and poverty reduction.
• Wealth calculations and adjustments to national income accounting.
• The economics of happiness and its relationship to real wealth.
• Economics and social justice.
• The growth in externalities and non-market values.

Recent (and indeed not so recent!) literature in each domain points unambiguously towards the need for radical re-thinking on intellectual and policy grounds and experts appear less than satisfied with the status quo. Leading work such as the Stiglitz Commission ; the Stern Report on Climate Change; the Giarrini/Slaus paper on wealth of nations; and David Korten’s book on “Agenda for a new Economy” all provide pointers to a new direction. Herman Daly and Robert Constanza’s early pioneering work on ecological economics and, of course “Limits to Growth” have re-emerged and now seem contemporary and more relevant than ever. Tim Jackson and others are exploring no growth options. Gus Speth ( a recently appointed member of the Club) and Joe Stiglitz have each recently authored important books which analyse America’s downfall on ecological and financial management respectively. The New Economics Foundation (Stewart Wallace, UK) and a number of scholars are beginning to assess the role that economics should play in determining contentment and happiness. We appear to be moving into an intellectual crisis with respect to economics and its role in promoting sound public policy; creating employment and other socially desirable goods, and designing markets that can work for both profit and for the common good. And we seem to have an even bigger void on what actually we should do. Indeed the downside risk of “wrong” economics producing more “public bads” and social ills is now very real: no longer the concerns and preserve of starry eyed and fuzzy environmental economists!

I sense that we are on an inflection point in our understanding and thinking of our common future and the role that economics should play in establishing more plausible means of measuring and directing wealth; creating jobs; measuring and protecting natural capital; embedding social and cultural capital; and providing us with the instruments to improve human welfare worldwide. I sense we need a new discourse; a new nomenclature; and greater clarity on what expectations we have for economics in a vastly changed world and global circumstances. We need to think more clearly about spill-over effects; how we deal with externalities which outweigh internalities; where new forms of capital such as social and cultural fit; and how the wide range of “ Issues without Passports” affect our thinking and behaviour. Will economics finally prove that it really is “the dismal science”?

The question is whether the Club Of Rome could add value to the discourse. I believe that it could and that it should. We have a number of members with considerable experience and expertise drawn from a wide variety of backgrounds and interests and we have a network of academics and think-tanks. One thought is whether we could organize a brainstorming session at some point over the next few months (possibly in connection with the Annual General meeting) to think through ideas and next steps. It would be interesting to gain deeper perspectives on how the various strands of thinking fit into a more cohesive and comprehensive understanding of economics; how and where do the pressure points lie for change and how can we make change happen in reality: in national income accounts; in investment and policy decisions; and in creating responsible markets.

Furthermore, the application of economics to decision making and implementation has been one of the most troublesome issues that I have come across: as someone close to economic policy in the World Bank and leading its Sustainable Development Vice Presidency I was always struck by how easy it was to reach agreement that our economic analysis was flawed, that the case for adjustments to national income accounts and real wealth calculations was justified; that our depletion premium estimates on natural resources were appropriate but it was always one step too many to consider any form of real implementation and action. One field of economics which appears to be rather under-served relates to the economics of transition: that is how we implement needed reform? What steps in policies are required and how should they be sequenced? In sum how do we manage the collective policies and actions of a transitional programme towards sustainability.

I have emailed those Club members I believe are likely to be interested in the topic and, of course, those members whose expertise and thinking is shaping our general discourse. I am curious whether you think that we should try and build a platform within the Club that can begin to both pull many of these strands together and can help shape a public discourse and possible action. I know, of course, that there are many others who are not members of the Club who can also contribute and I believe we would need to build relationships both within and external to the Club.

If you agree and are interested then please let me know. It would also be helpful to know of other experts that we might want to draw on (and also if I have missed any Club members). In addition, any advice on how we might pull together a group of us to initiate the effort would be welcome. And also where we might find funding to do so! My thought would be to try and get someone to host a one day retreat in the near future or possibly try and orchestrate a virtual meeting.

Best regards

Ian Johnson,

Secretary General,

Club of Rome