Systemic Failure

The global economic system is geared up towards, and centered on, the GDP-measurement. The financial markets react quickly and decisively on quarterly reports, and the media reports meticulously on small changes in forecasts or actual figures. GDP has assumed a very special role in our society. The reason for this is logical. For the biggest part of the 20th century we in the West, who drew up the blueprint for the global economic system, experienced an unprecedented rise in living standards. Sweden is a perfect example of this. It entered the century as an, in comparison with Western Europe, underdeveloped nation. It went through the World Wars less affected than most and enjoyed an extraordinary rise in GDP. And, for most of the century, this correlated closely with an equally astonishing rise in parameters like life expectancy, general health, maternal deaths and so forth; in short, well-being. Freed from the shackles of a 12-hour a day work day, relived of the tiresome and time consuming hand-washing, and a lot of other shores by machines, the Swedes found themselves having way more time and possibility to shape and enjoy their lives.

But somewhere we passed a line. At some point, the tight correlation between increased material wealth and increased well-being ceased to exist. Studies now show that even though GDP and productivity has continued to grow, the general level of well-being has stagnated, or even moved backwards. At the core of the issue is the question of what we as a society really treasure. Progress in the form of increased material wealth is a goal only as long as we want it to be, it is not a law of nature, but a human construction. The economic system rests on the foundation of a general consensus that it is the best tool for us as a people to realize our goals. When looking at for example Greece, over a quarter of the working age population is currently unemployed. This begs the question; at what point does the system in its current form cease to be just that, the best tool for the population to realize its goals?

Moreover, the growth that has been produced has come to be less and less inclusive. This has been going on for longer but became accentuated in the wake of the financial crisis. The GINI-coefficient, a measurement of income equality, in the United States is now back at levels not seen since the 1920s. The Dow Jones index is hitting new record highs, but with rising inequality, less and less people are able to benefit from it.

Aside from the social aspects, the economic system is not sustainable ecologically. In schools we preach the message of how we at this rate of consumption will deplete the earths stock of a number of vital minerals. Furthermore, our concerns about the global warming stand in sharp contrast to the strive for more economic growth – at least one fueled by an increased consumption following the current pattern of consumption.

But when starting to question the foundations of our economic model, it must be seen against the backdrop of development elsewhere. Now, for the first time the tiny minority of the global population that we in the West constitute, are not the ones who benefit most from the system. The fantastic journey that we experienced in the 20th century is now underway in large parts of the world. In China alone, hundreds of millions of people have lifted themselves from poverty in the last decades and join a new global middle class empowered by the fruits of international trade and industrialization. This is an amazing development that cannot, and should not, be denied to them. In these parts of the world, as for us before, the GDP-focused view is still highly relevant since the correlation with well-being is still strong.

At the core of the problem, then, is that the nations of the earth are all at either end, or scattered in between, these two extremes. But we all, with very few exceptions, coexist in the same globalized and interconnected economic system. Here, production chains stretch their webs all across the globe in a highly specialized division of labor, underpinned by capital markets that make capital footloose and flexible. This fundamentally good thing – economic interdependence and globalization – has the backside of being just that, global. Because no single country can opt out of it, and in the new multipolar environment that the great catch-up now brings about, global solutions to problems are increasingly hard to achieve. The most prominent proof of this is the string of failed climate summits and free trade rounds that we keep seeing. Unfortunately, stagnating growth under current circumstances is not an option either. The scenes from southern Europe, with capital flight and mass unemployment is scaring examples of what loss of forward motion can lead to. So we try our best to keep pushing forward and thus aptly reveal the central paradox; under the current system the unsustainable path of ever-increasing GDP – is the only economically sustainable one.

Text: Anton Ståhl

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