Strategies for sustainable economies

Evidently, business as usual is not an option. But what should a transformation towards a climate-friendly, sustainable economy look like? The following strategies differ in their basic assumptions and approaches. 

The market-liberal strategy, based on neo-classical ideas as well as those of Friedrich von Hayek, sees the market as the institution that combines individual action and social welfare. This is represented by the image of the ‘invisible hand’, which represents action that unintentionally leads to an optimal social outcome. It regulates supply and demand by means of the market mechanism. Thus, pursuing one’s own interests can serve the common good better than any economic planning. The state is seen as a coercive apparatus whose influence on concrete economic action must be minimised. Free market economy and free trade are the best prerequisites for sustainable economic activity. If there is a functioning market and property system, one can trust that the upcoming transformation will succeed spontaneously with the help of market processes. The task of market-liberal policy is solely to ensure the appropriate legal framework. Within this model, the spectrum ranges from libertarian positions that seek to minimise state intervention (in the tradition of Hayek) to neoclassical positions that opt for correcting market failures (for example, through a carbon (CO2) tax). Market failures can be avoided if ecological goods, such as good air and water quality, are given a price, since scarce resources and production factors are thereby optimally used. The associated expansion of markets is resulting in the commodification of more and more aspects of life that previously had no price.

The strategy of a socio-ecological transformation results from the huge environmental challenges of today. It is inspired by Karl Polanyi, various socio-economic theories, socio-ecological transformation research and partly also Keynes. According to this strategy, a fundamental transformation is needed, which opens new paths towards a sustainable and just economy.  Within this strategy, the spectrum ranges from pragmatic to radical ideas of socio-ecological transformation. A pragmatic position is, for example, that of the German Advisory Council on Global Change (WBGU), which proposes a new global social contract for a sustainable global economic order. This approach to ecological modernization combines social and systemic innovations. A strong public sector, good public technology and innovation policy and public infrastructure together create opportunities for ‘transformation by design’. However, economic growth remains important for solving distribution conflicts by distributing an ever larger ‘cake’. Economic, social and ecological sustainability can be achieved by decoupling economic growth from resource consumption and emissions. 

Amongst others, the degrowth movement calls for a radical socio-ecological transformation. It stresses two main obstacles to sustainability, that have to be overcome: the growth imperative and the tendency towards commodification of all areas of human life. As absolute decoupling neither has happened until now, nor is a viable strategy for the radical reduction of material use and emissions needed, it calls for turning away from the imperative to grow the economies. Instead of growing material prosperity and consumption, the focus should be on growing human well-being and sufficiency. Therefore, decommodification is needed, as many areas are not suitable to be traded as goods on the market. If fundamental basics of a good life, from fresh air and water, to good education, public health and public transport are provided to everyone, rather than traded on markets, well-being depends less on (growing) income and consumption. This is a vision of a profound transformation, leading to a truely sustainable and equitable economy. The approaches are political and strongly rely on social movements – such as Fridays for Future – to build up pressure ‘from below’, coming from civil society, in order to initiate systemic changes. It involves resistance to undesirable developments (e.g. lignite mining) as well as new forms of sustainable economic activity such as the Commons movement, social entrepreneurs or cooperatives. The following table compares the principles of the different strategies: