Transatlantic Take

We Did Start the Fire—Now System Change Is Inevitable and Irreversible

August 12, 2021
5 min read
Photo credit: Mishchenko Vladimir /

The latest report of the International Panel on Climate Change (IPCC) published this week delivers a warning louder than previous ones: some changes to the climate are inevitable and irreversible, with potentially devastating consequences. This comes as wildfires in the Mediterranean and the United States and floods in Europe have provided striking examples.

As Dana Meadows wrote in her book Thinking in Systems, “a change in purpose changes a system profoundly, even if every element and interconnection remain the same.” To swap growth for shared wellbeing as the main purpose of capitalism is key to realize global climate ambitions and guarantee a just transition at the same time. Contrary to the dominant economic thinking, not all growth is good, nor does it automatically create broad societal benefits.

Paradigm Shift Needed  

For the past 40 years the economy has run on the assumption that a model centered around growth would automatically bring widespread prosperity. This has proven untrue, despite tremendous achievements in terms of development and poverty reduction over the last century. Raising levels of economic inequality and human-induced environmental degradation show that assumptions themselves must be questioned. A new economic model designed to optimize multiple goals, as opposed to maximizing just one, would tackle environmental and social justice as priorities alongside economic success. An economic philosophy based on economic sufficiency and focused on the quality of growth as opposed to its quantity will make room for multiple goals to be pursued by design.

Today, practices such as minimalism, veganism, regenerative agriculture, and mindful consumption have become more and more mainstream, and they are reshaping ideas around success and prosperity. These imply a different value system to that based on utility-maximization that characterized Western society for most of the 20th century. They challenge the dominant concept of self-interest in economics, bringing social capital back into the measurement of value. The same ethical shift introduced environmental, social and corporate government criteria in finance, and CEO activism on social and environmental issues , corporate citizenships, and stakeholder corporate governance in business. Economic thinking has also been changing since the 2008 financial crisis: many institutions have begun questioning the orthodox patterns of neoclassical economic thinking to make space for more helpful approaches to seemingly unsolvable problems against the old frameworks. A case in point is the OECD’s New Approaches to Economic Challenges initiative.

Resistance to System Change

The international community has placed absolute decoupling of economic growth and carbon emissions at the core of its climate strategy. Yet pressures from citizens-led initiatives and the scientific community—ecologists and (some) economists alike—question its viability and urge discussing the very purpose of the existing economic model instead.

The basic idea of decoupling is to leverage technology (present and future) to separate economic growth from its environmental impact. This is a necessary shortcut to resolve the historical tension between economic and environmental ambitions if the premise of endless growth is to remain unquestioned. Technology is a key piece of the fight against climate change and environmental degradation. As in previous industrial revolutions, it plays a fundamental role in this one as well. Yet the one-sidedness of the debate around the socio-ecological transformation raises doubts if not concerns. It also ignores persistent alarms raised by the scientific community. Already in the 1970s, the Club of Rome commissioned and published its Limits to Growth report, which argued the impossibility of endless growth with limited resources. Already then economists replied that technology was the answer and humanity continued with business as usual. As we learned to harness energy form renewable sources the idea was apparently confirmed that technological progress allows people to transcend the natural boundaries of the planet by developing the capacity to exploit its limitless rather than limited resources.

Yet the scientific community continues to warn against this approach: a recent report by the European Environmental Bureau provides a thorough analysis complete with evidence, arguments, and further research questions “against the idea of green growth as the sole strategy for sustainability.”

The report shows there is no evidence that absolute decoupling has ever happened—that for renewable energy to be produced at the speed and scale required, high quantities of non-renewable resources such as rare and precious metals will be consumed, and thus renewable energy alone does not resolve the resource scarcity problem. The report advocates for “complementing efficiency-oriented policies with sufficiency policies, with a shift in priority and emphasis from the former to the latter even though both have a role to play.”

The seeds of a policy of sufficiency can be found in many energy-transition strategies, including in the United States and Europe, which advocate for energy efficiency. Beyond increasing the efficiency of available energy, the idea is to act upon the demand side by making consumers more informed and mindful of their energy use, therefore reducing energy waste. The best and cleanest energy is the one not spent.

This is just one example of a policy approach that implies a paradigm shift: from a growth-centered economic model that maximizes one goal to a wellbeing-centered economic model that optimizes several goals, including prosperity, equality, and sustainability. This approach does not aim to isolate the economy from the environment as decoupling does. Instead it brings back the economy to its natural place: embedded within the socio-ecological context.

Regulators and policymakers must consider evidence-backed research and connect with the shifts taking place in the very fabric of the society they aim to regulate. Questioning the imperative of growth as part of a viable climate strategy is an important step toward placing shared wellbeing as the core purpose of a new economic system. This is a necessary condition to ask important and complex questions, such as how to sustain prosperity without consumerism, how to reimagine work-life balance without full-scale production, what will be the future of work, and what role is there for universal basic income/services and other fiscal instruments to ensure a just transition.

The policy community cannot answer these questions if they are not asked. The time to do so in now.