We need a wellbeing economy that works for people and the planet

The EU is currently confronted with emergencies that are challenging its prevailing economic models. Slogans that until recently were used as the flagship of the European project, such as growth, jobs and prosperity, are no longer enough to speak to the hearts of the young generations of Europeans. The EU is under pressure to respond to a number of multifaceted challenges, which originated from a decade of economic and migration crises, social discontent and environmental degradation. It needs to reinvent itself fast, for the sake of its citizens.

This EESC opinion aims to define what “the sustainable economy we need” should look like by exploring a new vision of prosperity for people and the planet, bringing together economic, environmental and social dimensions in an integrated manner. The EESC is calling on the EU to propose new economic models, investment decisions to harness technological advances, and new indicators for the wellbeing economy, in order to regain citizens’ trust and belief.

With the implementation of the 2030 Agenda, a commitment to eradicate poverty and achieve sustainable development by 2030 worldwide, and the European Green Deal, with the goal of becoming the world’s first climate-neutral continent by 2050, the EU has finally made these issues its top priorities.

However, the most important thing is that this Green Deal becomes a real Green and Social Deal, making sure that the transition to a climate-neutral economy, which leaves no one behind, is just and coherent from A to Z. In fact, we need to rethink the whole system.

To ensure a just and green transition and implementation of the SDGs, we have to re-think our EU economy. ‘We must reboot the system but we need new software, not just an update!’ said rapporteur Peter Schmidt.

New indicators for a wellbeing economy

To begin with, the EU needs to establish new indicators of economic performance and social progress beyond gross domestic product (GDP), as prosperity is not simply a matter of production or income. GDP ignores important elements of individual and social wellbeing and fails to account properly for environmental and social considerations. Success measured by GDP is misleading when the impacts of growth lead to irreversible and catastrophic changes in the state of our climate, soil, forests, rivers and oceans.

The EESC recognises that the wellbeing economy must be able to meet the sustainable development goals and ensure prosperity even under conditions of low or no growth, such as those associated with economic recession or secular stagnation. This new model must come up with solutions that at the same time protect ecosystems, conserve biodiversity, deliver the transition to climate-neutral way of life, and foster sustainable entrepreneurship.

To this end, the EU should adopt a “living standards framework” and wellbeing budget, modelled on approaches adopted elsewhere, for instance in New Zealand. The EU should lead by example, but also build on good examples already implemented.

New economic models

The EU Green and Social Deal should deliver the large-scale investment needed for a just transition to a climate-neutral economy and provide quality jobs in every community, with clear and widespread public benefits. The improvements must reach the whole EU population, from cities to the countryside, from northern to southern Europe. Public investment is very important in this transition, to deliver the retrofitting of public buildings, the redesign of public transport (as transport represents almost a quarter of Europe’s greenhouse gas emissions), and the building of clean energy systems. Yet, this huge transformation will be useless if private investment and the major international companies do not get on board…

The EESC, therefore, is also calling for “green fiscal reform”: creating incentives and improving transparency and certainty, and using taxation to promote desirable outcomes and penalise undesirable ones, to reward those seeking to live more sustainable lives and, most of all, to incentivise sustainable investment. A gradual shift to qualified majority voting (QMV) would also help to reach our environmental objectives more effectively.

The EU should use re-distributive taxation and subsidies and “pre-distributive” policies, where the costs and benefits of the transition are fairly shared between different social groups, industries and regions – as well as between current and future generations.

Finally, and to ensure that all the existing mechanisms serve the same purpose, the EESC calls for the EU’s budgetary and financing mechanisms (such as the Multi-Annual Financial Framework, the European Semester and Better Regulation, as well as the Stability and Growth Pact) to be aligned with the SDGs and the European Pillar of Social Rights. Revitalising social solidarity is crucial to strengthening democracy.

Investment decisions vis-à-vis technological advances

How can we put an end to coal dependency and make carbon-neutrality happen by 2050?

As a first step, and with a view to consistency, the EESC calls for an end to perverse subsidies that support fossil fuel extraction and use in the EU.

The second step needs a push from technology, and technology requires investment.

To reduce greenhouse gas emissions, the EU needs to invest in renewable energy technologies, and to invest in technologies that result in “negative emissions”. Nonetheless, these investments are estimated by scientists to be less costly than those resulting from inaction or mitigation actions (money spent to reverse the impacts from climate change).

The nations of the world have committed themselves to an Agenda for 2030 that is radical, equitable and achievable. The EU, besides the 2030 Agenda, has adopted the Green Deal and is committed to making progress towards the SDGs. Commitment to that process offers a unique opportunity for the EU to renew its vision of social progress, revitalise its economy and strengthen its leadership across the world by example.

The sustainable economy we need (own-initiative opinion)

Key points

  • The EESC underlines that the European Union (EU) has fully committed itself to the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). To guarantee their proper implementation the EU urgently needs to develop the foundations for a sustainable and inclusive wellbeing economy that works for everyone.
  • The vision of social progress only relying on the pursuit of growth in the Gross Domestic Product (GDP) ignores important elements of individual and social wellbeing and fails to account properly for environmental and social considerations.
  • The EESC calls for the EU to propose a new vision of prosperity for people and planet based on the principles of environmental sustainability, the right to a decent life and the protection of social values. The economy is an enabler for this vision.
  • The wellbeing economy should protect ecosystems, conserve biodiversity and deliver a just transition to a climate neutral way of life across the EU and foster sustainable entrepreneurship. Educational systems across the EU will play a key role in promoting such concepts across society, thus inscribing in them the way of thinking of the decision-makers and leaders of tomorrow.
  • To achieve this goal, the EESC recognises the need to support the fundamental changes that have already begun to emerge in the nature of enterprise, the organisation of work, the role of investment and the structure of the money system.
  • The EESC highlights that building the wellbeing economy must start by adopting a precautionary approach in which macroeconomic stability does not depend on GDP growth. It proposes the development of new indicators of economic performance and social progress beyond GDP.
  • The EESC proposes the adoption of a Living Standards Framework and the introduction of a Wellbeing Budget for the EU, modelled on approaches already adopted elsewhere.
  • The EESC calls for an end to perverse subsidies and for the alignment of all public sector spending across the EU and its Member States with the goal of achieving climate neutrality.
  • The EESC calls for a European Green and Social Deal to deliver the large-scale investment needed for a just transition to a climate neutral economy and to provide quality jobs in every community.
  • The EESC calls on the Commission and the Member States to carry out green fiscal reform to help align taxation, subsidies and pre-distributive policies with the goal of achieving a just transition to a wellbeing economy, in particular by enforcing existing legislation.
  • The EESC proposes a review of the growth dependency of the EU Member States and a strategy to focus on sustainable and inclusive wellbeing in the EU economy. It also recommends a review of the EU’s fiscal and monetary rules to ensure they are fit for purpose in achieving the transition to a climate-neutral economy.
  • The EESC calls for all existing EU policy and budgetary/financial frameworks and tools (such as the Multi-Annual Financial Framework, the European Semester and Better Regulation) to be urgently aligned with a just transition to a wellbeing economy.
  • The EESC proposes the adaptation of the Stability and Growth Pact and the Annual Growth Survey to ensure that the wellbeing economy is fully consistent with the SDGs and the European Pillar of Social Rights.

Source : European Economic and Social Committee (EESC)