5 Big Ideas For A New Economy

In the aftermath of the recession, we have the opportunity to truly change the system. From replacing outsourcing with insourcing to untying well-being from GDP, here is what the economy of the future might look like.

An exciting moment is upon us, where some of the assumptions that have long governed our economy are beginning to unravel. There is the possibility that we could come out of this recession with a new concept of what the economy is, who it serves, and how it works.

Reflecting on history, we know that moments for truly re-thinking the economy are scarce. The replacement of mercantilism with liberal economic theory was such a moment. The Keynesian revolution was another. But where will this current moment of crisis take us? Will we succeed in powering a new economy? What ideas and solutions will enable our transition to a new economic paradigm? And what exactly would a new economy look like?

The truth is that it is actually up to us to decide what is to be on the menu of new economic thinking; what ideas take hold, what solutions gain staying power. In an effort to further stimulate this kind of discussion, we’ve synthesized the top five ideas that we believe are primed to catalyze new economic approaches. We’ll be exploring these ideas in more depth in the next few months on Co.Exist and look forward to sparking debate and discussion.

Shift from outsourcing to insourcing

A few weeks ago, the White House hosted a forum on "insourcing"—the idea of keeping jobs that would normally go overseas in America—with an aim to bring jobs back to the United States and stimulate local and regional economies. It was an interesting tweak, seeing insourcing and local production being emphasized over the logic of comparative advantage (that it’s better to pay someone overseas to do something which isn’t worth the time of an American worker), which has for so long justified outsourcing practices. Now, it seems, we’re beginning to wake up to the advantages of local production. But how do we stimulate local economies without undermining global trade? By investing locally, are we minimizing economic interdependence and creating artificial tradeoffs between local and foreign communities?

Access the wealth of the (hyper) local

The Internet has provided a new local, one that is based around markets and themes instead of geographies. Your Etsy purchase or Kickstarter investment may not be going to your own community, but it is likely going to an entrepreneur who is building a small business in another community. It decentralizes even the concept of community resilience, allowing entrepreneurs to tap into larger markets, reviving their own local economies.

Adopt flexible and alternative currency

Bitcoin has enabled an explosion of interest in alternative currency. But what can Bitcoin’s approach and scale teach us about the future of such currencies? While Bitcoin has been successful, local currency movements have never truly taken hold. BerkShares or the Bristol Pound, for example, remain important as symbolic illustrations of alternative currencies, but how practical are such approaches? Meanwhile, social currency movements like time banking (quite literally, people exchanging time rather than monetary goods or services) also show potential for transitioning society into communities of service.

Do-it-yourself (DIY) job creation

Frustrated with the inability of large corporations or governments to create jobs, many people are finding ways of applying a DIY spirit to job creation, by creatively exploring ways of bringing economic improvement to their lives. So, for example, rather than suffer unemployment, many young people are becoming entrepreneurs, investing in jobs for themselves and others. Or look at Starbucks’s partnership with the Opportunity Finance Network where they are leveraging customer donations into microfinance investments for job creation. With every $3,000 donated, one job is either created or maintained.

Focus on well-being, not growth

The recognition that countries have not grown happier as they have gotten richer has caused many to question the idea of "growth for the sake of growth." In fact, our dogged pursuit of economic growth has undermined our ability to use natural resources sustainably, as well as the resilience and prosperity of communities across the globe. In the words of Paul Hawken, "We have an economy where we steal from the future, sell it in the present, and call it GDP."

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  • Lois-baker

    More people need to see this article. these ideas are GREAT!!!! keep it up.

  • mikeriddell62

    Well-being is still a bit vague for measuring success. What we're doing in the Uk is measuring an individual's contribution to community (typically volunteering) in terms of hours worked. Each town or community can measure success in terms of contribution thus making local economies more resource efficient.

    This time contribution is converted into points (one hour = 10 points) which becomes that individuals 'CV'. Businesses with spare capacity can exchange it for points - for example Manchester City have spare seats for the game against Fulham and choose to accept two hours worth of points (20) for a seat that hasn't been sold.

    It's a time bank based community currency. The club get to prove that they're responsible capitalists, pick up a tax break, sell a hot dog and coke, gain a new customer and have more people cheering on their team...and it doesn't cost them a single cent more as the costs of the game are all fixed.

    Mad how easy it is eh?

  • Savik

    There is no such thing as foreign trade deficit! Compare US exports to China vs US imports from PCR per capita - may be US is exporting more? or it is importing some goods to make its own exports? 

  • Darc Syster

    The NYT had a wonderful article recently about why Apple outsourced to China and it has nothing to do with labour wages. Those count as such a small part of the price of an iPhone as to make the choice of China irrelevant. The big thing China has is an abundance of semi-skilled and skilled labour. The U.S., with people being either University grads, or high school drop outs has only highly-skilled and unskilled labour. If Apple wanted to hire 3000 technicians and technologists in the U.S., it would take 9 months or more. In China, it took less than 3 weeks. For the U.S. to be able to insource, it needs to develop the skills needed to compete. It needs fewer universities and more polytechnics. It needs more of the right kind of engineers, and many more precision assemblers, precision machinists, electricians, plumbers, and skilled trades people. The shortage that was predicted 20 years ago has now finally hit and hit in a way that hurts everyone.

    The problem with a flexible currency is its worth. How much is a bitcoin, BerkShare, or BristolPound worth in terms of a loaf of bread? How much is an ounce of gold worth in terms of a loaf of bread? The problem is, gold was used because it was rare, easily controlled, and with a touchstone, could have its purity tested by anyone. Otherwise, the worth of any currency is completely arbitrary, and therefore, meaningless, and ultimately, worthless. (A loaf of bread has worth we all recognize. A dollar has worth only because we can exchange it for a loaf of bread, but a dollar otherwise has no intrinsic worth.)

    I suggest an easily transferable but highly inflexible currency, the Watt-Hour. If a person does 1 Watt of physical labour for 1 hour, they get paid 1Wh for their trouble. The nice thing about this currency is that it is easily convertible into a value with real meaning. How many Watt-hours does it take to make a loaf of bread? That's the price of a loaf of bread. No inflation or deflation of value. It's stable. You can still bank it and earn interest. You can invest it into projects and earn dividends. And most of all, it has a real meaning and therefore an actual worth. It still has the problem of how do you equate non-physical labour such as design or engineering, but that's a problem even with dollars and gold and bitcoin and so shekels and so forth.

    According to the 2000Watt society, a person should all be able to live quite comfortably, but not extravagantly, on 2000W continuous. That translates to 48000Wh per day. Because I live in the Great White North, where the climate is not quite as friendly as Switzerland, I'm going to up it to 50kWH/day. How each person spends their 50kWh/day is their business. With reductions in power consumption, we can get increased quality of life without a "pay raise".

    So that's my 2pWh worth.

  • Liam Esterhazy

    Sorry to rain on your parade. Not much of this is "new economic thinking." Most of these ideas have floated around for years and are nothing new. They begin with a defeatist attitude, which translates as 'things are bad and won't get better, so lets share the misery and – while we are at it – change the measurement so that we can claim some sort of victory.'

    Who gets to decide what "well-being" means for us? I don't want Big Brother or The Collective deciding what makes me happy (happiness is loving Chairman Mao?).

    How, exactly, are alternative currencies an improvement over national currencies – apart from the ability to hide from consumption and income taxes? National currencies are imperfect tools, but what about fixing them before we trust some new-age scheme where there is no guarantee of a better outcome?

    "Insourcing" is another word for economic isolationalism and looking after yourself first – regardless of what happens to your neighbor. There is an autoparts manufacturer in Ontario, Canada, that is demanding a 50% reduction in pay from its workforce or it will close up shop and move back to the States, which in all likelihood has something to do with Obama's "Buy American" policy. The same thing has happened with the local steel mill, which is now owned by US Steel. Sure, the US will benefit initially from the return of jobs, but if there is to be no sharing of production with US companies, why would Canadians buy US products over, say, Japanese or Korean? Insourcing is a nice-sounding notion, but it will lead to economic nationalism and distrust, and will take away an important incentive for countries to play nice with each other.

  • Richard Lipscombe

    I agree with you that the new economy offers us great opportunities to improve our well being but we are not there yet.  First and foremost the new digital economy is global and does not recognise Nation-State boundaries.  For example, a key aspect of the new economy is cloud computing - this simple new storage device raises many of the big issues about the emerging digital economy.  Who owns the data in the cloud?  Who legislates for its property rights and use? Who could embargo the access of users to their own data and under what circumstances (think cyber wars)? The new economy will likely see less and less influence for a Nation-State, jobs/employment as we have known it, value adding as a notion of economic growth, personal privacy, etc.  State not National governments will likely become more important. Global forums on climate, wealth creation, poverty eradication, food/water/energy distribution, etc will gradually emerge to regulate our new global state. The inequality of wealth and opportunity around the globe will likely improve BUT at the same time worsen for US, Europe, and other Western economic entities.  Debt in the US and Europe is likely to still be a 10-20 year drag on economic health in those regions.  Ahead is a bleak 2012 for most of us in the West because we are going through the de-leveraging of our economic system.  We all  had become too dependent on debt both private and government controlled.  Paul Hawken was right, way back when, he told us that we were stealing from the future generation to fuel our analogue economy. Today we are that future generation and we are paying the price.  The price is unemployment, misery/hopelessness, bankruptcy, etc. This price is yet to be paid in full.  By 2025, lets hope, a new digital global economy will emerge with totally new rules for all participants.    

  • Startupvid.com

    One of The new economy idea which can survive is the theory of "Ephemeral" when someone or some company can serve more with less resources that is the one who can survive,The New Economy is The Information Era not the Industrial Era it's mean that The One that can use The Power of Information to gain the State of the art for their leverage is the winner and the other who don't know and don't utilize this will be the loser
    By: Founder of Startupvid.com

  • KevinJLenard

    Interesting 'notions', but why is it so few economists (or 'economic historians turned futurists') actually start by addressing the 800 pound gorilla in the global economy room?  Our entire modern human economy, everywhere, is based upon rich guys gambling against each other using the money (largely) of everyone else (pension funds, bank stocks, national bonds) and leveraging the natural resources that belong to the planet (and hence 'owned' by us all). 

    An oversimplification?  Not really.  The 'economic health' of every country and every 'investor' on earth is tied to stock markets, and stock markets are, at their core, just big gambling pools -- betting collectives that run hot or cold depending upon overconfidence or 'lemming-like' fear.  I elaborate on this contrarian notion here:

    Until we all stand up and recognize this universal truth, we won't be capable of exerting real control over global economic health and the fair distribution of wealth.  As long as the human species continues to allow former KGB operatives to become 'owners' of all of Russia's natural resources, or one family to control the world's diamond resources, etc., things aren't going to be predictable, stable or fair for most of us.

  • Anthony Aaron Cernera

    What I love about this piece is the optimism about a more community minded society where the internet provides the opportunity for new and improved human connection. We were starting to see a lot of talk like this before the recession started, but once things got bad, the enthusiasm disappeared. The fundamental premise behind this piece is spot on. Bad times allow for more change then when times are good and no one wants to rock the boat. The boat is rocking... how do we want it too look when it straightens out? 

    If I were to offer any criticism it would be to remind the writers these are cool trends but its the surface of the surface of the top tiny layer of the economy. American GDP of 14.5 trillion, only ~200 billion in sales happened online. In a global economy of over 63 trillion dollars, this means US online sales account for less that 0.4% of how the world makes and spends its money. We've got a good start, but we've got a long way to go. Awesome. Thanks, this made piece made my morning.