by Jo Swinson, Director, Partners for a New Economy

As the world becomes darker and more dangerous, economics provides an unlikely source of optimism.

2023 was dubbed the ‘Year of Exhaustion’. Devastation caused by wars and natural disasters; polarisation pervading both online and in-person; and a sense of overwhelm by the breathless pace of technology. A world in crisis is the new normal, so it’s no wonder that many people are experiencing burnout from pandemic fallout, geopolitical instability and the soaring cost of living of recent years.

No matter what your funding strategy or thematic focus is, your partners and the work you fund are certainly impacted by the ‘polycrisis’. Scanning the horizon for future trends, a return to how things were seems very unlikely. Just as many funders mobilised and adapted strategies to respond to Covid-19, or found ways to provide uplifts to grantees facing massive inflation, so philanthropy has to look ahead and prepare for a volatile, uncertain, complex and ambiguous world. WINGS rightly explores this in its current four-part seminar series ‘Embracing the Unpredictable: How is Philanthropy Navigating Complex Interconnected Crises?’ as part of the Philanthropy Transformation Initiative.

Many foundations are choosing to work differently in the face of polycrisis, including:

  • Replacing siloed thinking with a systemic view, narrow funding streams with cross-cutting programmes and ‘multisolving’ for several problems at once
  • Collaborating with other donors to pool funds and learn together, instead of a ‘go it alone’ mentality
  • Identifying and funding action to tackle the root causes of problems, not just symptoms

As our name suggests, the root cause that Partners for a New Economy focuses on is the economic drivers of – and solutions to – a broad range of interconnected problems, from environmental destruction to poor health outcomes, from grinding poverty to social unrest. Put simply, the 20th-century extractive, short-termist economic system is not fit for 21st-century challenges: namely regenerating planetary health to halt climate change and mass extinction, while nurturing the well-being of all people, whoever they are and wherever they live.

The attraction of targeting grant-making on changing such a fundamental mechanism as the economic system is that it is highly leveraged: small movements can have big impacts. A good example is central banking. Readers who enjoyed the excellent novel ‘The Ministry for the Future’ by Kim Stanley Robinson will recognise the pivotal role that central banks can play in coordinating global action to address climate change. After all, there will be little price stability in a rapidly heating world where large parts of the globe become unconducive to agriculture and food production.

Leading central bankers increasingly understand the clear link between sustainability and financial risks. The ECB’s Isabel Schnabel coined the terms ‘fossilflation’ and ‘climateflation’ to describe the factors which will create future inflation pressures. Since 2016 there has been a profound change in how central banks engage with the green transition: 134 central banks and financial regulators are now part of the Network for Greening the Financial System, and many have taken action to change their collateral frameworks, or how they hold assets. Philanthropy has played a role in creating an enabling environment for central bank action, by funding a range of organisations focused on technical policy work, high-level internal advocacy and external campaigning. For example, the changes to date have been supported by robust research from organisations like the Council on Economic Policies and academics at University College London, and accelerated with public education and pressure by groups such as Positive Money.

Of course, the goal of making our economy regenerative is an audacious one. There is no silver bullet, and to succeed, there will need to be multiple interventions to change business models, investment practices, mindsets in academia, financial regulation, government policy, economic indicators and even cultural norms.

There are exciting developments on all of these fronts. Pioneering enterprises are starting to engage with how earth system boundaries affect their business models, and investors are grappling with how to use their influence to ensure environmental and social responsibilities are met. In the academic sphere, just look at the recent article by Nobel Prize winner Professor Angus Deaton on the failings of economics, or the vibrant international student movement ‘Rethinking Economics’. The impact of extractive financial practices on valued real economy services, from care homes to football clubs, is being better understood and successfully challenged. A growing group of governments have created the ‘Wellbeing Economy Governments’ partnership to learn together about how to develop and put into practice policies that go beyond GDP as a measure of progress.

There are deep questions for us to consider as a society about what we value, intrinsically linked to our values, as Mark Carney explored so powerfully in his book critiquing economics, and which the pandemic prompted so many of us to reflect on.

Distressing and exhausting though they are, the flurry of crises provides the context, motivation and imperative for reshaping our economy to become a regenerative force. Rather than drowning in doom, we can be uplifted by the mission. Imagining, and catalysing a world where the economy works in service of life, where finance focuses resources on projects that regenerate ecosystems and value people, and where care and resilience are understood to be as important as competition and efficiency. This mission is ambitious yet absolutely possible, and philanthropy can help make it happen.

This article was published by WINGS in their Newsletter, on 30 April 2024

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