While there is no one definition for the “new economy”, most folks working in this field would probably agree on a few basic elements that distinguish this economic approach from the current dominant economic model. I’ve attempted to summarize those below.
Six Elements of Emerging New Economies, Contrasted with the Dominant Economy
1. New economies are more just, work better for people.
The dominant economy has used tax, trade and patent policy to greatly favor huge corporations and the very wealthy over small businesses and working people, leading to extreme levels of wealth concentration at the top, alongside stagnant wages for working and middle class people, and growing poverty. The very wealthy pay lower taxes on much of their income than do teachers and truck drivers; giant corporations pay an effective tax rate that is 6 – 8% less than what small businesses pay. Trade policy grants corporations the right to sue nations, states and communities over health and environmental protections. You can’t make this stuff up.
In the new economy, small businesses and family farms are central, creating substantially more jobs per dollar of sales. By purchasing from other local businesses, they create ‘economic multipliers’ that add much more value to the local economy than do chains and big boxes. New corporate forms, such as the Benefit Corporation, which commits businesses to positive social and environmental outcomes as well as financial profit, are also emerging in the new economy, with over 1000 nationwide. Some localities have begun to use Community Benefit Agreements to hold big corporations legally accountable for the promises they make to local communities, in exchange for public subsidies. These and many other creative measures ensure that economies work for people, not the other way around.
2. New economies are more diverse, less dependent on outside corporations, foreign markets.
The dominant economy rests on two core assumptions: that prosperity requires endless growth, and that jobs and income for the many ‘trickle down’ from the top, so long as taxes on this group are low. In actuality, the record of the past 60 years demonstrates unequivocally that lower taxes on the wealthiest and on the biggest companies have not made for a bigger economic pie; and economic wealth, rather than trickling down has been sucked up from working people, community banks and small businesses. There are many reasons for this, but one of them is the subsidies we provide to big boxes and big business, averaging over $100 billion per year. The results? Several studies have shown how communities with a diverse array of local businesses are stronger economically and socially, with better incomes, higher employment, and lower rates of poverty, incarceration, health problems and substandard housing, than those dependent upon a few big employers.
In the new economy, small to mid-size businesses take hold that build on the assets of their place, including music, art and culture, farms, forests and fisheries, the outdoors, historic downtowns and more. Local business associations, like the Business Alliance for Local Living Economies (BALLE) help strengthen these local enterprises and increase the connections between consumers and producers. Instead of spending millions of dollars to entice a big box chain, resources are redirected to homegrown businesses and entrepreneurs, making for more resilient economies and communities.
3. New economies build broadly-based prosperity, real wealth from the bottom up.
The five biggest Wall Street financial institutions own more than twice the capital of all the community banks in the nation combined. Yet these mega banks direct very little of their resources towards local prosperity: Small to mid-size community banks, with just half the assets, provide more than twice as much lending to local businesses. Big banks, especially since the overturning of the Glass-Stegall Act, concentrate on generating high returns for the biggest, wealthiest investors, often through the use of derivatives and other means that don’t produce tangible wealth.
In the new economy, capital is refocused towards small to mid-sized businesses, towards infrastructure that enables farmers and entrepreneurs to add value to their products, and towards technologies and businesses that meet real needs, such as affordable, green housing, renovated buildings and revitalized downtown business districts, and regenerative farm and food enterprises. Cooperatives, Employee Stock Ownership options, community land trusts and community-owned energy systems are among the means used to broaden prosperity, while increasing the productivity of businesses.
4. New economies fit within the ecosystem, recognizing limits rather than depending upon endless growth.
The dominant economy both depends upon endless growth and assumes that it is possible forever into the future. Yet serious limits confront us, from enormous declines in groundwater reserves, to an 80% reduction in productive land per capita, worldwide. And of course, there’s climate change and the consequences of too much carbon in our atmosphere – drought, floods and severe weather, sea level rise and more. In spite of these increasingly serious problems, the dominant economy fights all environmental regulation and assumes that technology and ‘the market’ will fix things.
In the new economy, our places, our ecosystems are understood to have limits, but also to present new and better ways of meeting needs and creating work. From organic and urban farms and restorative fishery systems to super energy efficient building systems and solar and wind power companies, the new economy is spawning products and services that meet people’s needs with far less impact on the environment. Complementing that is a growing emphasis on urban and community design that makes our towns and cities more walkable, more bike-able and more enjoyable.
5. New economies focus more on meeting real needs, fostering innovation in the process.
The dominant economy has been enormously productive and has made countless products much more affordable for ordinary folks, from cars to computers. However over the last thirty years or so, it has also become increasingly dependent upon what is called financialization, that is a focus on money and monetary products as a central part of the economy and the policy guiding it. This has led to what David Korten calls “phantom wealth”, where trillions of dollars of ‘assets’ are traded on Wall Street, making a small group of people spectacularly rich, while real assets – bridges, roads, high speed rail, rural health clinics, waterways and agricultural lands – are neglected and fall into decline.
In the new economy, there is a strong focus on addressing real needs and doing so in a way that helps people and communities to become more self-reliant. Business incubators and accelerators help local firms be more competitive, more innovative. Poor communities, from Detroit and Buffalo to Appalachia and the Southeast launch community gardens, urban farms, and ‘green development zones’. New techniques and systems enable farms to simultaneously increase their productivity while pulling excess carbon from the atmosphere. Businesses put people to work in recl