Economics and inequality: 15 minutes with… Christian Felber

Christian Felber is an economist who founded the Economy for the Common Good, an economic model focused on the wellbeing of people and the environment.

His book, ‘Money, The New Rules of the Game’ has recently been republished in English. He spoke to Thomas Barrett about how economics can address inequality.

You would like to see businesses contribute to a  balance sheet which would assess their contribution to the ‘common good’. How would this work in practice?

The common good balance sheet measures the contribution of a company to the common good in values such as dignity, solidarity, sustainability, justice or democracy. Each value is broken down in concrete aspects which is measured in four steps. Every business can obtain a maximum of 1000 common good points. The better the common good balance sheet result, the stronger the legal incentives. This might be lower taxes, tariffs, interests in loans, or priority in public procurement. Thanks to these incentives, the more ethical companies will be able to offer their products and services cheaper to consumers than less responsible businesses. Capitalism will become an ethical market.

Is society becoming more selfish, and if so, what can be done to change that?

If society “does not even exist”, as Margaret Thatcher said, the only choice humans have is to maximise their individual benefits. Firstly, we have to relearn that “such a thing as society” does exist and as a consequence, we need to put our focus on thriving relationships, communities, and democratic structures in the broader society. This will pay off plentifold. People will become more trusting, streets securer, the satisfaction of basic needs will become easier and, as a consequence, humans will generally be happier than in a “non-society” of atomistic individualism.

Why are communities becoming more fractured?

It’s the same problem as before. Economists and political theorists preach selfishness, individualism and the pursuit of material values such as money, power and success – which are all reliable strategies to becoming unhappy! The more people focus on these “extrinsic values” the more they undermine relationships, communities, and the democratic society as a whole. The alternative consists of shifting our value system to human and relational values such as empathy, respect, collaboration, or sharing. Human beings are, to a high degree, social beings, and only when we master this condition can we provide a higher degree of freedom. Confusing ”independence” from others with freedom is a fatal misunderstanding of human nature.

Will there always be winners and losers in any economic model?

Yes, it’s unavoidable. Every rule or law produces winners and losers! What we can do is to minimise the collective loss of freedom by any rule or model, giving people the freedom to chose between several alternatives, instead of voting with yes or no to only one proposal. One example is if we chose the extreme of “unlimited inequality” (capitalism) or its opposite “elimination of inequality” (socialism). People will not feel free in either case. If people are invited to propose a limit on inequality then we can measure resistance it against all proposals. The winning proposal – which meets the least resistance is usually “factor 10”, meaning that inequality is okay, but the highest incomes may not be higher than ten times the minimum income.

Is the current welfare system broken?

The political support of it is broken, but not the economic base. As long as the per capita income grows, which is the case today, there is no objective problem of financing social security. It is a question of distribution. According to international experience, countries with a larger public sector and a higher degree of distribution such as the Scandinavian countries show better social and economic indicators. Contrary to “pseudo liberal” ideology, life quality increases with a lower degree of inequality and a higher degree of social security and vice versa. Social cohesion and a solidarity-based society are investments that pay off both in human and economic terms.

How can your economic model help tackle the housing crisis?

Firstly, housing is a human right. Secondly, it should not be an object of speculation for the traders who pursue the maximisation of profits nor for the banks who give Ninja loans. The housing market should be oriented from a capitalistic to a true economic market. In capitalism it is all about making money and profit, in the latter, it is about creating a good life for all.

Vienna, the city where I live, is a good example where the local government has engaged in policies that provide affordable dwelling. Not-for-profit house building cooperatives are appropriate complementary players. Financial investors, on the contrary, produce segregation and scarcity.

Are governments doing enough to protect the environment?

If they did, the absolute volume of greenhouse gas would shrink and other ecological indicators would improve. That is, unfortunately, not the case. The Earth Overshoot Day this August indicates when mankind consumes in the run of a year what the planet is able to deliver on a sustainable ground. Our main point is that a sound environment and stable ecosystems have to become part of economic success measurement in every investment, every company, and for the whole national economy.

Let’s integrate ecology and economy so in the future, a company might only be profitable if it protects the environment.

Why do young people feel left out of the current political process/economic model?

They feel left out because many of them are left out, politically and economically. They are neither involved in the democratic design of the society nor they have the opportunities to participate in its wealth. Inclusion is the magic formula that requires a redistribution of both political powers, i.e. democratisation, and economic wealth. That might not sound attractive to the elites, but it could be the rescue strategy for the whole society. Only when everyone enjoys truly equal opportunities and the same freedoms can society thrive and flourish.