It Doesn't End With the Economy

The other week, I participated in a panel discussion about the future of Europe. The recurring topic of the debate was the economy. However, while the economy might be the beginning of a prosperous future, it cannot be the end of the discussion.

Europe is at a crossroads. While China and the US are thriving with the rise of new technology, most European economies are struggling. Germany is facing the danger of an economic recession for the following year. The post-pandemic recovery is slower than anticipated, economic growth is tepid, and market expectations are low. The public debate revolves around how to reinvigorate growth, how to make the European markets more appealing, and how to succeed, especially in the technology sector. While these challenges may seem daunting to some economists, the current economic situation is not just a problem -it’s an opportunity to fundamentally rethink our approach to capitalism established over the past 30 years.

Time for a New Credo

Over the past decades, capitalism was purely based on growth. Even though moderately, but “the more growth, the better” was the credo. Today, this philosophy has gifted us with multiple crises, and we find ourselves troubled. The unsustainable ways of production exceed the resources we have on this planet. Exploiting other world regions reinforces international dependencies, triggers uncontrollable migration flows, and causes geopolitical crises. In this sense, the natural dynamics of capitalist markets led to inequalities between and among societies that cause seemingly unbridgeable social conflicts. It may be time to change the credo.

The Limits of Unlimited Growth

When asked about the social and socio-political dimension of Europe’s future, which was addressed little in the debate, one of the panelists answered: “We need a strong economy first in order to produce the wealth and prosperity that we need to take the next step.” However, it remained unclear what the next step should look like.

Over the past decades, the European economy has shown growth, albeit with some setbacks. Since 1990, the GDP in Europe has almost tripled from 6.5 billion USD to 18.3 billion USD. However, this unlimited growth has not translated into unlimited wealth and prosperity for the entire society. Instead, it has primarily benefited a select few or specific sectors. Many sectors and billions of individuals have never gained significantly from this growth. Therefore, we urgently need a new, efficient, and socially motivated strategy for managing economic gains in a society that, on average, has more than it can consume.

Not about More Growth: How to Manage the Yields of our Economies

18.5 billion USD is a lot. A GDP of this size comes in with lots of consumption, with immense purchasing power, with a potential for high tax revenues, and a fiscus that has lots to base their policies on. Instead of blindly pushing for more and more growth, these factors must be considered to pave the way for a bright and prosperous future for European societies. Particular political incentives can guide consumption flow and nudge into more sustainable consumer choices. States can generate high tax revenues when particularly taxing big, potent, and economically successful sectors and individuals. These tax revenues can then be used to implement social policies that make capitalism more compatible for the entirety of society and compensate those who structurally lose in the game of capitalism. Furthermore, a fiscus with a solid economic base has the option to invest in sectors and projects that shape a brighter future, in green mobility, in carbon-poor sectors, in socially compatible and community-enhancing projects.

Therefore, while a well-performing economy is the fundament of a bright future, it cannot depict the end goal. Economic success must be embedded in broader policies of social cohesion and political integration. Economic success must be framed in a narrative that offers more to the people than just rising digits for our GDP. A working economy is only the start of what must end in a socio-political transformation that leaves people happy and satisfied.