The worst of the financial crisis that has plagued the economies of Europe since 2008 seems to have passed. In some countries, there are even signs of job growth. This is a welcome situation for those who can now find work again. At the same time, businesses and families are still struggling to pay off excess debts, as public debts are at post-war highs in almost every EU member state and cheap ECB money is needed to keep many banks afloat. In the global economy, the emerging economies whose growth helped European exporters through the crisis are now showing signs of stagnation. This demonstrates the fragility of the current design of our economic system. The crisis has shown us the major flaws that must be dealt with to prevent a repetition. Simply continuing with the current system without addressing its fundamental issues is not an option. The fundamental questions of poverty (and the working poor), ownership, ecology, energy, ageing and resources cannot be ignored, due to the simple fact that if these issues are not dealt with they will become the cause of a deeper crisis.
For this reason, the relational paradigm must be applied to our economy. Economy is, in essence, about life. In our view, the purpose of all economic activity is to support life and advance everyone’s wellbeing. The economy is meant to provide sufficient means for all people, to support family life, to let people flourish with their creative talents and to find solutions for the problems we face. This leads to the conclusion that the economy is not just about efficiency and competitiveness leading to a profit, regardless of the sociocultural context. The economy cannot be separated from culture, history and religion. The reverse is also true: our culture, convictions and history shape our economies, in a process that demonstrates that our economy is relational.
However, the one-dimensional view of the economy as a system of mere production and consumption is currently still dominant in practice, regardless of its unsustainability in both economic and ecological terms. The dominant factor in this current view is capital, which is seen as the most important input and result of the economic process. Seeing capital as the most dominant factor has resulted in an economic system in which capital markets not only dominate the whole economic process, but have even become a threat to the real economy. A research report from McKinsey shows how the focus on profit for short-term shareholder value is toxic to the real economy of real people, real companies, real production and real services. Even worse, speculation on food prices has apparently led to hunger and severe social problems in the southern hemisphere.
The dominance of capital markets has even put democracy itself in jeopardy. In the last few years, we have seen big investment funds and impersonal international bodies overriding the democratic process. In this way, the loss of economic ‘ownership’ has resulted in a situation in which people feel that their democratic influence has been lost as well. Their response has been to vote for populists and anti-EU parties, and supporting Brexit.
One important underlying cause of the financial crisis was the culture of excessive greed in the world of capital markets. This was possible partly due to the autonomy of these markets from the real economy, leading to a focus on money alone, disconnected from its effects on real people. This approach is likewise embedded in the idea that people are no more than producers and consumers who need to satisfy their desires, with the latter becoming more and more indebted with less and less capital to fall back on and less and less ownership of the economy.
This situation raises two fundamental questions: the question of values and the question of ownership of our economy. If competition and efficiency are the only values of financial policies, we will create an economy that ignores other, equally important values like trust, responsibility and reciprocity. It also puts pressure on fundamental societal values, such as generosity and mutual care. A limited scope of values will therefore lead to the exclusion of important aspects of life and society and consequently to the exclusion of people. This is indeed the case in the crisis that hit Europe, as demonstrated by the described effects on democracy. We can see it even more clearly in our economy.
Unemployment has risen to unprecedented levels in the south of the EU, especially among young people. According to the European Commission, there has been a sharp rise in poverty in the EU. The traditional answer of ‘more jobs’ to escape poverty is not sufficient in the face of a rise in the number of ‘working poor’. The Employment and Social Developments in Europe 2013 report found that only half of poor individuals who get a job are able to escape poverty. The explosion of unemployment in southern Europe is clearly connected to the mass bankruptcy of small and medium sized enterprises (SMEs) and massive lay-offs by multinationals. Both of these causes of mass unemployment point to the need for a new and more inclusive direction for our economy.
What is needed, therefore, is a renewed emphasis on values and relationships in our economic thinking and policies. It is time for a system that offers no reward without responsibility, no investment without involvement and no profit without participation. It is time for a relational paradigm that leads to a more inclusive approach in which the dignity of the human being, our common wellbeing and wise stewardship of resources are seen as equally important as competitiveness and efficiency. This approach can guide the EU, as well as national governments, in their economic policies.