In the course of time, various alternative economic forms have emerged that differ from the currently prevailing economic systems. These forms are grouped under the terms “alternative economic systems” or also “solidarity economy” or “alternative economies”.
Characteristics of alternative economies
Alternative economies share certain characteristics that distinguish them from other economic systems. Selected values form the core of the system in some forms. These values serve as a guide for alternative economic systems, although there are no legal requirements for them. Furthermore, these distinguishing characteristics set alternative forms of economy apart from other economic systems:
- Putting people and their needs first
- Taking ecological limits into account
- Mindful use of resources
- Applying social, ecological and needs-based approaches
- Democratic decision-making and ownership structure
- Collectivism, free of hierarchy, based on solidarity
- Emphasizing cooperation
- Non-profit orientation instead of focusing on individual profit maximization
- Changed or even degressive economic growth
- Replacing money as a means of valuation (overcoming materialism)
- Societal participation in political decision-making processes
- State intervention: Reorienting the governance system
- Examples of alternative economies
There are already several concepts that can be considered as alternative economic forms. Some of these alternatives propose that the market economy should be maintained, but with specific regulatory measures and a new prioritization of goals and values. Others reject the market economy entirely, advocating for a fundamentally different way of conducting business.
In the following, we will present three such alternative economic models: the donut economy, the common good economy and degrowth. However, this overview is only a sample of the existing alternative economic systems. Further examples are local economy, social capitalism, solidarity economy, among others.
Donut Economy (Kate Raworth):
Kate Raworth’s Donut Economy aims to tackle the key challenges of the 21st century by ensuring that the economy does not exceed the earth’s ecological limits while providing a decent standard of living for everyone. The aim is to combine basic social rights, ecological concerns and capitalism. While growth is not the main objective, it is not completely ruled out. Instead, the emphasis is on reducing overall resource consumption and adopting a new economic prioritization that balances the three pillars of the economy: economic, ecological, and social.
Why “donut”?
Kate Raworth has illustrated her concept graphically. The shape of a doughnut indicates the framework in which people’s economic actions can be carried out safely. It corresponds to the ideal situation with a functioning environment and a good life for all. The outer circle is the ecological framework and represents the finite resources of the planet. In the inner circle the social foundation reflects the basic (social) needs of people. The donut hole in the inner circle represents social challenges such as social injustice, hunger, poverty or wars. In a just economy, it is crucial to ensure that no one falls into the hole of social challenges while simultaneously not exceeding the ecological framework. By defining these boundaries, the Donut Economy addresses not only social inequality but also climate change.
The Common Good Economy
What is the Economy of the Common Good?
The common good economy is an ethical economic model initiated by Christian Felber, which has set the well-being of people and the environment as its primary goal, replacing competition and profit maximisation with values that promote the common good. Five values of human dignity, solidarity and justice, ecological sustainability as well as transparency and co-decision are (economically) build the base. The common good economy is an alternative economic system to the capitalist market economy, as it differs in characteristics such as the pursuit of profit, material wealth, concentration of power, economic growth, competition, and GDP. Instead, it emphasizes the common good, values, trust, sufficiency, cooperation, money as a means to an end, no compulsion to grow, and the GWÖ balance sheet.
What is the goal of the Economy of the Common Good?
The common good economy focuses primarily on the economic activities of various organisations. With the preparation of a common good report, entrepreneurial activities are linked to the values of the common good economy using the matrix. This matrix lists values needed for successful relationships and promoting a good life in the columns, while the rows contain contact groups with which companies usually have contact. This results in 20 intersections, or common good themes, which make the impact of economic activity on the common good visible.
What is the ECG balance sheet?
The ECG balance translates social values into measurable criteria. Based on this, the activities are assessed with points. Points are awarded if the economic activity contributes to the common good, with a possible range of -3,600 to 1,000 GWÖ points. Organizations with higher scores are rewarded with certain benefits such as cheaper loans or tax advantages. Although a concept has already been developed, the process of designing the GWÖ is ongoing. The matrix is being adapted. The principle of this movement is that it is a participatory and open-ended economic system.
Post-growth economy = Degrowth
What is degrowth?
Degrowth, or post-growth economics, is a socioeconomic concept that focuses on an ecologically as well as socially sustainable by moving away from the imperative of continuous economic growth. Degrowth acknowledges that resources are limited and that the planet has a finite carrying capacity. Thus, it recognizes the need for a reduction in growth to prevent societal and ecological collapse. Economic growth is seen as the reason for prevailing challenges of the 21st century such as social inequality and environmental problems and not as a solution. Degrowth theory critiques both neoliberal economic theory and sustainable development, as it argues that even so-called “green” and “sustainable” growth perpetuates the existing system of endless growth.
What is the goal of degrowth?
Degrowth aims to move away from the societal pressures to consume and work excessively, and instead, focus on increasing well-being, time, and preserving the environment. The reduction of consumption does not necessarily mean a reduction in quality of life, but rather, an increase in well-being through the aforementioned points. However, this requires radical changes in daily life and attitudes towards the value of money and work. It is about relocalising the economy.
How should degrowth be implemented?
The implementation would involve several areas. Relocalization of the economy is also necessary, which can involve decluttering, deceleration, and sufficiency strategies. This includes producing products oneself through self-sufficiency or supporting local agriculture to reduce transportation distances. Finally, the goal is to use fewer new raw materials. Therefore, reuse, recycling and repair play an important role. In summary, it can be said that degrowth involves institutional innovations and a renewal of the (inter)national governance system. Prosperity is no longer measured solely by GDP, but by alternative indicators that take into account social and environmental factors such as carbon footprint and gross national happiness.
Why is the demand for alternative economic models increasing?
The current economic system has resulted in significant challenges, including social issues such as inequality within and between countries, poverty, and disregard for the environment, such as resource waste, growth pressure, environmental pollution, and climate change. Alternative economic models aim to address these challenges by reforming the system. However, each model has a different focus and requires different measures to achieve its goals. All alternative forms of economy share the common requirement for a societal paradigm shift. This means that new structural changes and framework conditions are necessary. While each alternative form of economy has its own set of advantages, there are also inherent limitations that currently prevent their widespread implementation.