Why the current global economic model is unsustainable
The way that the global economy is currently operating — including its patterns of production, consumption and distribution — is, simply put, not sustainable. This is clear from high rates of climate disruptions, natural resource and biodiversity depletion and degradation, exceedance of planetary or earth system boundaries, and growing inequality in terms of income, wealth and access to basic needs.
The economic goals and policies set by governments, international institutions and businesses support fossil-fueled consumption and production without adequately considering critical well-being, equity and sustainability dimensions for people and planet. All of the world’s major systems require transformations of these patterns of production, consumption and distribution.
This system focuses on how to transform society’s way of understanding and guiding the global economy. This includes the goals and metrics used to guide economic planning, decision-making and policymaking; the analytical approaches used by governments and international institutions to understand the health of economies and design and evaluate policies; and the policies that support achievement of economic goals.
Beyond GDP: Redefining economic success
For decades, economic growth, as defined largely by gross domestic product (GDP), has been a key goal of economic planning and decision-making and has been conflated with prosperity. The growth of global GDP — over 7,000% between 1960 and 2022 — has corresponded to a dramatic increase in humanity’s ability to meet material wants and needs. It has also been accompanied in many areas of the world by poverty reduction, increased spending on health and education, and reduced child mortality and other measures of increased well-being.
However, overreliance on one metric to drive and monitor development has proved highly problematic. GDP is a measure of marketed economic activity. It does not reflect or directly measure many critical aspects of well-being, equity and sustainability (also referred to as "sustainable and inclusive well-being"). These include, for instance, access to basic services by different population groups, economic and social impacts from pollution and greenhouse gas emissions, and ecosystem health.
The environmental and social costs of economic growth
Metrics that track these dimensions of well-being, equity and sustainability show that economic growth is being undermined by severe degradation of nature and growing social inequality.
- Seven out of eight earth system boundaries — that is, the safe and just limits of what the planet can sustain for climate, aerosol pollutants, natural ecosystems, working landscapes, surface water, groundwater, nitrogen and phosphorus — have been breached globally.
- The Sustainable Development Index shows that the vast majority of countries have prioritized economic growth at the expense of ecological health. Additionally, 40% of countries have deteriorated over time.
- Income and wealth inequality have been increasing in most countries since the 1980s, undermining political stability and increasing polarization.
Why we need a new economic system
Maintaining today’s dominant economic goals, metrics and analytical approaches risks having public policies and investments that fail to create the system changes the world needs to address climate change, biodiversity loss and social inequality at the pace and scale that is required to safeguard the planet.
Economic goals used to guide planning and decision-making must consider well-being, equity and sustainability goals and metrics in addition to GDP to paint a more holistic picture of prosperity. This requires using more advanced and fit-for-purpose analytical approaches that better capture the interrelationships between the economy and climate, nature and equity to answer important economic and development policy questions. Transforming the economic system is key to setting policies that will support other shifts and getting the world on track to stay within safe and just earth system boundaries.
A growing movement for economic transformation
Recognizing this, a new wave of economists, politicians, businesses and civil society actors are calling for change and taking action. Several governments are beginning to meaningfully integrate climate, nature and equity goals and metrics into core economic planning strategies and legal and budgetary frameworks. Adapted and new economic analytical approaches are being developed for use by governments and international institutions that can better inform decarbonization pathways. Global consensus is also building on the scale of critical fiscal policy reforms needed, while at the same time novel policy ideas are emerging from “new economic” initiatives and think tanks.
While there is growing global consensus on this system’s three shifts of economic goals and metrics, analytical approaches, and policies, there is also a lack of clear targets for action for 2030 and 2050. The majority of “new economic” discussion has also been guided by European stakeholders, and there is a need for more context-specific and place-based solutions.
Transforming this system requires a fundamental shift in how we understand and guide global economic development. Achieving this transformation demands not only reimagining the economic system, but also advancing progress in other interconnected enabling systems, including finance, governance and equity. Swift, coordinated action at scale is essential to the future well-being of both people and the planet.