Jean-Jacques Lambin

Happiness and Well-Being

The objective of happiness is rising on the political agenda in several countries and this calls for measures of how well nations perform in creating great happiness for a great number, analogous to measures of success in creating wealth, such as GDP. The golden rule in economics has always been that well-being is a simple function of income. But in the debate covering the role of economics in society, an often repeated cliche is that money cannot buy happiness beyond a threshold of material well-being. The contrary idea is indeed slyly cultivated by advertising, which tries to convince us that the acquisition of certain goods or services will make us happier.1 If it is true that money alone cannot buy happiness, it is also true that poverty and the lack of money generate misery. Usually increased household income generates an improvement in the living conditions of the poor and as incomes rise from very low levels, human wellbeing improves. But several researchers2 have observed that, in rich countries, where the average income is above a threshold level (say €20,000 per year), additional income does not correlate with more happiness. This means that poor people benefit more than rich people from an added euro of income. It also means that causes other than income influence the level of happiness.

A Digital and Networking Economy

The digital economy isn’t just about speeding up communication: it’s about changing the very nature of consumption, competition and how markets work. In an interconnected global economy, as new companies and individuals use digital technologies to innovate, the market can change rapidly. New business models are being created to adapt and take advantage of the opportunities in the digital world. Throughout history, economies have been reshaped by revolutionary inventions. These breakthroughs — such as the telegraph, railroads and the automobile — each sparked a virtuous circle of growth for the economies that could take advantage of them. The difference with the Internet is that it is inherently global, benefitting both developed and developing economies. As such, the digital economy is triggering a third wave of capitalism that transforms business and government. Today everybody has direct and free access to the world market and the creation of network organizations is facilitated. The traditional antagonistic view of the market as a place where there is necessarily a winner and a loser is becoming obsolete and is progressively replaced by a “win-win” relationship and a collaborative economy.

An Innovative Economy

Traditional economics viewed economic growth in terms of investment levels and relationships among the three factors of production — land, capital and labour — and considered that competition between organizations is based on prices. Innovation economists argue that, in a market economy, innovation rather than price is the primary competitive dimension. Since the late 1980s, the economic literature1 suggests that R&D, innovation and spillovers are actually key factors driving self-sustained economic growth and that these factors are generated from within the capitalist system by responding to economic incentives. The turn of the century saw not only developed economies, but also most of the emerging economies, including China, India, Russia and Brazil, accepting the idea that innovation will drive further progress in economic growth and is essential to the survival of firms. This change in thinking forms much of the basis for justifying public support of R&D spending and established policies to promote innovation. One of the key objectives of the EU during the last decade has been to encourage increasing levels of R&D investment, in order to provide a stimulus to the EU’s competitiveness.

A Distributed and Collaborative Economy

There are different kinds of economy (Figure 9.1). In a distributed market economy,1 ownership, influence and control are globally dispersed. Complex networks of market actors are formed: companies, customers, suppliers, competitors, distributors, influencers and partners that gain mutual benefit from one another. With the development of the digital economy, markets are shifting towards two specialized yet collaborative global markets: GEMs and GTMs.2. GEMs globally produce and distribute digital products and services, while GTMs collaborate with GEMs to consume or continue the physical part of production and distribution. The firms in traditional markets extend their demand and supply to GEMs, while firms in digital markets create new demand and supply of both GTMs and GEMs. New market actors coming from GEMs are playing an increasingly important role and social networks facilitate interaction among market players. The digital economy has opened new doors for the implementation of the market orientation concept and for the development of non-monetary business models.

A Sustainable Economy

The well-known definition of sustainable development was proposed at the 1992 Rio de Janeiro conference by the Brundtland Commission’s report and reaffirmed at the Earth Summit Rio+20 in June 2012. Sustainable development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs. A more explicit but more diluted definition could be: a method of economic decision-making based on the democratic participation of all stakeholders — shareholders, workers, customers and citizens — across generations, while maintaining the collective, natural and cultural patrimony. The three main pillars of sustainable development are economic growth, environmental safeguards and social justice. The purpose is to find a coherent and viable balance between these three objectives. The sustainable development concept deeply modifies the conventional capitalist managerial approach in several ways.

State-Led Market Economy

The term “state capitalism” was previously used to depict the communist regimes of the former Soviet Union, China, Cuba and North Korea. Today, it can be applied to many governments using state ownership to keep key industries in public hands.’ As discussed in Chapter 1, the role of the state or of the government is one of the seven pillars of capitalism. The government has always a role to play in a capitalist system and no country’s economy is either purely a state capitalist or free market system. But the degree of government intervention varies within each country and fluctuates over time.2 The Economist magazine3 has recently published a debate on state capitalism in which it was suggested that state-led capitalism looks like the coming trend and is becoming a viable alternative to free-market capitalism. Moreover, as the result of privatization policies, an increased range of social services formerly delivered by the public sector are outsourced and provided by private enterprises under the control of the government, in so-called “quasi-markets”. Thus, many public service operations become subject to market-like mechanisms implying a greater market responsiveness of public servants. The question addressed in this chapter is the following: given the flaws of the conventional capitalist model, should the economy evolve toward the state-led capitalism model?

A Knowledge-Based Economy

The growing dematerialization of the economy is largely due to the development of the technologies of information and communication (TICS). This technological evolution changes the conventional capitalist system where technological information, intellectual property and knowledge become the new values, forming an intangible capital that substitutes the tangible capital of industrial capitalism. Knowledge capitalism’ can be defined as another system of accumulation, where intellectual ideas, technologies, patents, concepts, access, relationships and business models become the main sources of accumulation and value. The terminology is not well established in the literature and the terms “cognitive”, “knowledge”, “intangible” or “intellectual” capitalism are commonly used. While “intangible” is a useful term, there is a tendency for intangibles to be considered more as assets than, equally important, “capabilities”. From this perspective, the terms knowledge economy and intellectual capitalism have a better communication value and will be used interchangeably in this chapter.

The Market Economy System in Question

The 2008 economic crisis has triggered a flow of articles and books predicting the end of the market economy system and recommending an exit from the capitalism, allegedly accountable not only for the current economic and financial disaster, but also for the destruction of the environment, the deepening of income inequalities and the consumption society’s materialism. The crisis has shaken public trust in the market economy and several economists1 believe that, to drive recovery, new models of capitalism must be embraced. Will society maintain the individualistic business model of capitalism that created the crisis with recurring structural public deficits, excessive rewards for bankers and traders, costly bailouts for the banks and austerity for the people, or will society develop and implement a new balance between state, business and society? How can the capitalist system be amended and economic mutations adopted without altering its core principles? Several economic and social changes are currently taking place in the world and in the European economy as a consequence of the economic crisis. This subject is today a worldwide debate.

A Green Economy

Sustainable development is a widely used term, but its implementation in real life raises difficult operational questions. For environmentalists, the term is directly connected with natural capital and as such is defined as development that does not exceed the carrying capacity of the environment, that is, the size of the economy at which resources depletion is exactly compensated by renewal processes for a species. The cost of exploiting the earth is largely absent from the prices in the marketplace. The greening objective is a major progression in economics because it proposes to put a price on the use of natural resources too often thought of as free goods and of unlimited availability.1 The goal of a green economy is to align two objectives considered as mutually supportive: saving the planet and stimulating economic growth2 or, more pragmatically, making sure that the next generation will enjoy at least the same well-being as the present one. The green policy proponents have argued that green technology, green taxes, eco-conscious behaviours and the like could contribute, not only to protect but also to restore the environment, by improving bad business practices of corporations that are destroying the world. The greatest challenge confronting the capitalist system is the climate change problem.

A Social Economy

Social economy refers to a third sector in economies between the private sector and business, or the public sector and government. It includes organizations such as cooperatives, non-profit organizations, social businesses and charities. Social economy usually develops because of a need to find new and innovative solutions to issues — whether they are socially, economically or environmentally based — and to satisfy the needs of members and users, which have been ignored or inadequately fulfilled by the private or public sectors. By using solutions to achieve not-for-profit aims, it is generally believed that the social economy has a distinct and valuable role to play in helping create a strong, sustainable, prosperous and inclusive society. The social economy is a significant source of employment that has contributed to curbing the impact of the 2008 economic crisis in Europe.