Our economies should be the foundation of our security, yet today they often undermine it.
Rising living costs and declining standards are making it harder for many to access life’s essentials, while growing inequality strains the social contract and unsettles our political systems. At the same time, economic activity accelerates environmental challenges, and market volatility restricts the investments needed for a resilient, transformative future.
The traditional model of growth-driven prosperity is becoming less viable in an increasingly uncertain world. Its impact on the planet is now recognized as part of the problem. We must therefore ask ourselves the question:
What kinds of new economic and financial institutions could help us navigate though the present storm, and form part of a more secure, resilient and sustainable global political economy?
Around the world, new approaches are emerging that rethink economic development. Models prioritizing shared prosperity, long-term resilience, and harmony with nature over extraction and short-term gains signal that change is possible. While challenges persist, these efforts offer tangible pathways forward.
The Challenge
Today’s economic systems operate on outdated, mechanistic assumptions.
They are taught and modelled using simple, linear relationships and assumed to be independent and self-correcting. Instead they are complex and interdependent, ecological and political.
The interplay between various crises is eroding the societal ability to adapt quickly and absorb mounting social and environmental pressures. The emphasis on profit maximization and hyper-efficiency has come at the cost of resilience, equity, and planetary stability.
As Oxfam notes: “Billionaire wealth has risen three times faster in 2024 than in 2023. At least five trillionaires are now expected within a decade. Meanwhile, the number of people living in poverty has barely changed since 1990”, with “60% [of this wealth derived] from either inheritance, cronyism or monopoly power.”
Meanwhile, the decoupling of economic growth from environmental destruction is not occuring.
No country is decoupling its material footprint from growth, while the 11 high-income countries that have achieved some decoupling of growth from carbon emissions “would on average take more than 220 years to reduce their emissions by 95%, emitting 27 times their remaining 1·5°C fair-shares in the process.”
Aside from this, growth is in any case slowing down across the world; the average economic growth rate of OECD countries in the early 2020s being only 2%. Exceptions such as the US are often fuelled by massive debt spending, with US debt reaching 128% of its GDP in 2024.
According to Professor Tim Jackson:“we are – already – starting to live in a post-growth economy, but we don’t have the tools to deal with it.”
Pathways for Institutional Innovation
In a recent blog post we have reflected on alternative economic and investing models based on the previous work made by organizations and experts around the world such as Cassie Robinson with Arising Quo and Partners for a New Economy, Demos Helsinki and its work in new economic thinking, One Project, the Science Fiction Economics Lab by Edgeryders, the Ellen MacArthur Foundation around circular economy models, the Economics of Energy Innovation & System Transitions initiative.
These initiatives demonstrate that the economy can be a catalyst for the common good, fostering a more balanced and regenerative relationship with nature:
- An economy based on the common good is the base of initiatives such as Mexico’s Indigenous-led direct budgeting which grants communities control over their own resources and strengthens local security. By fostering fiscal autonomy, these models reinforce self-governance and resilience.
- Or in Italy where the MeSSinA Foundation has created a unique local cluster designing and experimenting with new socio-economic approaches to local development which empower the most excluded and keep value locked in the community.
- At a different scale, China has aligned private capital with public priorities, fostering strategic industries while maintaining economic dynamism through Government Guidance Funds.
New investment models that channel capital toward long-term, community-driven futures can do more than mitigate environmental harm – they can actively support the regeneration of natural and social ecosystems.
The Edinburgh Regenerative Futures Fund redistributes decision-making power to historically excluded groups; while the Builders Vision’s Oceans Strategy aligns investment with ocean regeneration. Investing Economic systems are not immutable; they are human-made institutions that can be rewritten to reflect the needs and aspirations of societies today.
By rethinking value, power, and finance, we can transform economies from engines of insecurity into platforms for planetary and human well-being.
At IID we’ll explore the possibilities of building the systems we need to match the complexity of the challenges we face, including an economy that works for everyone and the planet with a regenerative approach that prioritizes collaboration over extraction, fostering balance between the planet and society as a whole.
