Charting pathways to the transformation of economic systems
By UNDP’s Accelerator Labs (Alberto Cottica) & Strategic Innovation Unit (Xoán Fernandez Garcia & Alexandru Oprunenco)
(This blog post is a product of the collaboration between UNDP & One Project)
Humanity is struggling with a set of interlocking crises, that some call a polycrisis. One of its major drivers is the nature of human economic activities that triggered ecological and physical processes that are undermining the stable, benign conditions of the Holocene. Last year we — UNDP’s Strategic Innovation Unit and the think tank One Project — set out to better understand how development work can encourage the emergence of alternative economic models, that protect and restore the ecological balance instead of undermining it.
Our first reflection shows how the interplay between various crises is eroding the societal ability to adapt quickly and absorb mounting social and environmental pressures. The various forms of collapse are evident across the board. The global economy has been in a state of overshoot for over 50 years, eroding its own resource base and capacity to regenerate. The world is currently in breach of six out of the nine planetary boundaries. Indigenous peoples experience the cumulative effects of social and environmental degradation throughout centuries of colonialism and capitalist globalization. Wealth continues to concentrate, producing rampant inequality and injustice, often accelerated by technological advancements.
All the while, society is increasingly susceptible to systemic risks and catastrophic failure, because the globalization of capitalism dismantled many viable economic alternatives, making people dependent on global markets that maximized efficiency at the cost of sustainability and resilience. This situation requires more fundamental transformations than those implemented during past crises. As UNEP recently concluded, incremental reform won’t solve the polycrisis. What we need is transformational change, moving beyond efforts to improve resilience and adaptation within the current failing system.
New economic thinking
Against this backdrop, advocacy for new economic paradigms as an outright transformation is becoming more pressing, and uses increasingly bold language. The IPCC’s “systemic change”, the U.S. Congress’s “green new deal”, the European Commission’s “green transition”, the language of “just transitions” used by countries such as Poland and South Africa, the Club of Rome’s “extraordinary turnarounds”, the OECD’s “structural transformation”: all these expressions suggest discontinuity and radical change.
The concern for an economy that works for the people of Earth is, per se, nothing new. The first Limits to Growth report (1972) argued an economy based on limitless growth is incompatible with a finite planet. UNDP itself has long been calling for targeting human-centered policy indicators — such as the Human Development Index (1990) and the Sustainable Development Goals themselves (2014) — in place of the rate of growth of Gross Domestic Product. Here’s what’s different, though: in the last five years, the non-mainstream economic research has come up with new tools for economic transformation. In doing so, it acquired coherence and depth, as well as a new label: new economic thinking. This led us to writing a second reflection: what signals of alternative value creation have surfaced throughout the years that might represent islands of coherence out of which the world might build a new direction for transition?
In doing this work, we’ve been inspired by ongoing initiatives who are breaking new grounds in this regard: 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.
Three main learnings emerge from surveying the emerging field. The first one is around what alternative approaches to building new economic models already exist and are beginning to attract new energy:
- A first group of approaches is around analytical modes of understanding and uncovering possibilities for alternative economic models. These provide better data and better modeling techniques connecting economic and biophysical information that enable, for example, to measure poverty in new ways, leading to novel insights about how to reduce it. Integrating biophysical and economic models is also uncovering ways to reconcile policy goals previously thought to be opposing each other — for example, the increase of economic prosperity and the fight against global heating — by intervening on variables such as inequality and provisioning factors.
- A second group of approaches is around rethinking economic policies. Bold innovations are being proposed, that shift the focus from efficient markets and property rights to networks built on trust and resilience, shared ownership and decision-making structures, deliberative management of commons, and the restoration of traditional knowledge. For example, on protection networks, we are seeing proposals for job guarantees, trials of basic income schemes, and ideas around universal basic services, whereby social security is expanded to provide unconditional access to a wider range of free public services. More mainstream views on public finances and global financial systems are being questioned, leading to proposals to create new currencies, such as carbon coins to tackle the climate crisis or digital currencies issued by central banks, which could make the exercise of fiscal and monetary policy far simpler and more equitable. Demands are growing to tax wealth and prevent the siphoning of corporate profit to tax havens, and to rebalance international financial systems to better support the critical needs of lower income countries. Cities are being re-planned to give residents access to key services within fifteen minutes, while community land trusts are de-financializing housing by bringing land ownership back to local communities.
The second learning is around some emerging principles that can guide the work of supporting the emergence of alternative economies:
- Reimagine narratives of value by shifting from extractive to regenerative systems and redefine what we value and how we create it;
- Build countervailing power by strengthening collective agency to challenge dominant systems and balance asymmetries in power and influence; and
- Enable experimentation through progressive, adaptive policies that not only create space for innovation but actively learn from it to drive inclusive and sustainable outcomes.
Our second reflection provides more examples for each of these principles. They act as a compass for the economic policy maker to navigate the complexities of designing economies that prioritize equity, sustainability, and resilience.
Despite all these advances and emerging forms, much more work is still needed. Our third learning is that there are two main dimensions where development practitioners are well positioned to contribute to the advancement of new economic thinking:
The first dimension is implementation. At its heart, this is about harnessing multiple forms of intelligence across different constituents and disciplines as to generate many more possibilities for alternative value creation & societal organization. Many new economic thinkers operate by imagining some alternative way to organize the economy, and then examining its properties in the hypothetical. For example, Jason Hickel and Dylan Sullivan calculate that, by manipulating something they call the mode of provisioning, we could achieve decent living standards for everyone on the planet with as little as 30% of the current energy and material consumption. This is an exciting result, but it is only true in theory, until someone discovers how to solve the technical and political problems of re-organizing the provision of the goods and services needed for “decent living standards”: food, housing, education, health care, digital connectivity. Let’s call this “the practical knowledge gap”.
The second dimension is geographic and cultural diversity. At its heart, this is about transformation the North-South economic relations as to address the structural drivers of inequality. So far, voices from the Global North have dominated this debate. This dominance is bad for everyone, including the Global North: it is downright impossible to design a viable path to a more just, human- and planet-friendly reorganization of the economy without equal participation of Global Majority thinkers and policy makers, as well as the recognition of an evolving geopolitical context. For example, the Global North-issued vision of “green transitions” relies heavily on mining critical raw materials in the Global South, with a logic that has been denounced as neo-colonial: green and high-tech in the Global North vs. carbon sinks in the Global South. Let’s call this “the Global Majority gap”.
With its decades-long practical experience, global reach and roots in the United Nations system, UNDP is well placed to contribute to reducing the practical knowledge and Global Majority gaps. Doing so will arguably require rethinking institutional architecture, engaging with what economist Thomas Piketty calls “social experimentation”: the patient, time-consuming, often messy process through which an attractive idea is put to the test and improved upon, until it becomes part of the policy maker’s canon. This challenge will take center stage at Istanbul Innovation Days 2025, UNDP’s flagship innovation event. This edition, designed with the Institutional Architecture Lab and Demos, will focus on how reimagined institutions can pave the way for a safer, more resilient world. Together, 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. We invite you to connect with IID and our work on developing new institutions for a better economy.
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Read in more depth about new economic models in this piece, Pathways to the transformation of economic systems: lessons from the trenches, written by Laurie Laybourn
