EK blog: New economic models – what’s behind the buzzwords?

Tellervo Kylä-Harakka-Ruonala is member of the European Economic and Social Committee (EESC).

Tellervo Kylä-Harakka-Ruonala is member of the European Economic and Social Committee (EESC).

I must admit that I often get confused when people are speaking about ‘new economic models’. And for sure I’m not the only one because today´s discussion is teeming with a great variety of terms, such as (in alphabetic order) circular economy, collaborative economy, functional economy, green economy, platform economy, sharing economy, social economy…

Introducing new terms has also its advantages. By means of new words old and familiar issues can be highlighted again, with freshness and enthusiasm. One should, however, avoid a mess of concepts. I am not calling for exact definitions but I would like to have a more analytical approach to the wide range of concepts.

When referring to economic models we – in a way or another – speak about production and consumption. And all economic systems relate to certain basic questions: WHAT is produced and consumed, HOW does it take place and WHY is it primarily done? These questions are also relevant with regard to the new economic models.

  • As for the first question, the new models seek changes in what is being produced and consumed. Instead of just material goods, one looks for services and immaterial welfare. This is strongly pushed by the need for climate change abatement and sound management of natural resources.
  • As for the second question, the models seek new environmentally sound methods but also social innovations by means of greater inclusiveness and involvement of consumers and other stakeholders. More and more consumers also take the role of producers and are thus becoming ‘prosumers’. To a great extent, new kinds of production and consumption models are enabled by digitalisation and automation such as the internet of things and digital platforms.
  • The third question – the primary purpose of the models – is related to whether we speak about creating added value or about distributing it. We also have to ask whether we speak about business or other kinds of production forms. The basic role of business is to create added value – competitiveness and profitability being its prerequisites – while fiscal and welfare policies are the main means of distributing it. Here the ground and logic of action is different when non-profit organisations or publicly supported organisations are concerned.

All in all, the new models have several features in common: They call for benefits for consumers, workers and citizens at large. They call for the involvement of all stakeholders in producing added value. And they call for responsibility for the environment and climate. What is the new element here?

The core new element may be the fast development of technologies that enables new patterns of production and consumption. But basically – in my mind – the objectives of the new models can be achieved within an “old” economy as well. I would call it sustainable market-economy – market-economy that strives for economically, socially and environmentally sustainable development.