Blue growth
Reflections on how to get out of the trap of poverty and unemployment thanks to an ascending scenario.
April 6, 2015
The market economy is not able to provide services to the poor, as demonstrated by persistent rates of poverty and malnutrition. The market economy is not able to create jobs for everyone, as confirmed by persistent unemployment rates, especially among young people. It is necessary to imagine a much more efficient economic model, which generates value, circulates money in the local economy and aims to provide products and services with inputs, capital, energy and locally available human resources. The cases of the blue economy published here analyze real opportunities.
Since traditional solutions such as "runoff" have failed to overcome fundamental challenges, the local economic growth model should allow a transformation of the middle class community. We have witnessed how it has been achieved in the regions of violence and deprivation over the years. The fundamental approach consists in bringing together water and energy linked to sanitation and affordable housing; food and nutrition related to health and safety; culture and education that provide knowledge and wisdom accumulated over the generations; mobility and energy. All these combined elements, like all other links, will create jobs and provide innovations to emerging communities.
The case 108 added specific details on the design of the cluster linked to housing: how a new model based on an open market and entrepreneurial commercial initiatives can change the quality of life in the future. The housing needs are enormous. There has not been delivery in recent decades, but there is no need to blame politicians.
The commercial model chosen to provide affordable accommodation is to be blamed for the failure of delivery. This is where The Blue Economy intends to demonstrate that other economic models are possible. The creation of a local growth economy requires a meticulous identification of all opportunities. This leads to the design of an ascending scenario where the eradication of poverty and the growth of the economy depend on the speed at which new business models are prevailing on the market.
The objectives of economic growth
The assertion of communist intellectuals of the 19th century, and today a belief shared by many, according to which "the rich become richer and the poor poorer" now seems confirmed.
Professor Thomas Pikkety demonstrates in his very controversial book, based on two centuries of statistics, that the rich who control the capital are enriched, especially in times of crisis. Pikkety claims with eloquence that as long as the rate of return on capital is higher than the growth rate of the economy, the poor will be preparing. In the past, capital was made up of land, then mainly manufacturing equipment. Today, these are simply liquidity that hopes to earn money on money through aggressive healing funds or speculation in cyberspace. Have we ever had something more perverse than the notion that money makes money?
We know that stock market and monetary transactions carried out in a fraction of a second by superordinators report billions to those who have them. We know that those who earn billions, whether individuals or companies, exploit the flaws of tax laws and, if they pay taxes, it is never only a few percent of their profits or of their fortune. Almost all profitable and rich companies limit their involvement in the social economy to corporate social responsibility programs (CSR) which are aimed at some individuals. The photos of the annual CSR report most likely grasp almost all of the people who have benefited. We should ask ourselves the fundamental question of knowing if we are committed to having corporate social responsibility because we have made a lot of money, or if we earn money because we have successfully assumed our social responsibilities to 'business. In addition, all CSR initiatives are considered to be tax deductible; In other words, the community pays.
How many companies really make CSR a business strategy in line with their products and their production? We know that, in these circumstances, it is impossible that the poor can never get rich, unless you cheat with the system. The only option to get out of the poverty trap seems to be illegal and illicit trade, ranging from drugs to endangered species. Extremely high unemployment rates close the door to any possibility of rising through work. Strict immigration rules oblige the bravest immigrants to seek illegally into the territory.
Of course, the reaction of the establishment when it is faced with these facts is to debate results, to question the data, to throw doubt about the sources and, finally, to do what all the establishments have done During history when a new truth haunts them: discredit the author.
It's normal. When the facts are finally accepted, that they are no longer the subject of passionate debates and that they have become the favorite subject of social conversations, those who formulated the most severe critic Anyway, their original idea. There has rarely been such a strong and fundamental reaction against confirmation that "the rich become richer". The most virulent criticism against the theorem proposed by Professor Pikkety emanates from Anglo-Saxon economists who stick to "the effect of runoff", according to which, as the rich are enriched, the money and wealth are slowly but surely transferred to the poor.
This argument is only supported by anecdotes and no statistics prove it. One of the reasons why runoff never occurs is that rich and multinationals do not pay a reasonable tax rate. As we have learned in recent years, all large companies excel in tax evasion, which brings the real rate to perhaps 2 % of the profits. While a family who works hard sees up to 50 % of their gross income evaporating in taxes and social security, large companies obtain permission to distribute almost tax exempt to their shareholders.
The production of wealth in the past two centuries has offered Europeans the opportunity to reach the average glass. The accumulation of wealth in North America is an exceptional opportunity: a nation which has gone from 3 to 300 million inhabitants in less than two centuries and which has appropriated all the land and resources of the Aboriginal people has the ability to spread wealth and propagate the "American dream". Even in these circumstances, the rich have always become richer in two hundred years, except during the Great Depression and the Second World War. (The rich are enriched and the poor are mainly pointed out at the time of the last financial crisis in 2007).
We cannot neglect the fact that, until recently, growth in the United States of the absolute number of citizens of the middle class rightly fueled the idea that the "American dream" was possible. Unfortunately, the latest statistics suggest that the wealthy Americans have ever been enriched before. Many evidence shows that families with two income living in mega -cities like New York, Chicago and Los Angeles, fail to reach both ends or send their children to university. The data indicates that in 1964, 23 % of all the children in the United States lived in poverty. Fifty years later, despite 16,000 billion dollars in investment in the fight against poverty in the richest nation in the world, 22 % of all American children still live in poverty3. Children living in poverty are only a parameter; The income gap between the richest and poorest metropolitan region of the United States reached the largest level ever recorded in 2014.4 What happened to the American dream?
Hard absolute figures alleviate the positive impression created by relative data. Statistics show that whatever the argument we want to prove, we sometimes use absolute figures and sometimes percentages and reality can be presented to suit one or the other. However, when it comes to poverty, only one figure counts in our assessments: the absolute. It seems that efforts have been directed to reducing the pain and discomfort of poor people by helping them. If this is appreciable, some say that this is the very reason for this persistent poverty trap: the aid must be transformed into empowerment. The harsh reality is that the aid programs managed by governments, companies and foundations have failed to guarantee access to the tools necessary to get out of this trap.
While the poor have no advantage from the persistent weakness of economic growth rates, they have lost wealth, jobs and income, while investors have preserved their wealth and have accumulated even more. The wealth funds will not release the money they control unless the capital yield is high. With the exception of state bonds, no capital supplier is satisfied with an annual return less than 10 %. Business plans which do not provide for a return on investment (king) of at least 20 or 30 % are not taken into account. It is impossible to expect that even expanding emerging economies are experiencing a two -digit growth rate higher than the rate of return on capital. Now that the figures are on the table and the rich become richer, what do we do after having debated the facts more? (Do you earn money and then contribute to the company; or do you earn money because you have contributed to the development of the company)?
When I read R> G (R is the rate of return on capital, G is the growth rate of the economy), the question that immediately arises is how this simple equation could be reversed to generate the opposite: R <g (how to evolve from r> g to r <g?).
It is impossible to ignore the fact that poverty spreads in absolute figures. Even worse than poverty, unemployment of young people is increasing worldwide. This parameter reaches alarming rates and indicates that the next generation is unlikely to win the minimum wage required to take care of a family. This means that poverty is not only increasing, but that it may last. Young unemployment is not limited to the world in development. In countries like Spain, Italy and Greece, more than 50 % of the most dynamic members of society are left to unemployment. In Palestine, 98 % of young people under 26 are unemployed. It is an unacceptable waste of human resources when an increasing number of young trained and enthusiastic young people are said that their desire to work, their skills and their passion are not necessary. Governments accept these difficulties and hide behind the need to pursue austerity while continuing the task impossible to balance the budget. Companies and rich claim that the growth rate is too low and that consumption must first resume before being able to finance low -risk and high rate of return initiatives.
We have to ask ourselves how much additional patience we expect from the poor? A mother whose children go to bed empty every night and a father who sees her teenagers making rockets to cross an illegal fence cannot be satisfied with a promise that everything will improve in a few decades, when corrupt governments will have Finally was removed and that free trade agreements will finally have been concluded to allow access to cheap products worldwide. Instead of kissing globalization, a system that has failed to meet everyone's needs, the only option seems to be to give the poor the means to take charge and to design solutions with what they have . To do this, we must rethink the economic models capable of meeting basic needs, in particular those of the poor, while offering reasonable return to investors. Many traditional economists consider that it is impossible. The blue economy demonstrates, by case, that this approach offers the possibility of growing the economy from the base.
Empowerment models at the bottom of the pyramid
While poverty is endemic and billions of basic needs are not met in terms of water, food and nutrition, housing and community, health and care, energy, waste management And of mobility, education and culture, how is it possible that some claim that there is no request? How could global free trade guarantee health care for newborns while the nation that supports free trade has a hard core of politicians who reject any form of health insurance for the poor?
The typical answer is that there is a request but no money. Professor CK Prahalad and Stuart Hart demonstrated, in their article published for the first time in 2004, how 3 billion people who survive $ 2.50 per day represent an amazing amount of $ 2,700 billion in cash each year.
2.50 dollars per day represent an amazing amount of 2.7 trillions of dollars in cash each year. The bottom of the pyramid represents a market ready to be integrated into the formal economy. How can we exploit this vast
purchasing power with traditional business models and a finance that has high expectations for its minimum rate of return It is not easy for a traditional business to imagine how to transform.
For example, Unilever was inspired by the "fortune at the bottom of the pyramid" and put the shampoo in small affordable sachets instead of the large bottle which is above the means of poor people. These shampoo micro-portions are sold through network marketing and tiny neighborhood stores. These initiatives do not strengthen the autonomy of the poor, any more than they give them access to quality products at competitive prices. On the contrary, incursions on these emerging markets drain the money from these marginalized communities which have never used synthetic shampoos with artificial colors and odors, in addition to polluting their rare sources of water. Rather, this shampoo feeds the company's desire to reach ever higher economic scales and better margins.
The strategy is to arouse consumer membership and the brand's recognition, so the local distributor can soon be requested to sell the same supplier more, or be replaced by large distribution chains.
The need to change the business model
I am surprised that people still believe that the "free market" in general, the free movement of capital with investments in search of high rate of return, would reverse the poverty trap and to solve the problem of the problem one day Unemployment, while aid would soften acute angles and scientific breakthroughs such as nanotechnology, genetic manipulations and smart networks would make the magic that the market could never achieve. We have to realize that everything we have attempted with the best intentions in the world does not make a fundamental difference for the three billion people living in poverty and the billion people living in total dignity misery. Worse, we seem ready to accept poverty as a reality of life. Instead, we should design, create and implement competitive commercial models capable of meeting the basic needs of all thanks to an intelligent growth strategy that we call "blue growth" and others call "inclusive growth" . If you don't like color or adjective, change your name and focus on the implementation of new economic models. (We have to find leadership at business level. We need a much more efficient business model).
We must mainly focus on the business model and aim to recover leadership at the entrepreneurial level. Macroeconomic trends are the amalgam of decisions taken and initiatives undertaken at the micro-economic level. Thus, instead of trying to guide the world mainly since the cockpit of an aircraft by influencing interest rates, tax policies, monetary exchanges and trade, while unilaterally deciding to flood the additional liquidity market by The way of a technique known as the quantitative softening, we must turn the economy on the ground, starting where the needs are the most urgent, in places like the slums in Asia, the townships in Africa , favelas in Latin America and the unemployed all over the world. Let's call them the "corridors of growth". How to create and implement an inclusive growth strategy where not only are basic needs met, but where we take advantage of the integration of the poor and young unemployed in the economy and in a solidarity society, while Creating wealth for the poorest?
The current economic system: unable to meet the needs of the poor
It is essential to look at the reality of today: the market economy is not able to meet the needs of the poor. If the market is not capable, it is because current economic models are not. The result of this inability is that poverty and unemployment are the rule and must be accepted; It is difficult to accept. The main economic players have adopted the logic of economies of scale, by seeking ever lower marginal costs while balancing quality and price to stimulate sales and obtain higher profits, thus offering a better return on investment.
profits, thus offering better capital return. Since the absolute priority is to always offer higher yields and lower costs, the economic system has transformed into a hard system where the dismissal of people in the name of productivity is the norm.
In order to create ever larger economies of scale for standardized products, it is necessary to eliminate commercial barriers. Free trade was the name of the game, allowing the free movement of goods, services and capital. At the same time, there is no free movement of people. The borders have never been so difficult to cross and the issuance of a visa has become a full -fledged trade. When goods, services and capital are supposed to circulate freely beyond borders, the challenge then consists in sufficiently remunerating people within this "globalized" economy, so that they can get out of the poverty trap and lose The desire to emigrate at all costs. Those who see no way out, knowing that their parents and grandparents have not found it either, will find a way out as refugees in high-risk emigration, violence, drugs, fundamentalism and terrorism.
The globalized economy claims to balance supply and demand by fixing a market price. The modern economy has submitted everything to "fixing a price", including a good as necessary for life as water. This resource was once a common good provided free of charge by nature and society; Today, it has a price. There will therefore always be millions of people who will never be able to access basic goods and services. If we agree that the world model for supplying products and services is unable to reach the poor (otherwise, they would not be poor and would not live in misery), we must make people in these people in these "Poverty corridors" can meet their own needs with what they have. It is not a challenge to the globalized economy, but rather a response to the inability of the current globalized economy to be inclusive. If this delivery process fails by design, the only option we have is to change models and implement a more efficient market economy.
(As the market economy is not able to meet the needs of the poor, poverty and unemployment are the rule). The immediate reaction to this direct conclusion is that "it is not possible". The explanation is that if possible, then it would have been done for a long time and would have been extended to reach everyone. However, if the new commercial models are fundamentally different, then what has been practiced before? It is therefore unlikely that they will be accepted worldwide at first sight. It took more than a century for free trade economists Adam Smith, the author of "The wealth of nations", and David Ricardo, the inspiration for the theory of comparative advantages, to see their theory impose themselves as a dominant economic logic. None of these two economists had access to statistics or empirical data. Why is it necessary today to immediately provide proof of the concept on a global scale? This is why The Blue Economy undertakes to develop microeconomic case studies before drawing macroeconomic conclusions.
Meet the basic needs and circulate money locally
The two -digit growth model :
(1) meet the basic needs
(2) with local products and services, and
(3) circulate money in the local economy.
The money circulates more quickly, the portfolio of local products and services is more diversified, so that additional money circulates more quickly and more money remains in the local community as a capital. It is a possible two -digit growth model. If money does not circulate inside, the money brought back from work will come out of the community, which will slow growth.
Of course, one can wonder how many human resources, capital, materials and energy are available to ensure the pursuit of these transformations at a rapid rate. Will this two-digit growth proposal lead to shortages, price increases, even imports? Of course, there are limits and there will be challenges, but the current model of standardization and globalization based on an incessant effort to reduce costs maintains the poor in poverty since all the money spent for basic consumption
escapes from the community. Are we aware that in South Africa, 34 % of the purchasing power of the poor who survive with less than $ 2,500 a year is reserved for food; Those who survive with $ 600 per year spend 47 % of their purchasing power for food; And is everything that is eaten is provided from outside the community?
If many questions arise, the main objective of the blue economy is to develop this concept of inclusive growth in more detail and apply it to the creation of new communities in an increasingly urbanized world. We must therefore present in detail the conceptual development of a real development project, by offering an overview of the way in which intention can be converted into reality. If each of the programs and initiatives mentioned has been implemented somewhere in the world, the extent of the investment and the importance of the impact are ready for a large -scale implementation.
The dozens of cases published here on our site give an overview of science, entrepreneurs and patience that allowed us to transform hundreds of ideas into commercial realities around the world. It is an honor and a privilege of having had the chance to play a role. The question is now how we can speed up the process and strengthen its impact.
The design of the upward scenario
Ascending scenario
This is why we undertake "the blue economy 2.0". Our objective is to direct society towards sustainability, while strengthening the ability to meet basic needs with locally available resources. In 2005, the Zeri Foundation launched a research program in cooperation with the Biomimicism Institute entitled "Nature's 100 Best". Inspired by pragmatic solutions developed by thousands of species, we have launched the quest to identify which technology, based on what research, demonstrates a way to sustainability. Canine Benyus and his team studied the details of the science behind each species, which has become the basis of the famous website " Asknature.org " with thousands of academic articles. Gunter Pauli and the Zeri teams focused on ecosystems instead of discovering the scientific details of isolated species and has drawn new commercial models. The two organizations separated, and Zeri continued to focus on business spirit, innovations, job creation and satisfaction of basic needs with available resources. This approach made it possible to offer new perspectives of economic development known as "The Blue Economy", a report to the Rome club which was presented for the first time in Amsterdam in November 2009. This report was translated in more than 30 languages.
How the quest is organized
The Network of Zeri organizations, known as "think tanks", and the emerging network of the blue economy, recognized as the "Do Tank", followed the hundred initial cases. Thanks to an intensive program to monitor emerging sciences and companies, to dialogues with academics and practitioners, to interactions between people and institutions committed from around the world, as well as to exchange of experiences, technologies Isolated, pioneering scientists and daring entrepreneurs have gone from inspiring isolated cases to university networks and corporate bunches. As these local economic growth clusters were systematically documented, a transparent world of interconnected innovations and successful fundraising, combined with intelligent adaptations to local conditions, demonstrated that a new economy was in emerge. These cases of newly documented clusters are published here on www.theblueeconomy.org.
The transition from old to new corporate models
Economic growth has been raised to the main objective of life, and the achievement of growth is assimilated to improvements in productivity and efficiency. The so much praised free trade and the elimination of pricing and non-tariff obstacles guarantee the free movement of products, energy and services (but not people!). The objective is to reduce costs and prices under the theory generally admitted according to which lower prices improve purchasing power and increase the richness of people. This model has certainly led to the creation of wealth, but it also led to persistent unemployment, especially among young people.
In addition, many evidence has been gathered to demonstrate that "the rich are enriched and the poor are pointing out". Although this assertion has been widely challenged by academics and political decision -makers, the harsh reality of statistics indicates that, if improvements in the creation of wealth can be underlined, billions of people cannot access the basic services. Worse, the dominant economic growth model does not reach the poor in general and young people in particular.
The economic proposal for the blue economy suggests a different approach, which still pursues a growth strategy, but starting from the resources available locally and by exploiting the purchasing power of people, especially those who survive a dollar per day, as That governments The quest for development is evolving from improving productivity to reduce costs, improving productivity by generating more value from existing materials, nutrients and energies. The effectiveness of resources and energy leads to a reduction in costs. The driving force is made up of the millions of tiny expenses that meet immediate basic needs. The needs for water, food, health and housing produced locally generate local jobs, increase income, decrease the need for transport and channel local purchasing power in the local economy.
The faster circulation of money, without going through banks, thanks to local currencies or digital currencies stored on mobile phones, accelerates the flow of money, thus triggering new economic growth. The ability to provide products and services that you have an urgent need allows you to get people out of poverty while competing with global companies. Poverty and unemployment confirm that the world economy does not reach this segment of society and that there is no local economy to overcome this lack of primary, secondary and tertiary activities. If we want to eliminate the slums, we must therefore create the local economy and redirect the existing economy, which drains all liquidity outside the community, towards an economy that circulates money in the community and creates jobs.
A new share capital
Change
Celebrate innovation clusters
We can highlight the success that succeeds, and what makes them so different from the traditional development model.
Thousands of researchers and thousands of start-ups
Now that the next 100 cases are in production, we can move quickly towards the end of 2016 and the beginning of 2017, where more than a thousand researchers are identified by their name, their institution and their research subject, as well as Thousands of companies that continue this group approach. This card, which we call the ascending piloting of societies towards sustainability, demonstrates that the blue economy has gone from an interesting set of anecdotes to a visible trend, with common denominators. It is in this context and this pioneering work that the Zeri network, in cooperation with the Rome club, wishes to undertake the next step: to deepen clusters with more detailed information on social impact, technologies, the environment , including biodiversity and ecosystem services, job creation and skills, transformation of education, efficiency of resources. We must strengthen participation and have contacted transversal research organizations that could meet this need.
From a wide wave to a deep understanding
From a detailed card to an interactive mathematical model
The results will offer, over a two -year period, a detailed card, scientific data, commercial figures, social and environmental statistics. These data will then be translated into a mathematical model based on the dynamics of well -established systems which makes it possible to map the impact of these groups of small initiatives based on fundamental changes in corporate models which guide companies towards sustainability. This model then poses the following questions: what are the political options for local and national governments, multilateral institutions, financial organizations, research networks in order to accelerate the transformation that is emerging. It is expected that around 2 years are needed to refine this model, which will allow us to present it at the end of 2017, in early 2018, "The Bottom-Up Scenario", "The ascending scenario".
The upward scenario
The ascending scenario differs fundamentally from the traditional approach of the Rome club. Instead of working on macro-data worldwide, we are working on thousands of local facts, changes in business models that are like embryos. However, the concrete facts and the pragmatic measure of the impact allow us to adopt a new approach to the global challenges by relying on the pillars of science and the corporate spirit (risk). This would lead to a series of scenarios offering the immediate possibility of going from scientific discovery and political measures to applied research and the inspiration of entrepreneurs, as happened with our project to transform coffee into coffee in Mushrooms, which now has at least 2,000 companies worldwide.
