LONG READ
The world is crossing a threshold, and now is the moment to take a pause, catch our breath, and perhaps look more at the sky, the earth, our neighbors, and each other. A new era is emerging that is unlike anything before. Humanity is racing at full speed at the sharpest turn of this transformation. The steps and actions we take today will determine how we navigate this turn.
The global system is collapsing. Life systems are deteriorating, and social justice is crumbling. Our only home in the known universe is experiencing irreparable damage! Should a piece start with such alarming sentences? I don’t know, but what I do know is that the crises we all see are deepening more and more each day. Today, we are in a networks of crises deeply interconnected beyond the climate crisis that has begun to be discussed in the mainstream. Biodiversity losses, ocean acidification, destruction of natural habitats, and the terrifying increase in waste, among many others. On the other hand, rising poverty, human rights violations, industries continuing to practice evolved forms of slavery, the insecurity of marginalized groups, women’s rights issues, and much more…
Our ‘modern’ social system is constructing new deadlocks every day. Alienated individuals, changing societal structures, individualism, an approaching giant wave centered on artificial intelligence, generational divides, algorithms, data, and our dysfunctional relationship with democracy. All this, alongside the environmental and social crises we are experiencing.
Ece Temelkuran says at the beginning of her book Hepberaber (‘All Together’): “The global system is collapsing. And like every system, capitalism is also setting everything on fire as it collapses. It says, ‘After me, the deluge, after me, the apocalypse!’ On one hand, there are young people who say, ‘If we move quickly, this can still be a livable planet.’ On the other hand, there are the old power holders of the system who mockingly say, ‘Don’t dream!’ The system, in order to protect itself, is calling on authoritarian regimes around the world for help.” Just like in this narrative,the creators of capitalism have taken their megaphones, gathered crowds, and are shouting loudly. The world they have turned into a fire pit, the neoliberal policies they have used as armor in the crises they have created, have left them trapped in the wreckage. Capitalism, which made us believe that no other story was possible but its own, has died. Capitalism, which delegitimized, criminalized, and ridiculed others, has collapsed. It is for this reason that there is a sense of unease, gloom, and uncertainty around the world. This is why there is a threshold of pain globally: the panic of not knowing what to replace this collapsing system with. So what now? As capitalism tries to rebuild its identity from its own ruins while writing a new story, it whispers the tale of its own evolution to us. That’s why we need to focus on the center of the crises we are experiencing, to design an economy focused on post-growth. We need to look into the heart of destructive old economies.
Designing a new economy, together
When we delve into the foundations of today’s problems and crises, what we find is undoubtedly the economic designs and the values embedded in the heart of our economies: Unconditional growth, profit maximization; aging, white, hetero, wealthy, and destructive masculinity. No system is poorly designed by accident. The destructive economic system we are experiencing was designed with a focus on the wrong outcomes — namely, the unconditional accumulation of wealth by a certain group and wild, endless growth. The economy has come to serve not life itself but a particular group.
To design a fair, democratic, and just life, and to be able to talk about hope, we need to collectively design a new economy. I specifically choose the word “design” because we have been told up to now that the economy is something that can be calculated. But the economy is something that needs to be designed together with every living and non-living organism on Earth and every system. By using the power of design, by asking the right questions, and ensuring that everyone has a seat at the table, we can set aside calculators and pick up pens. It’s time to design a new economy together, one that does not perpetuate neoliberal policies and convince us that ecology, societies, the state, the family, and women have no place in the economic arena.
To design and navigate post-growth economies, we need to direct today’s financial mechanisms towards four key points.
1. Regeneration
One of the most used and most misinterpreted concepts today is sustainability. Over the past 20 years, this concept, particularly associated with growth-oriented investment worlds, has become an issue on the agenda of international organizations, governments, companies, individuals — essentially everyone. The failure to implement it correctly over time has rendered sustainability increasingly ineffective. Sustainability, in essence, is a damage reduction policy. We see various activities aimed at reducing the harm caused by ways of doing business, business models, and companies, and we don’t think beyond sustainability. Today, reducing harm is not enough for life. When our economies focus on reducing the harm we cause, their relationship with growth becomes quite weak and inadequate. Today, sustainability is the best way to say we will continue to kill life, but we will do it a little less each year. Moreover, even when sustainability is applied correctly, we do not see a profound transformation in business models because the goal is, in a sense, to reduce harm. This brings many activities that do not offer realistic approaches.
Our new reality is regeneration. We need to replace lost forests (instead of just reducing deforestation) and repair the land and living ecosystems. While continuing to reduce harm, we should design our business models to regenerate the damage we have caused. Otherwise, there will be no world left to live in.
2. Breaking free from infinite growth
The concept responsible for species extinction, child labor, the workers who died in Rana Plaza, and soaring inequalities is growth. Growth comes with the goal of profit maximization, and every maximization problem is also a minimization problem. Our economies, which we try to fit into equations, view societies and nature as costs and seek to minimize them. This has created a decision-making mechanism focused on money and capital. Economic growth is clearly killing us. The perspective we need to constantly keep in mind in designing new economies is to imagine what comes after growth: continuously asking the question of how we can have an economy that does not serve growth builds the path to the new economy.
3. Inclusivity, diversity, and accessibility
To design new economies we must create a social climate where every different voice can exist. Moreover, this must not be done through the top-down perspective of a dominant fixed group claiming, “We include you,” but rather by co-creating a dialogue space that goes beyond the new leadership, power, and masculinity relationships, and the socially constructed ideal human portrait, with an egalitarian perspective. It is impossible to design a new economy without engaging in discussions led by marginalized, left-behind, and othered communities.
4. Distribution
Designing a new economy requires thinking about fair distribution mechanisms for justice, equity, and a fair social system. When looking at the previous three points, we see that the common solution lies in distribution mechanisms. What do we distribute to nature, how are the benefits of growth shared, and what rights do those outside the mainstream human profiles have? How do we distribute which value or concept to whom and how?
In my opinion, if a single macro solution were needed to address all the issues of the 21st century’s economic system failures, it would be to design a proper distribution system. For example, is the climate crisis an environmental crisis? Or is biodiversity loss an environmental issue? No, because today we know what we could do or not do to stop these crises environmentally, but we do not. At this point, these issues cease to be environmental crises. All the crises we are experiencing today are crises of democracy, justice, and distribution.
Local African communities, which have not contributed to the climate crisis at all, are among the first to suffer from it, because we are mis-distributing not only wealth but also death. We need to see how negative externalities are distributed, where and how the results of our actions are distributed. We must observe the history of products and services, and every step in the value chain fairly through transparent blockchain infrastructure. For a long time, we have heard a slogan in climate actions: “There is no Planet B!” But if there were planets B, C, and D, would we have the right to do these things to this planet? Could we see ourselves as having the right to destroy life here? We even defend the continuity of life for ourselves because we believe that the greatest right in the distribution of life belongs to the human species, i.e. ourselves.
The fact that a large portion of the world’s income is concentrated in the hands of a small group represents a much larger systemic problem than we think. It creates a hierarchical system that others nature and the vast majority of societies. If we envision regenerating the world, creating inclusive life, and focusing on a fair life centered on post growth, we must develop technologies for fair distribution. We need a new economy that goes beyond growth and accumulation.
New approaches, same old goals
One of the most important points we need to be aware of is the methods, concepts, and efforts that seem to serve the new economy but actually work for growth-oriented economics. Many concepts and methods have presented a bold and exciting exit for transitioning to a new economy, yet they have never lost the growth-oriented perspective. Among the most dangerous are the newly imagined economic models, such as stakeholder capitalism, which aim to sustain capitalism with new quests, while fundamentally continuing to advocate for capital and growth.. Subsequently, concepts like green growth emerged as efforts to sustain the growth-oriented system. The story was sold as, “Let’s grow, but let it be green.” However, the root problem was making growth the primary goal and obsession. What is even more dangerous is that destructive and seemingly innovative methods have also remained within the growth circle. Concepts that appeared innovative and bold, and could create a new economy rather than serve the old one, have instead continued to serve the same root problem and remained trapped within the existing economic order. What we need to do is to find ways to bring topics like B Corp and impact investing to the financial scales of the new economy. We need to explore ways to accelerate the transition to the new economy by manipulating investment mechanisms and expanding the playing field of the new economy. In other words, we should focus on reshaping finance for economic design.
Reshaping finance
One of the biggest misconceptions about today’s economic model designs is the belief that finance and economics are sometimes the same or at least very similar. We are not entirely wrong, as perspectives from universities, media, business, and public sectors often try to portray and position economics as finance, viewing it as merely a flow of money. This is not entirely accurate, however, because economics is a discipline that encompasses everything related to life, extending far beyond money and markets, whereas finance is a sub-discipline that serves as a bridge between the economy and abstract markets. Over time, this bridge has become the main focus and started to shape our economies. So unless we design radical transformations and innovative processes in finance, we cannot redesign our economic models. We must build a new reality based on the flow of money.
A new reality based on the flow of money
When we examine the capital spectrum, it is quite possible to see proposals and critiques related to shaping finance. “Financial only” creates conventional and destructive business models that focus on growth, aiming to put in one unit of money and get five units back in a short time. Over time, responsible investment emerged, showing progress in environmental and social factors, followed by concepts such as sustainability, sustainable investment, and, most importantly, ESG. However, from the moment ESG investments were invented, they served no purpose other than protecting capital and delivering quick returns. The path was opened for every damage-reduction-focused action to be seen as an ESG investment. A petroleum company, for instance, could claim to have made a successful ESG investment by implementing a very small reduction in its harm, thereby asserting its right to claim it is a sustainable company. ESG has never been used to advocate for the rights of communities or nature. ESG remains a profit-focused goal and continues to address environmental, social, and governance issues that may impact profits. Issues with the potential to negatively affect profits never became part of ESG’s investment and focus areas. Essentially, ESG only reflects a focus on profit and being “better” at being profit-focused. Radical and genuine steps affecting profitability were never part of ESG’s scope. Thanks to media and marketing, however, ESG was able to connect itself with social issues.
One of the concepts that emerged in the new era with significant transformative and just transition potential is impact investing. The birth of impact investing carried more hope because it aimed at the positive side of the zero point, making it a type of investment more easily connected with regeneration. Investing in solving the world’s problems seemed both enjoyable and logical. One of its biggest steps was being quite different from the “impact only” or philanthropic type of investment. Impact investing became a promising investment type positioned between the profit focus of ESG and the hierarchy and dysfunctionality of philanthropy. It did not have the paternalistic, destructive, or exclusionary features of philanthropy, and transferring significant financial resources and business models to philanthropy was quite challenging. (Philanthropy was more than a donation, as it continued to harm the world without changing its business model and without seeking ways to radically change the economy. Attracting large capital to this field was also unrealistic in the long run. ESG, at its core, involved profitability and harm reduction.) Impact investing had the potential to be innovative, bold, and serve the new economy — and it’s an area for which we need to develop new methodologies.
Reimagining impact investing
Impact investing has brought with it not only great potential but also significant disappointment in many parts of the world. While it is supposed to primarily support enterprises and business models with high positive impact, it quickly deviated from its intended goal — adopting behaviors similar to conventional investments, with a reflex towards financial growth. The first focus became financial growth capacity and profitability.
When considering an investment in a renewable energy company, for example,renewable energy is seen as a clean and positive impact business model, and such investments are considered impact investments. The focus, however, was on the financial growth of this business rather than the impact itself. Today, impact investing has supported high-profit enterprises, such as renewable energy and food technologies, positioning impact as a secondary, decorative element on top of the cake. Many destructive sectors and companies, without changing their business models, claim to be making impact investments by investing in renewable energy and food technologies, thus engaging in green and social washing. This leaves us with two questions: Can anyone claim to be making impact investments, and is an investment model that focuses on rapid growth while creating positive impact a genuine impact investment model?
This is exactly the issue we need to address in impact investing. For example, let’s consider two enterprises, A and B. Enterprise A works in renewable energy, delivering portable energy kits to regions experiencing energy poverty. Its goal is to prioritize impact over rapid growth and profitability, rather than building large plants. Enterprise B, on the other hand, also focuses on renewable energy but grows rapidly by setting up massive plants, going through investment rounds, industrializing, and selling energy to oil companies, with growth as its primary goal. Positive impact is an added value that comes with rapid growth. In these two examples, investors usually choose company B because they foresee transforming their investment of 1 unit of money into 5 units over two years. If they invest in company A, they might only receive 2 units of money in 4 years. Therefore, investors focus on growth rather than impact and choose to invest in company B, claiming to make an impact investment. In the current era, we need to decide whether impact investing will evolve towards selecting company A or company B. Initially choosing B might seem logical for taking the first step, but in the long run it will only deepen growth-focused crises. If we want to create a new economy, we need to convince large accumulated funds and investment portfolios to invest in genuine impact investments, like company A.
We also see that conventional investment metrics are increasingly shifting towards impact investing and impact-prioritized business models. This is a normal and expected transition. Consider this: your house is on fire, a huge blaze. Would you want to invest your money in a place that quickly multiplies it for you, or in a place that can put out the fire? Our question is: While our only home in the known universe is burning and collapsing due to crises, will we invest our money in saving our home or in profitability? We must recognize that achieving financial returns should not prevent us from doing good work and addressing the world’s problems, and we need to find ways to increase this. As with social entrepreneurship, in impact investing we should see how possible and transformative it is to achieve fair and good work while obtaining financial returns through investment tools. Especially since the finance sector is a major provider of funds to all sectors, its role in the transformation is highly accelerative. Transformations in finance will significantly accelerate the flow of money and the transformation of other sectors. We need to move impact investing out of the growth circle and make it serve the new economy, not the old one.
To steer capital towards impact-focused areas and to envision post-growth economies, we need to develop investment models that do not prioritize growth. We must act on the reality that an economic transition cannot occur without preparing the financial foundation. The primary concept in impact investing should be to center the purpose. The difference between impact investing and investments that create impact is shaped by the investment’s purpose and where it is made. The investments we make should be aimed at solving impact-focused problems. For instance, investing in a social enterprise that produces alternatives to plastic or a social enterprise that delivers emergency medical supplies with drones to areas in Africa inaccessible by road means we are investing in an enterprise with benevolent goals, meeting the first crucial criterion of purpose. A company is only making an impact investment when it invests in such social enterprises. Simply donating money earned from a bad business model elsewhere does not constitute impact investing. Investors who still view impact investments as charity are hesitant because they are unsure whether they will make a profit. However, many conventional investors, like Y Combinator, ask enterprises about their goals and what problems they aim to solve before investing. They believe that all the enterprises they select offer good solutions to significant problems, but these conventional solutions have not yielded commercial returns. They then ask what characteristics a good problem should have for its solution to yield a commercial return. They identify six key characteristics, and if an enterprise has two of these, they suggest it could have a commercial counterpart. Let’s examine these six characteristics in the context of environmental or social problems:
- Problem Popularity: When considering an environmental or social crisis, impact investors see it as affecting a large number of people. They view these people as potential customers.
- Recurrence: If a problem repeats, it indicates it will likely occur again.
- Problem Growth: The problem is increasing.
- Urgency of Solution: The solution to the problem is urgent.
- Cost of Unresolved Problem: The unresolved problem is costly.
- Necessity of Solution: The solution is necessary.
Evaluating these criteria, we see that the six characteristics developed for conventional investment can also indicate a commercial counterpart for impact investing. This is because the environmental and social problems addressed by impact investing align with nearly all of these six characteristics. Social enterprises, impact enterprises, and impact investing represent significant areas in the new world with substantial trade volumes. Currently, the capacity for impact investing is limited, but it is growing: the direction of capital, increasing crises, demand from young people and social enterprises, and the interest of large pension funds are all factors that will lead to better impact investments. To create an effective impact investment mechanism, we must develop innovative financing models along with proper impact measurement methods, avoiding the pitfalls of conventional investment tools. New business models are needed for designing a new economy, and the number of these models and the types of investments required for profitability must also increase. By creating innovative impact investment tools, we can foster the emergence and growth of new social enterprises, thereby accelerating the transition to a new economy. More support for social entrepreneurs through innovative impact finance methods is crucial.
Innovative tools for impact investing
1. Structured exit options
One of the most important aspects of investments is the exit strategy. Funds, particularly venture capital funds, have a lifespan. They raise money from investors, buy shares in different companies with that money, and then sell those shares as their value increases to exit the investment. With this profit, they pay their investors more. The fear of not being able to exit the investment, especially in impact investing, hinders many investments. Additionally, many companies, especially social enterprises, never go public because they are structurally unsuitable and do not want to surrender control of their capital. Even if a social enterprise promises a valuable return, the lack of exit options becomes an impediment to investment. We need structured exit options here. Revenue-Based Finance is one such tool. In this model, the investor says: I believe in the team, business model, and profitability of this social enterprise, but to eliminate the exit logic, let’s make an agreement. I will give you X amount of money with the expectation of doubling it. I do not expect significant growth from you or that you become a unicorn, meaning I do not want to incentivize constant growth. All I ask is that you earn enough to repay my money twofold over time. I am setting aside my high return expectations. Pay me 3–5% of your revenue each month until you repay twice the amount I initially gave you. This way, the investor’s biggest fear of exit is embedded directly into the investment, and the shares remain with the social entrepreneur. This is crucial for both the development and the social entrepreneur, as it becomes a non-extractive investment. The investor does not take away more than the value created but only earns as much as the social enterprise can provide financially. This type of investment is faster because the investor focuses on profitability rather than growth. For a social entrepreneur, this is a fundamental requirement. With this investment type, it is possible to foresee an increase in the number of social enterprises that do not prioritize financial returns but can still earn money, thereby accelerating the transition to a new economy.
2. Foundations and public institutions
Foundations and public entities usually provide grants. Grants often limit the innovation space of social entrepreneurs. The public provides the grant, and an authority decides how it will be spent, removing flexibility for innovation. A new concept to consider here is forgivable debt. Public or foundation funds are provided as debt to social entrepreneurs, in order to encourage social entrepreneurs to build a self-sufficient business model. In this investment type, the foundation sets impact targets with social enterprises. If the social enterprise meets X targets, the foundation will forgive part of the debt’s interest; if Y targets are met, the foundation will forgive the full interest; and if Z targets are met, the entire debt will be forgiven. This way, the foundation transforms the money it was already willing to give into an impact tool and ensures the creativity of the impact with the money. Additionally, it stimulates innovation rather than imposing constraints like a grant.
3. Results-based contracts
Previously known as social impact bonds, results-based contracts involve a public institution commiting to pay based on the results rather than the process of an enterprise. An investor supports a social enterprise and assumes all the risks. If the social enterprise creates the desired impact through its efforts, the public institution will pay the initial investor based on the scale of the impact achieved. This establishes an effective financial relationship between the public sector, investors, and social enterprises.
Focusing on impact over growth
Ultimately, if we want to discuss a new economy and a just system design, we need to increase the number of new economic enterprises and social enterprises that focus on impact rather than growth. We must collaboratively design the new economy across different areas with these structures. This includes developing fair financing models for new and just business models. The necessity of bringing impact investing into service for the new economy rests on this. Of course, the responsibility does not lie solely with investors; social entrepreneurs also have a significant role to play. Globally, we face conceptual confusion, and we may be unclear about what we can define as a social enterprise. To increase effective impact investing and attract investors to fair investment models, we need to increase the number of fair and correct social enterprises. We need social enterprises that can generate income but do not prioritize income, growth, exit, or becoming a unicorn; instead, they focus on addressing the world’s problems. Social enterprises that develop regenerative and distributive approaches will become the primary institutions of the new world and new economy because they will be the ones we need the most. As the number of fair social enterprises working to regenerate and distribute grows, we will see an increase in impact investing and, more importantly, the emergence of new financing models that go beyond impact investing. Following examples such as non-profit enterprises and post-growth entrepreneurship structures will provide us with perspectives on making impact investing and innovative, fair financing models more just, democratic, and impact-oriented each day.*
The need for a new economic paradigm is quite clear, and one of the most important steps toward this path is to create fair earnings and business models, and to increase the number of appropriate social entrepreneurs. The three most challenging aspects of systemic transformation are:
- Spreading over time: The process of transformation must be gradual.
- Requiring a proper transition structure: A well-designed structure is necessary for the transition.
- The need for diverse fields to work together in an intertwined manner: Different areas must collaborate closely.
Just like in new-generation investments and business models, to ensure the proliferation of social enterprises that emphasize regeneration and distribution, we need to increase the amount of effective impact investment. To boost effective impact investment and discover innovative models, the number of social enterprises must also increase.
We need to implement new economic foundations by standing side by side without prioritization or hierarchy, learning from each other, and developing dialogues with diverse communities. Creating a new, fair economy is an extremely challenging goal, but transformation is nearly impossible without progress in business models and financial relationships, especially without moving finance towards a democratic direction.
It is time to redesign the core of finance for a fairer world, for post-growth economies, and for the equitable existence of life. We have already surpassed many things that seemed impossible a decade ago, and we are taking steps beyond growth. What seemed like a dream today could become reality tomorrow. Now is the time to work together to make democratic finance a reality. Let’s design a new finance system together!
I drew inspiration from many names in writing this article, but I especially want to thank two individuals: Erinch Sahan and Can Atacık, whose sentences I have used directly.
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