The Pelletier Column
Searching for a new economic model
by Christophe Pelletier With the many challenges arising from a growing world population, it becomes more and more obvious that the economic model of the past six decades needs to be refreshed. As such, providing consumer goods at an affordable price for the masses is not a bad idea. Helping people to have a more comfortable and pleasant life is certainly welcomed by most of us. The problem is that the so-called ‘consumption society’ is not so much about consumption as it is about people buying and giving their money to someone else. In the current system, consumption is optional. Research has shown that consumers use 75 to 80 percent of the goods that they buy no more than once. What really matters is the act of purchasing the goods. It is good for growth and the GDP, currently the leading metrics for the state of the economy. The problem is that mass production has gradually shifted from affordability to cheapness and from value to price. It has also focused mostly on volume and has not taken into account that consumers would have to get rid of what they bought after usage. Negative externalities have been kept external indeed. Short-term financial results have had the preference and long-term impact has been ignored. The system is hitting a wall and issues of greenhouse gases emissions and waste of resources are now becoming urgent matters to address. All industries will be affected one way or the other. Food and agriculture will be no exception. The big question is how to change the system without having it implode. That is not an easy one to answer but sooner or later it will have to change. Vision and leadership are crucial to manage the transition. I wish I had seen more of it. So far, I see and hear more about pro ‘this’ and anti ‘that’. It is highly insufficient and produces more noise than results. In my opinion, the problem is not so much about growth as it is about what growth means. Over the previous few decades, growth has been mostly about volume numbers; it has been a quantitative growth. I believe that the best transition towards the next model is to focus on what I call qualitative growth. It is not so much about volume as it is about adding value to the buyer. For consumers and countries, qualitative growth would be to quantitative growth what EVA (economic value added) is to turn-over for a business. It is about prosperity. For food producers, such shift growth will lead to a 22 | February 2016 - Milling and Grain
different approach. The most valuable areas of value added for consumers and society probably lies in providing good and enjoyable nutrition, yet affordable, thorough advice and education. The industry will have to help consumers eat better and help them have healthy diets. It will go beyond just supply food; consumers will also have to rediscover what proper nutrition is. Initiatives such as the Global Access to Nutrition Index can play a pivotal role in helping food producers make the transition towards quantitative growth. The food sector has also an important role to play in keeping our environment liveable. The trend towards transparency is an important part of the evolution on both health and environment fronts. Of course, such a change of economic model means that the economics must change, too. In my previous column, I stated that those who do the right thing must be rewarded. A new reward system must be introduced in the set of rules and regulations so that producers get the proper incentive to make the shift because adding the type of value that I mention to consumers also requires a different price tag in the store, or at least a different breakdown of costs and benefits along the entire chain from producers to consumers. How to fairly distribute the cost tag of the change is still open for debate. The system has to be rewarding for businesses by allowing margins to be comparatively competitive in the new arrangement. Consumers doing the right thing must also be rewarded; the new system’s rewards should also apply at the remuneration level. In particular, the share of qualitative improvements in companies’ bonus systems will have to increase at the expense of qualitative growth targets. The adjustments needed in the food and agriculture sectors will not end in this sector. They will have to include other areas of government too; in particular the health sector will have to be involved, as the consequences of the quality of nutrition on health are obvious for individuals and society both at the personal as at the financial level. I also believe that such a shift in economic model will mean that business partners within the value chain will have to challenge each other to carry out the transition and it will become a critical point in choosing with whom to do business in the future. Christophe Pelletier is a food and agriculture strategist and futurist from Canada. He works internationally. He has published two books on feeding the world’s growing population. His blog is called “The Food Futurist”.