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Client Spotlight: Introducing Economic Architecture

December 2, 2019 | By: Stuart Yasgur

In 1998, consumers started buying Fairtrade coffee. In the years since, they have bought more than $250 billion of Fairtrade products.

With each purchase, consumers expressed their support for the principle that workers should be treated fairly and earn a sustainable living. 

To date, Fairtrade products have generated more than $441 million of premium payments for the benefit of workers.

By almost any measure, Fairtrade is an overwhelming success.

It is also one of the most familiar and easily understood examples of a powerful new approach that we call Economic Architecture.

Economic Architecture seeks to (re)design our markets to serve the public good. 

At the heart of Economic Architecture is the design of structural innovations that shift the strategic landscape in a market. They effectively change the source of strategic advantage. This prompts market players to adopt different strategies and change their behaviors. When a large enough number of market participants change their behavior, it changes the impact of the market.

By doing this, Economic Architecture can change the impact of the market.

Fairtrade illustrates Economic Architecture’s approach.

Fairtrade created a trusted certification. This provided consumers with confidence that their purchase of Fairtrade products reflected their values. For this service, consumers were willing to pay a premium for Fairtrade products. 

This changed the strategic landscape.

Companies that could efficiently build ethical supply chains could realize higher margins by selling premium Fairtrade products. This spurred a wave of innovations and new management approaches as companies sought to effectively incorporate the practices that Fairtrade certification required. In 2016 alone, this impacted the lives of over 1.6 million workers.

By designing their structural innovation, i.e., the certification, Fairtrade was able to tap into the power of the market to get workers fair conditions and sustainable livelihoods. This is the hallmark of Economic Architecture.

Today, Economic Architecture is more important than ever before as we face extraordinary opportunities and momentous challenges. 

Climate change is accelerating. The planet is 1 degree hotter. We are ⅔ of the way towards the threshold beyond which the impacts of climate change become life-threatening to millions.

Inequality is rising to historic proportions. The 26 richest billionaires own as many assets as the 3.8 billion poorest people on the planet.

Gender equality is still a long way off. Women in the United States still earn only $0.81 for every $1 a man earns. For women of color, it is even less.

Too many struggle to meet their basic needs. More than 2.1 billion people lack access to clean drinking water. Seventeen million households in the US lack consistent access to nourishing food. Seventy-two million children around the world are not in primary school. And over 400 million people lack access to basic healthcare services.

Addressing these challenges will require a massive collective effort. The market is the most powerful tool we have to tap into humanity’s collective creativity, ingenuity, and industriousness. But left to its own devices, it won’t direct those abilities to solve these challenges. 

We need to design our markets to serve the public good. This is the promise of Economic Architecture. It has the ability to tap into the drive, ambition, and ingenuity of market participants to solve the problems that are impacting people’s lives.

Recognizing this, we launched the Economic Architecture Project with an audacious goal: to build the field of Economic Architecture.

Knowing that in the early days people would understand the field through examples, the Project has identified compelling examples in which Economic Architects were able to tap into the power of the market to address a wide array of challenges in vastly different geographies. For example:

  • An Economic Architect who addressed the shortfall in affordable housing in the UK, 
  • An Economic Architect who created a safe, transparent and viable labor market for informal workers in India, 
  • An Economic Architect who protected the cultural rights of indigenous peoples in Colombia, and
  • An Economic Architect who provided for the economic well-being of children with disabilities in Canada.

The Project has also begun to partner with leading think tanks and foundations to foster a new generation of Economic Architects who will address the most pressing challenges of today.

If the Economic Architecture Project is successful, in the years ahead we will begin to see the emergence of a new breed of Economic Architects. These will be people who help us face new challenges by (re)designing our markets to tap into the collective abilities of humanity to serve our common good.

 

Stuart’s role as Managing Director of the Economic Architecture Project sees him take the lead in articulating the organization’s vision. Specifically, the most powerful ways to engage the market to improve people’s lives.