Definition
The foundational economy is both a concept designed to rethink the character and purpose of contemporary economies and an approach to socio-economic development that focuses on providing everyday universal basics within planetary limits (see Universal Basic Services). It emphasizes that there is no single “economy”, but rather different economic zones, each with distinct rationales and forms of consumption (see Table 43.1). The foundational economy facilitates the often-collective consumption of daily essentials such as energy, electricity, water, and food, along with welfare-state services like health, education, and social housing. In addition to being essential for meeting human needs, foundational sectors differ from other sectors of the economy in two main ways: (i) consumption needs are predominantly delivered through infrastructures, networks, and branches, rather than through the purchase of individual commodities; and (ii) much is relatively sheltered from international competition.
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History
The foundational economy approach has evolved over the past decade (2010s). In 2013, the Foundational Economy Manifesto identified a distinct part of the economy “that creates and distributes goods and services consumed by all (regardless of income and status) because they support everyday life”. This led to the introduction of a zonal understanding of contemporary economies (see Table 43.1).
Each economic zone has unique principles, ways of working, and forms of consumption. The zonal schema critiques the dominant focus on growing GDP/capita (which adds heterogeneous forms of consumption according to a singular definition of worth), boosting international competitiveness, and viewing the market economy as the defining system (see Ecological Economics). Instead, it emphasizes the importance of everyday consumption for the quality of life. While income is portable, consumption in the foundational economy is place-based and depends on household location; deficiencies cannot be remedied by simply raising personal income for private consumption. Therefore, per capita disposable income poorly reflects living standards. The zonal schema also shows that applying a uniform market logic – including privatization, financialization, and short-termism – can threaten universal access to the consumption of daily essentials.
In 2018, the Foundational Economy book expanded the discussion from rethinking the economy to providing new framings for politics and policy. In terms of politics, it emphasizes that entitlement to foundational provision is the material basis for the actual exercise of citizenship, enabling social participation. In terms of policy, it began to explore how to restore the collective foundations of everyday life, including reinventing taxation and instituting social licensing (see Box 43.1).
In 2023, amidst the cost-of-living crisis, the book When Nothing Works introduced a three-pillar concept of liveability: residual income after covering essential household costs; access to foundational goods and services; and social infrastructures (e.g., parks, community hubs, public spaces). This highlights the need for policy to balance focus between residual-income-based private consumption (e.g., for occasional purchases in the overlooked economy) and infrastructure- and services-based collective consumption. Given that 70% of UK citizens live in multi-person households sharing expenditures, the book argues that the household, rather than the individual, should be the primary unit of analysis.
Different Perspectives
Initially developed in the United Kingdom, foundational thinking has evolved with contributions from across Europe over the past decade, sparking debates and variations within and between national groups. For example, internal and external critiques have pointed out its neglect of unpaid work and ecological concerns, leading to increased engagement with feminist theories and ecological limits as well as exploration of synergies with other concepts of alternative economies.
The foundational economy, well-being economy, and doughnut economy all advocate for high-income countries to move away from growth-focused strategies to ones that prioritize public services and redistribution. Thereby, foundational thinking is central to bridging the gap between the doughnut economy’s heuristic recognition of social foundations and practical policymaking (see Box 43.1).
Critiques highlight that the foundational economy’s lack of biophysical realism may hinder its ability to operate within ecological limits, emphasizing that the current provision of services such as food, mobility, housing, and even health are highly resource- and emissions-intense. Engaging with these critiques, some scholars have begun integrating sufficiency research into the foundational approach. Examples include addressing excessive residential floor space, implementing progressive pricing models with absolute consumption ceilings, and placing greater emphasis on prevention (see Sustainable Mobility, Sustainable Housing, Energy Consumption Behavior, and Personal Carbon Allowance).
Box 43.1. Foundational economy: policy recommendations and examples
The foundational policy objective is to improve access to essential goods and services, which depend on social investment and tax revenues. Compared to Universal Basic Services, this approach tends to be more sensitive to local context and systems and is agnostic on ownership models (e.g., private, public, communal). While all places face challenges related to foundational services (e.g., transportation, housing, and adult care), the specific conditions for change vary. Foundational policy differs from mainstream approaches by prioritizing issues such as housing costs, tenure, and redesigning service provision over jobs and growth.
Foundational policy priorities include:
- Social licensing is essential for regulating corporations in foundational sectors (see Extended Producer Responsibility). Businesses extracting cash from a territory via networks and branches should provide social benefits in return, regardless of ownership. For example, Austrian limited-profit housing developers face profit and rent restrictions and must reinvest profits into social housing. Development contracts can also require private developers to include social housing units and invest in public infrastructure. Supermarkets, with their territorial franchises, could be required to promote healthy diets and reduce single-use plastics.
- Reinventing taxation, financing, and charging systems to support social investment is another priority. This could involve traditional tax mechanisms (e.g., wealth taxes) and capturing rising land and property values and redirecting them into the foundational economy to enable collective consumption, rather than boosting private investment. Progressive utility charging systems, such as for water, would ease financial burdens on poorer households, ensure long-term financing, and align with theories of production and consumption corridors.
- Strengthening collective consumption, or what households cannot buy from private income (e.g., local parks, free healthcare), is crucial. Collective consumption can also be advanced through public procurement. For example, the Welsh government’s Economic Action Plan, inspired by the foundational approach, emphasizes sustainable public-sector food procurement and free school meals to enhance public health, social justice, and ecological integrity.
Application
It is clear that foundational provisioning systems must undergo radical decarbonization (e.g., housing retrofit), conversion (e.g., focusing on sharing and repairing), transformation (e.g., reducing car dependency, diet reform), and extension (e.g., including the provision of clean air and public green spaces, and restoring ecosystems). Against this backdrop, the foundational economy offers a specific contribution to enabling sustainable consumption and lifestyles, given its (i) focus on collective provisioning for human needs; (ii) effect on inequalities; and (iii) potential role as a cornerstone for a radical social-ecological transformation beyond capitalism.
First, foundational thinking highlights that our capacity to act is always realized in systems we produce and reproduce. Having the capacity to be mobile or to dwell sustainably requires the provision of accessible, affordable, and sustainable mobility and housing systems. This shifts the focus from changing individual behaviors within existing systems (see Consumer Scapegoatism) toward the collective shaping of these systems as a primary purpose of politics. Collective in-kind provisioning generally leads to better universal need satisfaction and lower energy requirements than individualized consumption. Thus, improving access to infrastructure-based collective consumption – from local recreational areas and public kitchens to free healthcare and energy communities – contributes to sustainable consumption and lifestyles.
Second, foundational policies recognize that everyday essentials will not be accessible to all according to need if they are left to the realm of private consumption from individual income. This shifts public policy toward renewing collective foundational provisioning, grounded in social investment and a commitment to social priorities. Since, in OECD countries, low-income groups spend around two-thirds of their income on essential services, this approach reduces residual income inequality. As Kate Pickett and Richard Wilkinson have famously shown, reducing inequality benefits individuals, households, and society as a whole, as inequalities erode trust, increase anxiety and illness, undermine public support for climate policies, and encourage excessive consumption (see Conspicuous/Positional Consumption).
Third, universal access to the foundational economy serves as a cornerstone for Degrowth/Postgrowth. Prioritizing the foundational economy in public policy requires shrinking economic zones and activities that directly undermine universal foundational provisioning, particularly those driven by rent extraction and redirecting productive capacities toward the universal provision of everyday basics and thus toward collective consumption. This counteracts the creation of artificial scarcities, which restrict people’s access to daily essentials and have historically served as the engine of capitalist expansion, from the enclosure of the commons to the commodification of public services. As foundational policy aims to ensure universal access to the goods and services necessary for a good life without requiring high levels of income, it establishes the precondition for “radical abundance” beyond capitalism.
Further Reading
Bärnthaler, R., Novy, A., & Plank, L. (2021). The foundational economy as a cornerstone for a social–ecological transformation. Sustainability, 13, 10460. https://doi.org/10.3390/su131810460.
Calafati, L., Froud, J., Haslam, C., Johal, S., Williams, K. (2023). When nothing works: From cost of living to foundational liveability. Manchester University Press.
Foundational Economy Collective. (2022). Foundational economy: The infrastructure of everyday life. New ed. Manchester University Press.
Schafran, A., Smith, M.N., & Hall, S. (2020). The spatial contract: A new politics of provision for an urbanized planet. Manchester University Press.
Wahlund, M., & Hansen, T. (2022). Exploring alternative economic pathways: A comparison of foundational economy and Doughnut economics. Sustainability: Science, Practice and Policy, 18, 171–186. https://doi.org/10.1080/15487733.2022.2030280.