One can’t walk away from economics because it frames the world we inhabit.
‘It’s the common language spoken by all the public policy, rationale for multi-billion-dollar investments, tools used to tackle global poverty and manage our planetary home’. For over half a century, economists have fixated on GDP as the first measure of economic progress, while majority of other economists claim that, GDP is a false goal waiting to be ousted.
The 21st century calls for a far more ambitious and global economic goal: meeting the needs of all within the means of the planet vis-a-vis sustainability. Sounds familiar, right? Well, when we draw this goal on a page, it comes out looking like a ‘doughnut’.🍩
If you are wondering what does a doughnut have to do in economics? Thank Kate Raworth who recently introduced the world to a new theory called ‘Doughnut economics‘.
Doughnut roll to Ms.Raworth is what apple was to one Mr. Newton.
Doughnut economics is a visual framework for sustainable development – shaped like a doughnut – combining the planetary boundaries with complementary concept of social boundaries.
A doughnut roll
Contemporary economics need a new story, a new approach.
What if we focus on human well-being instead of profits? (Honestly can’t believe it took economists 200 odd years to realize this)
This transforms the purpose, meaning and shape of economics: From endless growth, to thriving in balance. The challenge now is to create local to global economies that ensure that no one falls short on life’s essentials – from food and housing to healthcare and political voice. While safeguarding nature’s environment: you know the stable climate, fertile soils, healthy oceans, protective ozone layer et al.
Let’s understand what the Doughnut model is. As the name suggests, picturize a doughnut
The inner ring of the doughnut represents the least we need to lead a good life. It’s basically food, clean water, certain level of housing, sanitation, energy, education, healthcare, gender equality, income and political voice. Anyone not attaining such minimum standards is living in the doughnut’s hole.
The outer ring of the doughnut represents the ecological ceiling set by ecologists and scientists. It denotes the threshold beyond which we should not venture. However, this is to avoid damaging the ecosystem and biodiversity. The doughnut is a good way to represent the economics system. We do not focus on growth, but on a cyclic balance.
Between the two rings is the good stuff. The sweet spot: the dough, where everyone’s needs and that of the planet intersect.
The central premise is simple. The goal of economic activity should be about meeting the core needs of all. But not at the expense of burning down the planet, quite literally.
Call for Progressive Economics
Doughnut Economics is a call for a progressive economics.
According to a study by University of Leeds researchers, with the way things are currently present–providing a healthy, fulfilling life to every person on the planet would require two to six times the natural resources actually available. The study demonstrated the need to rework our infrastructure, technologies, and economies. It is necessary to meet people’s needs with a much lower level of resource use. This is not just about efficiency. It is an urgent need to find ways to characterize a healthy economy. So that it doesn’t rely on the pursuit of GDP growth.
Kate Raworth maintains that if we find ourselves falling below the social foundation towards the center of the circle means that quality of life is not upto the standard. If we shoot beyond the outer, we are risking our ecology itself. While the GDP only considers the ‘value’ of goods and services produces in the county. It simply doesn’t take into the fact that we have finite resource.
Sustainability through GNH
Bhutan is one of the countries that understood this and came up with “Gross National Happiness Index”. Bhutan sought to create a measurement tool that would be useful for policy making and create policy incentives for the government, NGOs and businesses of Bhutan to increase GNH. The GNH Index includes both traditional areas of socio-economic concern. It considers living standards, health and education and less traditional aspects of culture and psychological well-being. GNH is a holistic reflection of the general well-being of the Bhutanese population. Rather than a subjective psychological ranking of ‘happiness’ alone, it encompasses 9 domains that offer a holistic view.
Playground for Doughnut roll
Netherlands, however on finding doughnut model potential, chose Amsterdam to be the playground. They are experimenting to check the feasibility of it to mend post-Corona virus economy. How?
Studies showed, nearly 20% of the cities’ tenants had very little money left over after paying for their monthly rent. There were 60,000 online applications for social housing assistance and only 12% of them receiving help. That leaves the other 88% to fall into the doughnut hole. Direct solution could be to construct more houses. However, since 1990 Amsterdam has increased its carbon emissions by 31%. They estimate that 62% of these emissions come from the importing of food, various consumer products, and building materials.
The city started to plan on ways to balance both. They focused on ensuring affordable housing and jobs, revamping recycling programs, and cutting food waste. The city plans to regulate builders to use materials that can be recycled and more bio based, such as wood. Its overarching goals are to slash the use of raw materials in half by 2030 and phase them out completely by 2050.They also seem to be exploring ways they can move on from the dependence on the fossil fuel industry– which they expect will naturally evolve from the adaptation of the doughnut economic model.
Pandemic has encouraged a change in priorities of the people—i.e. they are thinking more about health & community and less of economic growth. COVID-19 has been destroying lives and livelihoods across the globe. However, it has also left us with an opportunity. How? To wipe the slate clean. To break with the past dogmas/stereotypes, and rebuild an economy. So that it truly works for both the people and the planet.
Seeking balance between the need of the people and environment is the need of the hour.
This new way of thinking is best summarized in the shape of a doughnut. As a circular economy rather than a linear one. No matter which model, there seems to be no denying that there is an urgent need to upgrade our understanding of economic theory.
By now, we know that having more money doesn’t make us happier. However, we know creating sustainable things makes us feel great. Or sharing a slice of cake makes us feel happy and repairing broken objects makes us feel proud. Why don’t we just choose to do more of that and less of “value” transactions?
An eminent contemporary economist, Kate Raworth’s inspiring and mind-expanding book: Doughnut Economics: Seven Ways to think like a 21st-Century Economist.