Journal

Take a doughnut, rethink economics

Words by Alice Rizzo
27 July 2017

Just like Isaac Newton saw an apple fall, Kate Raworth saw a doughnut roll. An eminent contemporary economist, Kate Raworth gives us a sweeter view on the subject in her new book, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist.

 

 

Throw away the old

Long-standing economic theory focused on growth, efficiency and profits. Initially, prosperity was linked to peace, and the richer a country was, the more peaceful it would become. However, this theory proved to be wrong and the 2008 financial crisis is only one of the few examples. Contemporary economics need a new approach, a new story. What if we would focus on human well-being rather than profits? This rather obvious shift of focus transforms the entire shape of economic progress from endless growth, to infinite balance. The challenge is to create a global economy where everyone can strive while safeguarding the Earth, our life-supporting system.

 

Take classic ingredients

We human beings live on a planet, Earth. Anything we do on this planet as an indirect impact on our future. Most people think economics is a matter of using complicated equations when it’s mostly about the way we shop, eat, travel, volunteer, invest and protest. Economics are about the individual and the cumulative result of his behaviours, choices and values shapes it and by extension, the world. As Kate points out, in ancient Greek, the word “oikonomía” simply meant “household management”. Economics really are just about how we live our lives and it is about time we realise we can all give a hand in taking care of our shared planetary household.

 

Add 4 under-rated ones

Current understanding of what the economy is made of is missing some key ingredients. First, economics are embedded in the environment. The economy per se could not take place if there wasn’t a supporting life system for it to thrive. Second, technologies and the commons are shaping the economy to be more collaborative and open. Collaborations, not necessarily involving any monetary exchanges are an essential aspect of the economy. Unpaid care economy should be cared about. Women around the world, taking care of their husbands and kids without getting paid yet contributing to the economy. Why wouldn’t that count as work? And finally, we have created an economy of the 1% where “it has to get worse before it can get better” well actually, according to Kate, inequalities are not an economic law and there is a design failure within the theory itself.

 

Write a new recipe

According to Kate, our goal as human beings is to reach a “safe and just space for humanity” and economic development should be inclusive and sustainable. This space is undoubtedly between the upper/lower crust of the doughnut, the mellow centre. Our challenge is to ensure that the upper crust, isn’t too heavy, as it would crash the mellow centre and that the lower crust is strong enough to hold the dough together. This means unloading ecological issues such as climate change, biodiversity loss and air pollution and reinforcing social foundation such as social equality, resilience and political voice.

 

 

Draw a new picture

The doughnut is a good way to remember and understand the ins and outs of our economics system. How can we ensure that we human beings meet our human rights within the means of the planet? How can we live a life that won’t damage but rather benefit our environment? This new way of thinking is best summarised in the shape of a doughnut, as a circular economy rather than a linear one. Kate wants to put purpose at the heart of economics, not profit. She wants us to understand the economy is embedded within a system that is life-supporting. By drawing a new picture of what the economy should look like, we draw a new picture of ourselves and of the world.

 

Start a revolution

Remember, human well-being consists of two fundamental elements: human rights and the environment. In order to meet our basic human rights, we need resources. These resources, in turn, are linked to the environment around us. By now, we know that having more money doesn’t make us happier. However, we know that creating things makes us feel great, sharing a slice of cake makes us feel happy and repairing broken objects makes us feel proud. Why don’t we just do more of that?

 

Image and many thanks:

The doughnut of justice: A new way to think about growth

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