Doughnut Economics: The Only Doughnut that Can Save Humanity

Have you ever thought about when did growth become the equivalent of ultimate economic success?

And if it is true, growth indeed expresses the ultimate economic success. Then what happens when we have grown exponentially? Is there an end to it, or are we thriving for an unimaginable ambition of limitless growth? Kate Raworth tries to answer all these questions in one of her TEDx Talks titled “A Healthy Economy Should Be Designed to Thrive, Not Grow.”

Kate Raworth saw two major flaws in the way we understand the economy. First, we understand the economy in terms of the exchange of money or resources. Secondly, we believe a successful economy has to be on the path of constant growth. Understanding the economy in these two contexts ignores some of the important factors that are persistent in reality. For instance, when we talk about the exchange of goods, we imagine the flow of labour and money in a vacuum. But the economy is not working in a vacuum; it is deeply embedded in the environment. That means the flow of exchange has an impact on the environment. It extracts resources such as energy from the environment to produce goods and, as a by-product, emits waste into the environment. 

Apart from this, Raworth has highlighted three more reasons that deem this way of understanding economics fundamentally flawed. Firstly, it ignores any work that cannot be measured in terms of money as a part of the economy. Due to this, many unpaid works that sustain families and raise future generations are overlooked. Secondly, the conventional economy does not recognize free collaborative work even though collaborative work is the biggest asset and blessing of globalization. Humans have collaboratively created a huge encyclopedia for free. They have created free knowledge on any topic and made it globally available. The value these collaborative commons generate is not monetized. And as a result, the most dynamic process of the modern economy is ignored. And lastly, when we calculate economic success in terms of GDP, we generalize all households. We think the money that has been added to the flow of exchange is equally distributed among the households. But that’s not true. In most high-income countries, the wealth is accumulated by only one percent of the population. So, what GDPs or the flow of income tell us is a half-baked truth.

Now, the second major flaw Raworth has founded in mainstream economics is its obsession with growth. To explain this obsession, Raworth has used one of the most influential economics books, W.W. Rostow’s ‘The Stages of Economic Growth: A Non-Communist Manifesto.’ Rostow explains that all society needs to go through five stages of growth.

First is the traditional society, where a nation’s capability to use resources is limited. Then comes the preconditions for take-off, where mechanization has just begun. Next is ‘take-off,’ where growth becomes the normal condition. Then the nation upgrades to ‘drive to maturity.’ In this stage, the nation earns the capability to choose any industry it fancies, irrespective of its resource base. And then comes the final destination, the age of high-mass consumption. It is safe to assume that in this stage, the economy of a nation has matured in such a way that people can buy any consumer goods they want. It is a fairly simple and interesting theory. But then a question arises- once a nation has ascended to the final stage, then what? Well, even Rostow had this question in mind. He said, “And then the question beyond, where history offers us only fragments. What to do when the increase in real income itself loses its charm?” Unfortunately, he never answered it. But Raworth answers the question Rostow so strategically brushed aside. She uses the aeroplane metaphor to explain the unending growth stage. She explains that as an advisor to presidential candidate John F. Kennedy, Rostow’s job was to keep the plane flying. And now, over a century later, we are still flying into the sunset of mass consumerism.

We are politically, financially, and socially addicted to growth which is rapidly destabilizing the balance of our planet. As a solution, we are given options to choose green growth, inclusive growth, resilient growth, or any solution as long as we choose growth. But what if growth is not the solution at all? It is high time we saw progress in terms of human well-being, not by the metrics of money and growth. Kate Raworth believes progress should mean balance. Therefore, she proposed a radical economic model that emphasizes the balance between using resources to meet human rights and protecting the planetary life system. The model is called ‘doughnut economics.’


What is ‘Doughnut Economics?’

The model is named as such due to its circular visual that resembles a doughnut. There are two circles: the inner circle is called the ‘social foundation,’ and the outer circle is called the ‘ecological ceiling.’ The space in the middle of these two circles is the sweet spot, the green doughnut.

The hollow space in the middle that we reach after crossing the ‘social foundation’ boundary is a space where people are falling short on life’s essentials such as food, housing, health care, education, etc. The aim of the model is to get everyone out of this hole, over the social foundation, and into the doughnut.

However, it is crucial that we do not let our collective use of resources overshoot the outer circle known as the ‘ecological ceiling.’ Because the ‘ecological ceiling’ consists of nine planetary boundaries, as set out by Rockstrom et al., Beyond this ceiling lies unacceptable environmental degradation and potential tipping points in Earth systems. Similar to this, there are twelve dimensions of the social foundation that are identified by the world’s governments in the Sustainable Development Goals in 2015.

The challenge is to keep a balance between these two and keep the entire human species in the middle. This model is important because the old economic models have failed to offer us a sustainable future and predict global economic challenges. The doughnut model represents the million and billion people that live in the hollow space in the middle, who are suffering to fulfill the most basic human rights. These people are invisible in the mainstream economic models and, as a consequence, irrelevant in policy-making. On the other hand, the model also successfully visualizes the embeddedness of our economy in the environment. We have already overshot at least four of the planetary boundaries and started a journey of irreversible climate breakdown. Therefore, the time is now to think unconventionally and focus on well-being, not materialistic growth.

Author- Nayeema Nusrat Arora 

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