Typically, my posts relate to the economics of everyday simple things. Today’s post is related to a book I have recently read and a new economic framework that I believe may be truly relevant to our times.
In 2017, Oxford economist Kate Haworth introduced a new framework called doughnut economics to guide decisions and policies in light of the many changes and existential issues that our global economy face. Her framework introduces a more holistic view of economic growth and viewing the world in economic systems where certain metrics need to be met in order to have a more inclusive definition of economic growth. It takes aim on the idea of never-ending economic expansion is a dangerous idea—one that has to be revisited.
The framework is shaped, well like a doughnut. It is made up of two circles, one with an inside edge and one with an outside edge, and the classic hole in the middle. The inside edge is called the social foundation and the outer edge is ecological ceiling. Between these two edges is the dough, which the safe and just space space for humanity—essentially all the good stuff of the doughnut. It is the zone where dynamic balance exists and all our needs are met without overextending our planet’s resources.
The doughnut’s social foundation includes everything that humans need to live and thrive. From basic needs such as food and clean water to support networks and social equity. These 12 requirements for a strong social foundation are important considerations to economic growth and must be taken into account when introducing policies.
The ecological ceiling is an area that we should stay within if we want to create a planet that we can all thrive in. It essentially a guardrail to prevent us from overextending our planet’s resources, which several times, we have already crossed.
Raworth, goes on to show that the classic views of neoliberalism may actually be outdated. Prevailing views that private sector is more efficient than governments and letting markets come to equilibrium as well as chasing endless growth, has pushed countries to social and economic collapse. Doughnut economics is her proposed mindset to rewrite this narrative.
So what do we need to do to adopt this mindset? Raworth suggests shifting to a circular economy from a linear economy. Instead of producing disposable products, we need to shift to reusable goods and working towards repurposing many of the goods that we use everyday. A clean environment must not be viewed as a luxury good—one that only wealthier economies are able to afford but one that becomes a responsibility by all. Regenerative design is also the heart of this concept.
In fact, Amsterdam has begun to adopt the idea of doughnut economics into their city. And several other countries and cities have followed suit. This app also shows various countries in relation to doughnut paradigm.
Raworth’s doughnut economics model is a novel and bold statement intended to rise up to the challenges of our times. While it may have its shortcomings, the model is a more realistic reflection of issues that we are faced with now and in the future. I think that all the good sweetness of that dough is totally worth it.
The Gist
Doughnut Economics is a novel way of thinking about economic growth.
Compared to a static view of economic growth, this model shows that economies must be cognizant to social foundations when making policy decisions and ensuring the ecological boundaries are not breached
It is a new economic model to ensure that we preserve the delicate and fragile balance of social and environmental factors.
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