PERHAPS the two most important questions confronted by economists today are on the issue of development — what is it and how do we measure it? Economies and societies have indeed evolved in the past few centuries. But have economic theories and economic toolkits changed in tandem? Are economic theories still relevant in explaining economic challenges of today’s world? Can economic tools provide solutions to make the world a better place to live in now and in the future?
Seen by some as “The John Maynard Keynes of the 21st century”, Kate Raworth, an Oxford economist, discusses these issues at length in her book, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, giving timely insight at a critical time for humanity.
Raworth begins by asking a fundamental question: “What enables human beings to thrive? A world in which every person can lead their life with dignity, opportunity and community — and where we can all do so within the means of our life-giving planet.” And for that, her answer in the book is: “We need to get into the ‘Doughnut’.”
That ‘Doughnut’ basically is her attempt to redraw economics. The quote in the beginning of the book states — “the most powerful tool in economics is not money, nor even algebra. It is a pencil. Because with a pencil you can redraw the world”.
While it is impossible to discard long-established economic theories and great economic thinkers, she decided to change her approach. Rather than making economic theories the goal itself, she applies them in reverse, that is, by setting humanity’s long-term goals first and then seeking out the economic thinking which is appropriate to achieve them. And as it turns out, the diagram, or the picture she drew, came up looking like a doughnut!
Basically, the doughnut-shaped diagram has a pair of concentric rings. Below the inner ring, that is, the social foundation, lies critical human deprivations, such as hunger, illiteracy, social inequity, absence of political voice, gender bias, the absence of peace and justice, and lack of work and poor income or inequality of income level. And beyond the outer ring is the ecological ceiling, where critical planetary degradation, such as climate change, chemical pollution, biodiversity loss, land conversion and air pollution are situated. Between these two rings is the Doughnut itself. Thus, the essence of the Doughnut is “a social foundation of well-being that no one should fall below, and an ecological ceiling of planetary pressure that we should not go beyond. Between the two lies a safe and just space for all”.
That is basically the gist of Raworth’s concept of Doughnut Economics. The next question would be how to operate, measure, and achieve it.
At the heart of Doughnut Economics are seven new ways of how economics and societies should be viewed in today’s world — change the goal; see the big picture; nurture human nature; get savvy with systems; design to distribute; create to regenerate; and, be agnostic about growth.
Some of the new perspectives and measures are indeed revolutionary, such as changing the goal from gross domestic product (GDP) to Doughnut. For more than 70 years economists have seen GDP as the mother of all data. Now it appears that looking at GDP per se seems inadequate. Hence the goal now is not to get a higher percentage of GDP as possible, but to get into the Doughnut. And to do this, the shift in mindset and perspective is important.
Now, the focus is no longer on the market, but on Planet Earth itself. It’s time to realise that the earth has its boundaries, not something which is inexhaustible. Next, is the importance of society rather than an individual. It is time to shift attention and see individuals as socially adaptable humans rather than the rational economic man. And perhaps the one important shift highlighted in the book, which obviously remains invisible in economic theory, is the importance of the household in the economy.
Much has been said about labour and wage labour in the market, but what about the unpaid care provided at home — cooking, washing, nursing, sweeping? While each family might have their own mechanism to deal with this, it is time for public policy to be directed towards this issue as a crucial measure to enhance happiness, well-being, and productivity of the people at large.
One of the important aspects of getting into the Doughnut is in having greater redistribution of income and wealth. Besides a minimum wage, the doughnut economy also proposes other measures, such as to have living wages and a maximum wage. Furthermore, a national basic income, paid unconditionally to all, is also proposed, so that with or without jobs, every person must be ensured that they have sufficient income to meet the basic needs of their daily life.
The scope and targets of Doughnut economics are in line with the United Nations’ 17 Sustainable Development Goals 2030 agenda. And since the government has just announced its Shared Prosperity 2030 economic model, much of the input from Doughnut economics can be useful in ironing out its fine details.
After all, a Shared Prosperity can also be interpreted as getting into the Doughnut.
The writer is associate professor of Economics, School of Economics, Finance and Banking, Universiti Utara Malaysia