Economics Week III: Doughnut Economics - a way to rethink our economic model
Photo by Sharon McCutcheon (unsplash)
This article is part of the Economics Week series in which we explore flaws in and alternatives to our current economic system.
One of the most important figures in economics and politics to this day is the GDP growth. We often hear politicians say that a country’s GDP needs to grow for the society to thrive. The answer to our societal problems would be producing more, consuming more and growing more, without taking into consideration that this often leads to environmental destruction, increased inequality and mass consumerism. We need a shift in mindset, a systematic change in how we think about our economic systems in which the focus is on thriving as a collective instead of a focus on eternal growth. Luckily, Kate Raworth, an Oxford economist, has come up with an alternative economic model: Doughnut economics.
First things first: why is an economic model named after a sugary snack? Well, it has everything to do with the shape of a doughnut. As seen in the picture, Doughnut economics can be visualized as a disk with a hole in the middle. It exists of an inner ring; the social foundation, based on the UN Sustainable Development Goals, and an outer ring; the planetary boundaries, that have been drawn up by earth-system scientists. Both exist through a number of indicators with the goal of having no shortfall on the social foundation and not overshooting the planetary boundaries. If we achieve that goal, it will lead to us ending up in between the two rings, where you meet the needs of all, within the needs of the planet. We need an economy to lead us to that safe space in between the rings by design.
As mentioned before, the social foundation indicators are derived from the UN Sustainable Development Goals. It takes into account a range of subjects ranging from access to clean drinking water and the mortality rate of children under 5 to the gender earnings gap and the amount of political voice one has. The other ring, the planetary boundaries, represent the ecological ceiling drawn up by the world’s leading earth-system scientists. It highlights the boundaries that we should not cross to avoid damaging the climate, oceans, the ozone layer, soils, freshwater and ensure abundant biodiversity. However, as can be seen in the figure, many planetary boundaries have already been crossed, and plenty of social foundation indicators are not met.
Doughnut economics is not just a theoretical model. The city of Amsterdam has decided to use Doughnut thinking as a starting point for public policy decisions, the first city in the world to make such a commitment. The city uses an adapted model of the Doughnut to make it more suitable for policy making for a city. Take for instance housing: 1/5th of tenants in Amsterdam are not able to cover their basic needs after paying rent. Building more could be an option, however, as shown in Amsterdam’s Doughnut model, CO2 emissions are already 31% above the 1990 level and building would only increase the overshoot. Thus, alternatives are being considered. This exemplifies how consequences of policy decisions could be visualized more easily on both social and environmental level through the model.
Now is the perfect time to change our idea of a suitable economic model. In times of crisis like these, people are starting to reflect on what is really important. Ideas that have seemed radical for a long time, are now reconsidered. Today we have the chance to create a new way to evaluate policies. By taking this chance, we will find the space that is environmentally safe and socially just and in which humanity can thrive. I believe Doughnut economics can help us achieve that.
Visualisation of Doughnut Economics. From the 2012 book by Kate Raworth, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist.
Would you like to learn more about Doughnut Economics? Have a look at the Doughnut Economics website at www.kateraworth.com/doughnut
Sytske Valk is a graduate of the master’s Global Business & Sustainability who currently works as a business consultant. She is passionate about Sustainable development goal 4 (quality education), 8 (decent work and economic growth) and 10 (reduced inequalities).