“It’s time to act like a 21st century economist”

“It’s time to act like a 21st century economist”
Diagram: Doughnut- economics modelRepresentational Pic

MADIHA TRUMBOO

Kate Raworth, a British economist, coined the term ‘Doughnut- Economics’: a doughnut- shaped economic model developed to eradicate global poverty and extreme inequality within the means of limited natural resources. Her model believes in mastering utility, growth and efficiency. According to her, the double-digit gross domestic product (GDP) growth is an inefficient economic indicator of human and natural well being as the globe still suffers from abject poverty, gender inequality, hunger, illiteracy, loss of energy, income, peace and justice. Hence GDP is not the only proof of success!

Doughnut model is visually represented by two doughnut-shaped discs: the hole in the middle of the doughnut represents the shortfall and deprivation of 12 basic human needs: (1) Food safety (2) Water (3) A living income (4) Healthcare (5) Education (6) Energy (7) Gender equality (8) Social equity (9) Political voice (10) Peace and justice (11) Networks (12) Access to housing.

The policymakers and the economists must pull out the sufferers from this hole and form a strong social foundation. They should strive to create a safe and just space for humanity that can stay in the middle of the circle (the inner ring of the doughnut). The middle (inner ring) of the doughnut, is the space in which humanity can progress if the planet’s boundaries are respected. The outer ring

is the ecological ceiling, it constitutes the nine life supporting systems which should not be exceeded if we are to guarantee the well being of humanity. An overshoot of the ceiling will lead to 1) Climate change 2) Loss of biodiversity 3) Ocean acidification 4) Land conversion 5) Freshwater withdrawals 6) Nitrogen and phosphorus loading 7) Chemical pollution 8) Air pollution and 9) Ozone layer depletion. This Doughnut sums up explaining that countries need to balance their economic growth and work on environmental sustainability.

Amsterdam is the first city to adopt the doughnut economics model which focuses on establishing a circular city by 2050. The city’s chief objectives are to reduce the overall raw material consumption by 20%, reduce food waste by 50% by the year 2030 and vitalize sustainable material for construction. Recently, the city has signed a “Denim Deal” wherein three million jeans will be manufactured by 20% recycled textiles as it takes 8,000 liters of water to make a pair of jeans which is a major concern for the environment. Hence, Amsterdam successfully moves from idea to action.

In 2017, Kate Raworth wrote a non-fiction book, ‘The seven ways to think like a 21st century economist’. The book elaborates her concept of Doughnut economics, first developed in her 2012 paper entitled ‘A Safe and Just Space for Humanity’. The book provides some wonderful insights about the seven ways to think like a 21st century visionary economist:

1. Change the goal : The pursuit of our growth objective has to be reconciled with the objective of protection of the environment. The 21st century economics calls for, “Meeting the needs of all within the means of the planet and thriving in balance”

2. Nurture human nature: An economic man stands alone with money in his hand, calculator in his head and nature at his feet. Human nature recognizes that the brain is wired for empathy, cooperation, mutual aid and dependency on the living world. Hence with our efforts we all can thrive in the Doughnut’s sweet spot and nurturing space.

3. Get savvy with systems: Our economies are complex, adaptive and evolving. It is high time to stop searching for the economy’s elusive control levers and start becoming effective stewards. Economists are like gardeners tending to shape the economic garden as it evolves from mechanical equilibrium to dynamic complexity.

4. Create to regenerate: Today’s economies which are degenerative by default are in the loop of ‘take-make-use-loss’ process. We use goods for a while and then toss them away; pilling up tons of waste every single day. The 21st century economists need to convert the economies into ones which are regenerative by design. The principle of reuse, recycle, reduce, refurbish and restore should be every one’s goal.

5. Be agnostic about growth: Nothing in the nature grows forever, the need is to create economies that are allowed to mature and thrive, says Kate Raworth.

6. See the big picture: It time to write a new economic story fit for the century, one that sees the economy’s dependance upon society and the living world.

7. Design to distribute: The gap between the rich and the poor has been widening since last 30 years. The policymakers and the government must go beyond the idea of redistribution of income and explore ways of redistributing wealth which means investing in health, education, controlling money creation, business, ideas, land, technology, and knowledge.

Author is pursuing B.A Honours in Economics from Aligarh Muslim University.

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