- Date published:
11:54 am, April 14th, 2017 - 10 comments
Categories: Deep stuff, economy, sustainability, uncategorized - Tags: economy, embedded economy, george monbiot, kate raworth, sustainability, sustainable economy
A model for a sustainable economy. Something to ponder on a wet holiday weekend. From The Guardian:
Finally, a breakthrough alternative to growth economics – the doughnut
Instead of growth at all costs, a new economic model allows us to thrive while saving the planet
… Faced with a multifaceted crisis – the capture of governments by billionaires and their lobbyists, extreme inequality, the rise of demagogues, above all the collapse of the living world – those to whom we look for leadership appear stunned, voiceless, clueless. Even if they had the courage to act, they have no idea what to do.
The most they tend to offer is more economic growth: the fairy dust supposed to make all the bad stuff disappear. Never mind that it drives ecological destruction; that it has failed to relieve structural unemployment or soaring inequality; that, in some recent years, almost all the increment in incomes has been harvested by the top 1%. As values, principles and moral purpose are lost, the promise of growth is all that’s left.
In Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Kate Raworth of Oxford University’s Environmental Change Institute reminds us that economic growth was not, at first, intended to signify wellbeing.
The aim of economic activity, she argues, should be “meeting the needs of all within the means of the planet”. Instead of economies that need to grow, whether or not they make us thrive, we need economies that “make us thrive, whether or not they grow”. This means changing our picture of what the economy is and how it works.The central image in mainstream economics is the circular flow diagram. It depicts a closed flow of income cycling between households, businesses, banks, government and trade, operating in a social and ecological vacuum. Energy, materials, the natural world, human society, power, the wealth we hold in common … all are missing from the model. The unpaid work of carers – principally women – is ignored, though no economy could function without them. Like rational economic man, this representation of economic activity bears little relationship to reality.
So Raworth begins by redrawing the economy. She embeds it in the Earth’s systems and in society, showing how it depends on the flow of materials and energy, and reminding us that we are more than just workers, consumers and owners of capital.
The diagram consists of two rings. The inner ring of the doughnut represents a sufficiency of the resources we need to lead a good life: food, clean water, housing, sanitation, energy, education, healthcare, democracy. Anyone living within that ring, in the hole in the middle of the doughnut, is in a state of deprivation. The outer ring of the doughnut consists of the Earth’s environmental limits, beyond which we inflict dangerous levels of climate change, ozone depletion, water pollution, loss of species and other assaults on the living world.
As well as describing a better world, this model allows us to see, in immediate and comprehensible terms, the state in which we now find ourselves. At the moment we transgress both lines. Billions of people still live in the hole in the middle. We have breached the outer boundary in several places.
Well worth reading the whole piece in The Guardian.
Homer was right all along
Excellent. And a strong argument against the Randian fallacies that are screwing our world over, and the lives of the majority on the planet.
The average, run of the mill economist and politician with their focus upon money has lost sight of the economy.
And rich people who use that model to excuse their sociopathic behaviour.
The last bit is wrong. The proxy goal is actually profit.
Quite correct Draco. Most economists today – if not all – especially those adopting the Chicago School model – follow the Adam Smith WON model as it has been twisted by Milton Friedman in Free to Choose. I have a close relative who has a BCom after studying during the 2000s, and is now doing post grad stuff – talk about a closed mind – didn’t even recognise the name John Maynard Keynes. Won’t listen when I try to explain about Adam Smith’s Theory of Moral Sentiments, or about Robert Owen’s Co-operative movement and it’s very successful Mondragon System descendant.
Sadly they all seem to be locked into the lasse faire capitalist model. This despite the fact that co-ops out last LLCs on average by triple the number of years – most of NZ most successful enterprises started as co-ops.
While Monbiot seems to be trying to reshape the standard parameters of the model, is it just a new spin on the tired old LFC model? or is it something like the communitarianist model?
Perhaps those of better economic knowledge could share – it’s not at all my area of expertise.
This is direct, well-put, factual, intelligent stuff.
The aim of economic activity, she argues, should be “meeting the needs of all within the means of the planet”. Instead of economies that need to grow, whether or not they make us thrive, we need economies that “make us thrive, whether or not they grow”. This means changing our picture of what the economy is and how it works….
Simon Kuznets, who standardised the measurement of growth, warned: “The welfare of a nation can scarcely be inferred from a measure of national income.” Economic growth, he pointed out, measured only annual flow, rather than stocks of wealth and their distribution.
Monbiot writes “We cannot hope to address our predicament without a new worldview.”
The four cornerstones of society used to be politics, religion, economy, and culture. Currently, this seems to have shrunk to one single pillar, the most tangible one: economy.
Indeed, economic growth can provide the necessary conditions for thriving, whatever that might mean, but it cannot fill the gaping holes left by the other cornerstones, particularly politics and religion; Maslow’s pyramid was not flat.
Raworth’s economic model will not, by itself, change the focus on individual success/profit, the relentless competition between individuals, the distrust between people, and the growing loneliness all this causes. Paul Verhaeghe, a professor of clinical psychology and psychoanalysis, regards neoliberalism as a major cause of psychological disorders and mental illness. People, especially young people, have lost a sense of belonging, a sense of purpose, no authority to fight against or ask for help, and who have been left to fight lonely fights for themselves in an ever-increasingly cut-throat society where the winner takes all. No wonder the number of youth suicides is unacceptably high.
Our predicament is not caused by economic models, by neoliberalism for that matter. Our problem is that we threw away the other cornerstones without replacing them.
As long as we keep framing it in terms of economic ‘wrongs’ or ‘rights’ nothing will fundamentally change IMO; it might get better briefly and then it might get worse again, economically speaking, of course.
Monbiot has previously touched on where we might find a possible way forward, i.e. in collective engagement and community-focussed endeavours. These may provide more diffuse, non-localised (fluid) forms of the old patriarchy & (political) authority, religion/church, and cultural identity – more advanced forms, who knows …
There seems to be a lot of this in Adam Smith’s “Theory of Moral Sentiments” – he basically said that human (in 1777 I think he had a fairly narrow definition of human) community involvement and happiness depended on a balance between individuals connections and dealings with (a) family and clan (he was Scottish after all), (b) community and church (or Kirk as he would have called it), (c) business and (d) the wider world as he/she knew it.
As your professor correctly updates this quadrant – politics, religion, economy & culture – and as Smith pointed out – his Wealth of Nations was directed at “business” only and could not nor should ever be direct towards the other facets of human existence.
Early 21st century and late 20th century human focus has been far, far too much on business/economics as if this was the sole reason for our existence.
It’s nice to see that not everyone has swallowed this fallacy hook, line & sinker.
Thank you for your comment.
I have not read the works by Adam Smith; many old writings and ideas stand the test of time because they gravitate around a discernible truth and/or they have a timeless (and priceless!) quality or beauty. Specifics change over time but the essence remains the same.
Verhaeghe argues that our identity is a socio-cultural construct that is based on the dominant discourse of our culture (i.e. neoliberalism). Our identity is the sum of our social relationships: 1) the opposite sex; 2) inter-generational & authority; 3) intra-generational & equals. These relationships are always (!) driven by our ethics that, in turn, also are a socio-cultural construct.
I think this might indeed be consistent with Adam Smith.
In any case, it provides a useful paradigm for understanding the current conundrum that is neoliberalism and the apparently flailing democracy.
We had a balanced economy in the 1960-1970’s until the madman Muldoon got his hands on the country’s purse string and embarked on his stupid Think Big Projects, subsequently followed, by Rogernomics, Ruthanasian Economics, Jenacide Economics and Keysian Economics?
Not entirely right HI, the think big projects were started under – shock horror – Norm Kirk who wanted to extend NZ independence from imports by further developing our own control of our resources – especially oil and steel. Muldoon just extended this concept further.
Remember that after the Great Depression of the 1930s, and during and because of WWII – NZ developed a whole range of internal industries to make us self-sufficient so we weren’t reliant on imports – clothes, shoes, tyres, cars, trains, aircraft, etc.
Trouble was Muldoon was a cost accountant who tried to balance the books all the time and didn’t use Keynes very well, so he turned into a control freak and we got the wage-price freezes, leading to Rogernomics etc. That is we went from one extreme to the other.
Now we’re left dependent on overseas cheap and nasty imports and on our small component of primary produce exports.
This article seems to provide an alternative to the present economic ideals, but it doesn’t say what the ultimate goal is. Without a clearly defined goal all theory is kinda irrelevant.