Kate worth

The book discusses the contrast between economic theory and the actual state of the world in terms of wealth inequality and the dire threats posed by climate change. The author writes that the future leaders of 2050 are being taught an economic mind-set that is rooted in the textbooks of 1950, which in turn are rooted in the theories of 1850. Given the fast-changing nature of the twenty-first century, this is shaping up to be a disaster.

Instead of abstract theories, what if the aim  of  economics  was  focused  on―humanity‘s long-term goals?‖ From this, the author introduces the idea of the Doughnut.

In its hole lie the foundational needs that everyone faces – water, food, health, education, political voice, peace and justice, income and work, energy and so on. On the outer rim of the doughnut are the things that threaten the earth – climate change, ocean acidification, chemical pollution air pollution, biodiversity loss and other ecological threats.

The ecological-ceiling bounds critical planetary degradation such as climate change and biodiversity loss. Between those two rings is the Doughnut itself, the space in which we can meet the needs of all within the means of the planet. In other words, the thick part of the Doughnut will be ‗the safe and just space for humanity‘.

While this vision may sound less contentious, the author shares the dilemma involved in realizing it. She writes that no country has ever ended human deprivation without a growing economy. And no country has ever ended ecological degradation with one. She writes that today, we have economies that want to grow, whether or not they make us thrive. Instead, what we need are economies that make us thrive, whether or not they grow.

The author professes the ideas like ―See the big picture,‖, ―Nurture human nature,‖ and ―Be agnostic about growth.‖ The central idea of the book is that we must build an economy that makes the world a better place for human beings to live in, while also taking care to ensure that the Earth remains habitable.

The author urges responsible attitude towards ―limits to growth‖. The author argues for the equalization of endowments rather than expansion of policies that redistribute current income.

Kate Raworth then lists seven ways of thinking about the economy that will help us manage common needs such as water, food, income – the things in the hole of the doughnut – so that humanity lands in the sweet spot rather than drifting past the outer ring – the ecological ceiling — where phenomena like ozone layer depletion thrives.

She writes that rethinking economics is not about finding one (a model) because it doesn‘t exist; it‘s about choosing or creating one that best serves our purpose- reflecting the context we face, the values we hold and the aims we have. As humanity‘s values, context and aims continually evolve, so too should the way we envision the economy. Her seven ways of thinking are:

1.   Change the Goal: From GDP to the Doughnut

A more sustainable and encompassing guide to economic success starts by asking the question: what enables human beings to thrive? The answers are found within the doughnut. The doughnut is a way to transition from growth for the sake of growth to providing for every person‘s needs while protecting the planet we call home.

2.   See the Big Picture: From Self Contained Market to Embedded Economy

Mainstream economics depicts the whole economy in a single image – the circular flow diagram. While it accurately depicts the flow of goods & services, labour & capital, wages & profit and consumer spending between households and business; it fails to address the energy and materials on which the economy depends and the social context in which it exists.

Instead of viewing the economy as a unilateral, it must be thought of as a tool that‘s embedded within nature, partnered with the state, fuelled by trade, serviced by finance and exists to improve society in general. If the 21st century economy were to be viewed as a play, the cast should look something like this:

Earth; which is living, so respect its boundaries

Society;   which    is    fundamental,    so nurture its connections

The   Economy;  which   is   diverse,   so support all of its systems

The Household; which is core, so value its contribution

The Market; which is powerful, so embed it wisely

The Commons; which are creative, so unleash their potential

The State; which is essential, so make it accountable

Finance; which is in service, so make it serve

Trade; which is double-edged, so make it fair

Power; which is pervasive, so check its abuse

3.   Nurture Human Nature: Embrace Complex, Social and Adaptable Humans

While the monotonous rational economic man may create more immaculate economic equations, it is not a fair representation of our economic realities. It is time to redraw the entity at the heart of economic theory (humans) as people who thrive by connecting with each other; and within the living planet we call home.

4.   Get Savvy with Systems: From Mechanical Equilibrium to Dynamic Complexity

Say farewell to economy-as-machine and embrace economy-as-organism. Let go of the imaginary controls that promised to pull markets into equilibrium and instead, get a pulse of the feedback loops that keep them continually evolving. The economy is not a stable, mechanical  system  populated  by  a―rational economic man‖ that can be controlled with simple levers like adjusting interest rates or printing more money. It is a complex, adaptive system that is made up of diverse humans who are dependent on the dynamic, living planet we call home.

We need to embrace the always-evolving system that is our economy and understand that we cannot control what happens, but we can design (and redesign) the parameters that define it.

5.   Design to Distribute:      From Growth- Centrism to Distributive by Design

Starving portions of the population of the money and resources they need to lead full lives not only amplifies the strain on social welfare programs, but dampens those people‘s ability to be productive members of an economy.

She writes that rather than wait for growth to deliver greater equality, 21st century economists must design distributive flow into the very structure of economic interactions from the get- go.

The author also mentions the role of commercial banking in fractional reserve system. She writes: ―In the majority of countries, the privilege of creating money has been handed to commercial banks, which create money every time they offer loans or credit.

As a result, more money is made available only by issuing more interest- bearing debt, and that debt is increasingly being channelled into activities such as buying houses, land or stocks and shares. Investments such as these do not create new wealth that generates additional income with which to pay the interest, but instead earn a return simply by pushing up the price of existing assets.

6.   Create to Regenerate:    From Growth- Obsession to Regenerative by Design

The time has come to relinquish the search for economic laws that paint a picture of the results we desire; and rather find real solutions that deliver the results we need. To do so, we must re- frame our understanding of the word value. The author writes that economic value lies not in the through-flow of products and services but in the wealth that is their recurring source.

Protecting that source of economic value means weaving regenerative design into corporate ecology and replacing linear material flows with circular systems of resource management; cradle to cradle over cradle to grave. The author urges to design the economic policies and institutional innovations -for enterprise and finance, for the commons and the state – that will unleash the extraordinary potential of the circular economy and regenerative design.

Instead of aiming merely to ‗do less bad‘, industrial design can aim to ‗do more good‘ by continually replenishing, rather than more slowly depleting, the living world. Why simply take nothing when you could also give something?

7.   Be Agnostic about Growth

The status quo of mainstream economic theory is that never ending growth is a must. But this is an unrealistic concept, nothing natural grows forever. When growth is the primary metric by which we gauge economic progress we lose sight of why we created an economy in the first place – human prosperity. But giving up on growth is easier said than done because we‘re addicted to it. The author explains that agnostic about growth implies that ‗promote human prosperity whether GDP is going up, down or holding steady‘.

The ideas covered by the author resonate well with Islamic economics which gives primary emphasis to need fulfilment, holistic objectives, distributive justice, equity and fairness, contentment, cooperation, stewardship, simplicity, compassion and sharing while taming our desire for lust, greed, boastfulness, pride, ego and selfishness.

Islamic economics not only has tools set in terms of institutions as rules and institutions as systems, it also offers a worldview which provides lasting motivation and incentives to adapt and recondition the preferences in a humane way.