The hole in the doughnut, and more economics

And of we go, to Kate Raworth speaking in Rotterdam, about her book and ideas on ‘dougnut economics’. The evening started well: at the entrance I overheard a conversation between two students: One saying: “what a lousy students we are, not going to lectures for half a year and yet we go to Kate Raworth…. “ Laughter… You can think a lot hearing that, but maybe its best after all that they did not follow those outdated economy courses….

The lecture was outstanding, well documented and convincing. Just like in her book it had a detailed analyses of the history of economical knowledge development, and how its manipulated and used. And of course the need for a new model. For which she proposes a interesting analyses, most essential is the already famous illustration , that acquired the name Doughnut: two circles, of which the outer circle shows were we exceed the planetary boundaries, the 7 critical global developments ( of which one is Co2 emissions causing climate change ) defined by the Stockholm Resilience Institute , and a inner circle depicting a social minimum, a set of requirements serving as basis fro a decent human life . Which link for a main part with the UN adopted millennium and sustainability targets.

In between we have to move, its the space available for us as humans to create a sustainable situation. The bars in the model show were we overschoot the planetary boundaries, or were we stay below the social minimum. And by the way, the planetary boundaries are global, affecting all of humanity, were social underscore are local, it hits certain countries and cultures, mainly developing countries. Not illustrated in the main picture, and which would give a confronting message, is in which topic areas countries in the industrialized world live way above the social minimum .Which is mainly the reason the planetary boundaries are overshooted. To be honest, its a brilliant illustration, a very compact summary of the state of the earth. And as Raworth invites, you can make a similar illustration for your country,, or even city . I see this happening , that it will be used as such.

In the elaboration , the underlying analyses how to stay inside the “doughnut”, Kate Raworth is much further than most other analysts in this area. She also sees that solar energy is ultimately the source driving the whole machinery, and presents a new economical model, in which this is integrated. Her analyses as well are to the point, about knowledge, education, poverty, stocks, social needs. The model anyway is very inviting for contemplations of many kinds, that are easy to understand and structured. Lets have a look at some of the model’s issues. Like the planetary boundaries. Its good to realize that these are effects, not causes. Its works well to measure the problems, but to create solutions its required to look at causes. Only looking at fighting effects can lead to new problems. Think of building more roads to combat traffic jams, that is a endless story. The same for some of these effects, but if we remove the cause, it will have much more impact. Though it no easy of course.

Next about the bottom-line, the inner circle. I wrote before that most of the sustainable strategies start from securing a set of needs and wants, and even from human rights… Think of Brundtland and ‘needs’. [1] However it makes a lot of difference of how high the bottom-line is set, and moreover, there are in fact no ‘rights’ Nature is based on survival of the fittest, and there is a maximum of what a certain system can cope with, or what earth can provide on a yearly continuing basis. So if we are with more, the equal potential share gets less. Think of a birthday party: if we are four, each has two pieces of the cake. If we are twenty we each have but a bite. In other words, the inner ring, the bottom-line in ‘needs’ does not exist, its variable: and with growing to 10 billion globally, the hole in the doughnut will slowly close in/ decrease… , the share of each of us will go down . Or maybe not , but in that case more planetary boundaries will be crossed… its a devils dilemma. In other words, or we live within carrying capacity, which will require sacrifices of everyone, especially us in the industrialized world, or live like ‘après nous le deluge’ , and see what happens further down the road…

But the how, is the question, how to live within the carrying capacity boundaries? For that in the first place we yet have to look at the current financial economy. And this is where everyone gets stuck. Everyone knows that the current economical model is not sustainable, but the interests are huge, and solutions are usually sought after in adaptations of the current model. Moving taxes from labor to products, parallel systems like CO2 credits, which will become scarce and will create another ‘market in the parallel economy, and so on. And as long as we educate students in the traditional economical knowledge, a fake system, nothing will change, at least not fast. Raworth showed a graph, depicting the courses in Dutch economical university studies; the ones that deal with modern economy, or circular economy, or organic economy etc, where mainly absent. But even is we would teach the right things, it would taken at least two generations before taking effect. Which by the way Jan Rotmans , Dutch transitions professor, also predicts for a major transition. But even then. For me the primary fault in the system is the fact that money itself has no foundation. : its just paper printing, that creates debt. Debt with the one taking the loan ( and debt to whom in fact? ) and with that debt buys stuff above the level what normally could have been acquired, creating a second debt in the earth stocks, above recovery rates of those sources. Its like a double lock, a double debt strangulation. Of the earth biosystem, and between people.

You can try to repair the financial economy as much as you want, but the foundation is missing. [2]

And of course, its people that have invented this system, and people that can change this. Which is our main problem, how are we as humans going to change our system that brought us all this wealth? How to get everyone convinced and involved? Raworth in her book spends significant attention to this subject, however, as she writes: .’our brains evolved to cope with with the near, the short term, and the responsive’. And thats a fact. And a tough nut to crack. Also in neuro science , as Swaab writes (‘we are our brains’) : we eat what ever we can get our hands on, its our nature , its in the genes. [3] Add to that emotions, interests, lack of knowledge, lock ins, and you enter a roller coaster, for which I don’t have a solution. ( and no understanding..)

My expertise is more on the physical side, not the economical or social side. And therefore mainly in defining the outer boundary of the doughnut, the definition of value in the system. As said, not looking at the effects, but at the causes. By the way, here Raworth also is only one of few people that look in the right direction, if she states that energy is main variable in the system : “Its a one way street of energy, nothing can move grow or work without that”.

But not only: also the other resources are in the game, its a mass-energy system: to make energy work, we need materials and vice versa. And materials are the limited fraction in our system, where energy is daily supplemented by the sun. More people should have look at the work of Robert Ayres, especially his book The Economic Growth Engine. [4] To the economical mantra of labor and capital he added resources in the calculations, and oh wonder, suddenly some of the unexplained economical moves and turns in history could be explained….

The upper boundary limit is clearly determined by a physical maximum in resources that can be delivered by the system in a sustainable way, that is a continuous maintainable flow into the future. Which can be translated into land, as production unit to transfer solar energy into useful forms, like food, energy and (renewable) materials. Land is as such the only real physical value , on which a economy can be based. And not added to ‘ capital, but land is the capital . Now thats precisely the item that has disappeared from economical practice. ( more next time) . And labor? Yes, but this also is land, land that feeds people and delivers the energy for labor.

The problem now is, as Raworth writes: everything is losing value, over time, except money…

The conclusions can thus be that we have to turn things around: That money should loose value, and all the other should profit, grow…. And where Raworth still urges economists to adopt new principles, I would like to pose: economists , how to get rid of them…! The amount of economists has also long ago crossed a planetary boundary. Is about time physicists takes over…! As is what I suggested the two students , that went to listen to Raworth: to change studies …

 

 

[1] article: http://www.ronaldrovers.com/not-people-but-resources-brundtland-2-0/

[2] article: http://www.ronaldrovers.com/the-growth-syndrom-a-pyramid-game/

[3] We Are Our Brains: From the Womb to Alzheimer’s by D F Swaab (Allen Lane), for £16.00 with free UK p&p, go to theguardian.com/bookshop.

https://www.theguardian.com/science/2014/jan/28/dick-swaab-sex-brain-theories-men-women-sexuality-womb

[4] The Economic Growth Engine: How Energy and Work Drive Material Prosperity, Robert Ayres, Benjamin Warr, 2009 .

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