Doughnut economics #8

Key idea #8: growth isn’t an infinite upward curve – we have to start asking ourselves what comes next.

Thanks to Rob Liu for granting permission to reprint this from the Conscioused website.

Buy Kate Raworth’s Doughnut economics  at Fishpond (New Zealand)

What’s the purpose of economics? Ask an economist, and she’ll likely say that the discipline helps to spur growth. But growth can’t last forever. In the end, something has to give.

So what do we do when the inevitable happens, and our economies stop expanding? It’s a question worth posing. After all, our current growth goals aren’t environmentally sustainable.

The Organization for Economic Cooperation and Development’s 2014 report projected only moderate long-term growth in the global economy. But even this “mediocre” growth would double total greenhouse gas emissions by 2060! And that’s not the only problem. Other evidence suggests that growth is beginning to plateau in high-GDP, low-growth nations like Japan and Germany.

The million-dollar question is whether GDP can be sustained during the transition to a “green growth” model. Can economies continue to grow even as they make the switch from fossil fuels to renewable energy sources like wind and solar power? The only other option is to embrace “de-growth,” and accept that GDP might slow down, flatten out or even go into reverse.

Perhaps the best course of action is to become less dependent on growth. One way of going about this would be to close tax loopholes.

Governments are obsessed with GDP because it allows them to raise revenue without hiking taxes. But lots of money simply goes untaxed. It’s estimated that around $156 billion is lost each year to tax havens – that’s more than twice the amount needed to end extreme poverty.

Another option is to make use of demurrage. At the moment, currency appreciates due to interest. If you have money, it makes sense to keep hold of it. The longer you sit on it, the more it grows – that’s the mindset of the financial sector. But that also means that money ends up getting trapped in that sector rather being invested in other things. But what if savings didn’t appreciate, but became less valuable the longer they went unspent? That’s the intriguing idea behind demurrage.

It’s a potential game changer. People would have an incentive to spend their money rather than squirreling it away. Despite sounding like a radical new policy, it was almost implemented in the US during the Great Depression!

These are just some of the ways to get us into the sweet spot inside the Doughnut. But however we do it, we have to kick our addiction to endless economic growth. Our planet depends on it.


The key message in this book:

We need to rethink economics to meet the challenges of the twenty-first century. The Doughnut is a model that might just put us on the right path. It shows us how we can build economies that serve our social needs without overtaxing the planet’s limited resources. If we manage to get inside the Doughnut’s safe space, we’ll be well on the way toward a world in which both humanity and nature won’t just survive, but thrive.

Actionable advice:

Think globally, act locally.

Reforming something as big and complex as the global economy is a daunting task. But small changes can make a difference too. You can help make the world a better place by buying sustainable coffee or choosing an ethical bank. Once you start looking, you might be surprised by how many different ways there are to transform the world around you!