It’s not every day you come across an economics model that gets you all fired up, that makes you want to change things, in your home, your business, your community; and yet, recently, a great book on economics has done just that for us.
Kate Rayworth’s ‘Doughnut economics’.
Based on the idea that our challenge as a species in the 21st century is to provide social wellbeing for the inhabitants of planet earth without destroying its ecosystems, Kate Rayworth imagined a visual framework shaped like a doughnut: the planetary/ ecological limits are on the outside edge whilst the social/human wellbeing necessities are on the inner rim (the hole).
The perfect sweet spot or ‘doughnut’ in between these boundaries is where humans are able to live comfortably without damaging the planet. In her book entitled ‘Doughnut economics: 7 ways to think like a 21st century economist’, the British economist outlines some of the ways we can change our philosophy and our approach to economics to reach this balance.
1. Change the goal: from GDP growth to the Doughnut.
Let us stop using GDP growth as the sign of a strong economy and start using other factors (like social wellbeing and environmental health) to measure the success of a nation and its policies.
2. See the big picture: from self-contained market to embedded economy.
Economic models to date have not taken into account that the economy is embedded in the natural environment (where the ‘free’ resources come from) and society at large, and is not a simple circular flow (workers- production- wages- spending). These limitations have helped to reinforce the neoliberal narrative of the efficiency of the market, the incompetence of the state, the domesticity of the household (and the free labor of domestic workers) and the tragedy of the commons (if ‘no one’ owns it we can all empty it- like the sea- or privatize it).
3. Nurture human nature: from rational economic man to social adaptable humans.
We need to change the way we see ourselves. The image we have of ourselves as individualistic materialistic humans can be turned around to cooperating, environmentally-conscious beings. We have done this in traditional societies in the past where social collaboration, community support systems and sacred forests have always existed.
4. Get savvy with systems: from mechanical equilibrium to dynamic complexity.
The simple model of supply and demand just does not do justice to the complexity of economic systems. We need to embrace the chaos of an ever-evolving system.
5. Design to distribute: from ‘growth will even it up again’ to distributive by design.
Put simply the ‘trickle down system’ of neoliberal policies just does not work. Our systems need to be planned to be more equal and distributive by design, including when it comes to wealth, land, technology, knowledge and power.
6. Create to regenerate: from ‘growth will clean it up again’ to regenerative by design.
Waste and pollution are not fatalities, we have the power to design things that can last and be repaired, reused, remanufactured, regenerated, and not just thrown away. That’s what nature does.
7. Be agnostic about growth: from growth-addicted to growth-agnostic.
We might be able to change the goal of GDP growth but the addiction to it will be hard to overcome. ‘Today we have economies that need to grow, whether or not they make us thrive; what we need are economies that make us thrive, whether or not they grow’. This book inspired us and guided the way we set up our business.
How we applied number 5 to our business model.
Rayworth’s ‘design to distribute’ way of changing the world really resonated with us. We design advanced communication tools for communities and then sell advertising space on these platforms, so, the more the members of the said-communities use our tools, the more these advertisement spaces are worth. When we thought about this, we realized that the community members were the ones creating the income by being active on the platform and so it seemed fair that they have a share in the benefits reaped. So, we designed a business model in which we would commit to sharing a portion of our profits with the communities that helped us make the income. That way the communities could thrive and grow, the members would have even more incentive to use the platform- they would be making money for their community- and we would be a part of a virtuous circle to builds more social capital and, hopefully, we would inspire others to emulate us.
How we realized it also tied in with number 2 and number 3.
In re-reading the 7 ways, we realized that our initiative to be distributive by design in our business model also made us actors influencing the wider social context in which the economy is ’embedded’ and this nurtured a different aspect of human nature. Business does not exist in a vacuum and businesses, especially local ones, thrive when the social network and the local economy thrive. Communities are the pillars of a healthy society so we feel that by supporting communities both by giving them better communication tools (for free) and by sharing our profits with them, we are supporting a healthy social fabric.
Additionally, by providing businesses with a socially responsible advertising space- one that respects the right to privacy of its users and does not mine and sell their data to the highest bidder at their expense-, we feel we can contribute to a healthier and more compassionate economic exchange. We want to attract businesses interested in being involved in supporting communities. Ones that would rather advertise in a niche group to hit their target audience rather than use data mining and that are excited by the prospect of contributing to a more socially and environmentally conscious business model. We hope we appeal to the more cooperative and collaborative side of the human nature in the people running the businesses we work with and want to attract.
We also wanted to do something towards number 6.
As a service provider, we do not produce objects. If we did though, we’d like them to last as long as possible, create minimal waste, and we’d rent them out rather than sell them, as shown in this excellent new documentary “Backlight : the end of ownership”. Never the less, we found it made sense for us to consider our company responsible for doing our bit towards a healthier planet. Since this is not our area of expertise, we decided we would support those who are already working hard to protect and regenerate our natural environment. We included putting aside a portion of our profits to help finance environmental projects in our company charter. Every little helps.
The road is still long but we’ll get closer to the doughnut if everyone starts taking small steps.
We know we still have a lot more we can do- and must do- but we do hope that, already, what little we are doing can help inspire others to do the same and rethink their businesses’ objectives. The time has come when the sign of our success should not simply be how much profit we generate- at any cost- but: profit, yes, but only if it goes hand in hand with building social capital and a positive impact on regenerating our fragile natural systems. Changing our goals is the first big step of many small steps towards being in the doughnut.
Positive final thought.
Amsterdam city government has embraced the Doughnut economics model to ‘rebuild’ the city after the co-vid crisis. Rayworth’s think tank Doughnut Economics Action Lab (DEAL) are guiding the new approach. Other municipalities have also contacted the team to start taking steps to bring their cities into the 21st century economic philosophy. People are taking notice and Rayworth’s ideas are becoming policies. Let’s shift our economies to the doughnut.