Post No. 8450
Date uploaded in London – – – 4 August 2020
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Books Indians Should Read Chapter – 2 – Part 2
Doughnut Economics
R. Nanjappa
Economics: dismal science
Over the years, in their zeal to model economics after a ‘science’ such as physics, economists narrowed their focus to just the money making aspects of society, divested it of all moral or ethical considerations, deprived it of even an ultimate purpose. It became economy for its own sake.
For this, they reinvented man. They conceived of an ‘economic man’- Homo Economicus- a rational, calculating, benefit or utility maximising animal. He was operating in an economic world, which was abstracted from society. Only economic interests counted. They dealt only with economic activities as if they were being carried out in a vacuum! No other goal mattered.
Enter GDP
There were two other developments. In the 1930s, as America was grappling with depression, they wanted to measure how their income was moving!
Simon Kuznets.www.nobelprize.org
The American Congress asked economist Simon Kuznets to devise some method, and he came up with the idea of Gross National Product! This caught the world’s fancy and in its various versions such as GDP, became the universal measuring rod of the economists. Kuznets himself said that “the welfare of a nation can scarcely be inferred from a measure of national income”, he himself became a critic of that measure, but no one was caring.
Circular flow
Then along came Paul Samuelson who revolutionised the teaching and popularised the study of economics through his 1948 text book which has been studied by millions of students worldwide! Through graphs and charts, it has promoted the study of economics as if it were an exact science! Particularly innovative was the diagram of the circular flow of the economy! This book is still in print in its 20th edition! (2019)
A basic diagram of circular flow of income in the economy. Modified from Samuelson’s 1948 model.
In the meantime, economics has gained position as the king of the social sciences, and even a Nobel memorial prize has been instituted by somebody! People have been reduced to the position of customers or consumers- whether one is availing of hospital care or legal advice, or simply purchasing ice cream cone!
As Martin Luther King, Jr once remarked:
“A person participates in this society primarily as an economic entity. At rock bottom we are neither poets, athletes, not artists; our existence is centered on the fact that we are consumers, because we must eat, and have shelter to live “
As we see the rise of economics as a ‘science’, and the world as it is, we cannot but be struck by one fact: the distress of the world is in direct proportion to the rise of economics and the economists!
Doughnut Economics
Kate Raworth, an Oxford economist examines the issues connected with how economics works in the world, and is practised by the mainstream economists, in this book, published recently
Published by Random House Business Books, London. April, 2017.
Cover shown here for purely educational purposes.
Seven deadly economic sins
Raworth pinpoints seven ways/areas in which mainstream economics has misled humanity and caused distress and havoc worldwide. And she proposes alternatives, drawing from the latest research and insights from a large number of connected disciplines.
– Exclusive focus on growth and GDP as its measure has led us away from the real purpose of the economy. There is enormous inequality of wealth and income not only among nations, but within each nation itself. It is well known that 1% of the people own 99% of the wealth of the world. 20% of the people of the world live in abject poverty and state of deprivation. We have to mind more than growth and GDP.
-Economy is not a closed system by itself. It is embedded in society, which itself is embedded in the Planet Earth which is a closed system. As the planet itself is finite and closed, it is just not possible to have endless growth. It is here we have to think of the doughnut, and not the circular flow.
The embedded economy!
Source: Kate Raworth and Marcia Mihotich
Shown for purely educational purpose.
We have to think of more than the economy, while dealing with the economy.
– Man is not a mere calculating animal. Man has social instincts and higher values than mere economic calculation. Society has to nurture man as a whole, and not simply to cater to his economic interests or instincts. Adam Smith showed us that “we love to truck, barter and exchange, but he was also right that we and our societies flourish best when we display our ‘humanity, justice, generosity, and public spirit’. “ In the name of economics, we should not kill the greater man, and destroy his society.
-The prevailing economic system invariably promotes the twin evils of “growing social inequality and deepening ecological degradation.”
– “these trends echo conditions under which earlier civilizations… have collapsed.”
The economy does not automatically reach any equilibrium- it is the resultant of diverse forces and factors, all in a state of dynamic operation. Man’s economic activity directly interacts with the planetary ecological systems and forces, and in many vital areas, we have crossed the stage of critical tolerance.
Source: Kate Raworth and Christian Guthier/ The lancet Planetary Health. Image used here for purely educational purpose.
This illustrates the current state of the results of our economic systems as they operate. Billions of people worldwide lead a life of deprivation, while the world economy as a whole has breached bounds of ecological safety in several areas.
– Growth does not automatically lead to or create equality. If anything, growth as it is now pursued has clearly led to concentration of wealth and income in ever narrower bands. Governments live by debt and this adds to the wealth of the wealthy! Increasing automation in industry leads to even more concentration of wealth and shrinking job opportunities. In the name of intellectual property rights, even systems of knowledge which have been in the ‘common domain’ of people are cleverly and unfairly appropriated by a few.
To be continued *****
TAGS – 7 Deadly Economic Sins
Tamil and Vedas 