Application Exercise 6f: ‘Doughnut Economics’
- If we are operating on the inside of the doughnut it means that our quality of life, both economically and socially, is below the optimal level. In other words, we are below the ‘sweet spot’ – in other words, we are yet to achieve the ‘safe and just space for humanity’.
- If we reside outside the doughnut, It means that overtime our quality of life will be compromised because we are using our resources in an unsustainable way. In other words, we use ‘too many resources and move beyond the outer edge of the doughnut into climate and ecological breakdown’.
- Growth in real GDP is the primary means by which we can improve our material living standards. It translates into a growth in incomes (on average) and provides households with a greater ability to afford those goods and services that are featured on the inside of the doughnut, such as housing, food, water, energy, health and education. This helps to establish a social foundation, but of course it is insufficient on its own given that a pure focus on GDP ignores other factors that provide for a strong social foundation, such as gender equality, social equality, income inequality, political voice, as wells as peace and justice.
- Growth in real GDP represents growth in the real value of production over time and it has the potential to become unsustainable if it grows too quickly or if appropriate measures are not put in place to protect against environmental damage and resource depletion. For example, without some form of government regulation to prevent excessive carbon emissions, it is likely to lead to long-term environmental damage that threatens future production and living standards.
- Excessive carbon pollution which accelerates climate change. A decline in the quality of air (air pollution), leading to a decrease in the health of the population. An unsustainable rate of freshwater withdrawals leading to an erosion of water quality and growth in water shortages. Land conversion that leads to a depletion of natural resources such as native forests.
- It might be difficult because the rate of technological advances might be insufficient to account for the growth in the world population and the requirement for more resources to sustain life.
- It represents another example of why a focus on real GDP (i.e. production of goods and services) can only capture one aspect of living standards – i.e. the ability to access goods and services and our material standards of living. Doughnut economics helps us to focus on the many limitations attached to real GDP as a measure of living standards given that it ignores a whole host of other factors that impact on our quality of life.