Doughnut Economics: Is GDP the reason for the world’s problems?

Chances are, even if you don’t have the slightest interest in economics, you’ve probably heard of the term “Gross Domestic Product” (or GDP for short). It’s essentially the tool we use to compare an economy’s output—and see how our country’s overall income measures up compared to the year before. It’s the primary indicator used to determine the health of an economy—domestic and global—and its continual growth is the goal of developed countries across the world.

It’s so embedded into our collective thinking that you’d be forgiven for believing it’s the most effective measure of progress available. The thing is, it isn’t. In fact, for the last 70 years, GDP has caused us to focus on the wrong things—which has resulted in some pretty dire social and environmental problems.

This is precisely what the Doughnut Economics Book Club discussed in our first two meetings, as we made our way through the Prologue and Chapter 1 of Doughnut Economics: 7 Ways to Think Like a 21st Century Economist by Kate Raworth. While these two chapters touched on a LOT of topics, their underlying theme was rather straightforward: If we hope to move into the Doughnut, we need to “Change The Goal”.

As Raworth outlines in her book, GDP is laden with flaws. On the one hand, it only acknowledges the market value for goods and services—and completely ignores the bigger picture (like, say, the role of the household in a well-functioning society). Second, it’s obsessed with this notion of eternal growth (if you look at the GDP curve, it only goes up)—and encourages us to do some crazy stuff in our quest to attain it.

Bottom line? This fixation on GDP isn’t working out very well for us—which is why we need to shift our focus. Enter, the Doughnut.

Raworth refers to the Doughnut as a 21st century compass—something that will allow us to divert our attention away from the goal of never-ending growth and toward a new goal of “dynamic balance” that will ultimately lead to “human prosperity in a flourishing web of life”.

To make the shift, however, we’ll have to pay attention to five key factors: population, distribution, aspiration, technology and governance. Specifically, we’ll have to:

  • Stabilize the world’s population, by ensuring everyone’s social needs are met (particularly, by making sure women have the power and resources to manage the size of their families);
  • Take steps to ensure the equitable distribution of humanity’s use of resources;
  • Collectively change our lifestyle aspirations to fit within the earth’s planetary boundaries;
  • Leverage technology in ways that allow us to effectively meet people’s housing, transport, water, sanitation, food and energy needs while staying within the ecological confines of the planet; and
  • Design governance frameworks that are equipped to address the 21st-century challenges we face on a local, national, regional and global level.

How, exactly, do we go about enacting this type of change? Well, that seems to be a story for another chapter. If you’d like to join us on our quest to learn more about Doughnut Economics—or if you’d like to participate in the Doughnut Economics bookclub on Thursdays at 1:30—you can do so on the Guelph: A Doughnut City Facebook page or our Slack channel. We hope to see you there!

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