On the fourth anniversary of the Rana Plaza disaster, and taking the publication of Kate Raworth’s Doughnut Economics as his cue, Maurice Macartney calls for a move towards global economic democracy
“The social responsibility of business”, said free-market evangelist Milton Friedman in 1970, “is to increase its profits”.
Profits first, profits above all, profits as a ‘social responsibility’, overriding any other possible responsibilities. There could scarcely be a clearer articulation of the gospel of the crank economy. Economists and politicians of a certain bent (though by no means all) embraced this as orthodoxy, and over the next few decades skewed the economy (and politics) towards the overriding goal of increasing corporate profits, often by disempowering those at the base of the economic pyramid. The system that cranked rewards for the profit-makers up and pushed ‘costs’ – such as workers’ wages, terms and conditions, pollution controls and so on – down, was defended not just in economic terms but also as an almost moral imperative. On the fourth anniversary of the collapse of the Rana Plaza building in Bangladesh, an industrial accident that took the lives of over 1,100 garment workers, it is perhaps worth rethinking the morality and even humanity of this globally dominant paradigm. The line from Friedman is quoted in a new book by Kate Raworth, Doughnut Economics: Seven Ways to Think Like a 21st Century Economist, a work which undertakes just such a rethinking.
Beyond Crank Economics
In brief, her argument is that we have to move away from a linear model of the economy premised on endless exponential growth to one shaped rather like a doughnut. The hole in the middle represents a state of deprivation that leaves many people falling short of basic human necessities. The outer edge of the doughnut represents the limits to the natural world’s capacity to regenerate: go beyond this and you push the ecosystem into catastrophic collapse, across a range of measures such as fresh water depletion, ocean acidification, nitrogen and phosphorous poisoning, and of course climate change.
“Between those two rings”, says Raworth, “is the Doughnut itself, the space in which we can meet the needs of all within the means of the planet”.
It may seem a quirky, even trivial image with which to combat the globally dominant paradigm, but as Raworth herself stresses, orthodox neoliberal economics itself relies on certain simple but potent images – from Kuznets curves to the ‘scissors’ of supply and demand, to the apparently ‘gently’ upward-sloping exponential curve that sets out the (impossible) vision of limitless GDP growth – to get their message across. And the message is that endless growth is good, regardless of the inequality or pollution that results from its pursuit. Growth, or so its adepts believe, will eventually (like jam tomorrow) cure the very ills it causes.
Since the economic crash of 2008, as Raworth notes, even many formerly devout believers have come to doubt this story. Indeed, she is able to cite a list of writers from a range of disciplines whose texts would amount to a foundation course in new economic (and political) thinking for the 21st Century (see below).
To get into the Doughnut, Raworth argues, we will have to get away from our fixation on the dominant way of measuring economic progress – growing GDP – and move towards both a “far more equitable distribution of humanity’s use of resources” and a much more “circular” economy.
Raworth’s vision for the economy to come is one in which the state, the commons, and the markets (yes, socially embedded, well-regulated markets still have a key role) operate in balance. To make the shift to such a system will require close attention to system dynamics, with its circulatory flows and feedback loops, rather than the linear, mechanical model; it will mean moving from an extract, use up and dump model towards a circular economy, which, like nature, does not produce ‘waste’ as a side-effect, but uses the outputs of one process as food for the next, by design, in a continuous flow from cradle to cradle. The economy to come will not be redistributive but distributive; it will not be extractive but regenerative; and we must begin to build a politics designed to bring that about.
In one key passage, Raworth notes that you will scarcely find the word ‘power’ in modern economics textbooks, except, perhaps, in an analysis of electricity sector reform. But power relations are everywhere, running through every aspect of human life. The orthodox economic model simply skirts the issue. For Raworth, one element in particular demands attention: “the power of the wealthy to reshape the economy’s rules in their favour”.
It is a crucial insight, and one shared by a growing range of thinkers and actors. Robert Reich, in his most recent book, speaks of “the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs”.
Bernie Sanders puts with characteristic vigour: “if billionaires are freed to give unlimited sums of money to candidates, it will mean in no uncertain terms that those candidates become nothing more than paid employees of their sponsors”.
Global Economic Democracy
If we are to make the transition away from the dominance of the crank economy, we have to realise that the phrase ‘money is power’ is not a metaphor. Politics and the economy are not separate spheres: they are both about the distribution of power. Separating politics and economy out is a political move, and one that is part of the problem. It has helped lead us to the crises we are living through. It is, at heart, anti-democratic.
In effect it says to the majority of the citizens ‘you are of equal political status – your vote counts for as much as the wealthy – but we are going to hand control of the economy to some (highly rewarded) experts who will run it as they think best. It is for your own good. And if inequality increases and the environment is degraded, if your factories are shut down and your farm-gate prices sink below the cost of production, well, sorry, but it’s not a political (democratic) matter: there is no alternative’.
But you don’t have to subscribe to the ideas of Karl Marx to know there are, and always have been alternatives, from Keynes through JK Galbraith to Steve Keen and others. The neoliberal turn that began in the 1970s and picked up pace with the end of the Cold War was always a political project, not just a helpless response to iron economic necessity. Even had it been necessary at one stage, the onset of catastrophic climate change, the global economic crash of 2008, as well as the all too literal crash of the Rana Plaza building on 24 April 2013, should have made it obvious that we urgently need a paradigm shift.
Raworth’s book is a valuable contribution to just such a shift. Appended below are a few other suggestions. But if there is to be a paradigm shift it won’t come about through reading alone. Indeed if Raworth’s book had nothing more to recommend it than the series of examples of innovators at work (though it very much does) it would be worth reading.
If the currently dominant model cranks power vertically to the top (by putting pressure down at the bottom), then the answer is to shift the gearing so that the transmission mechanisms start spreading the power horizontally. The answer, that is, will be democracy. Not the first-past-the-post, vote once every five years kind of democracy, but democracy that runs from the grassroots all the way to the top of the political tree (rather than vice-versa). We need to ensure that much more wealth and power begins to circulate around our local economies. At the same time, we have to rethink what our ‘local’ economy means.
If the shirts on our backs are stitched together by garment workers in Bangladesh, then they, too, are our neighbours. It is now well understood that we have a ‘carbon footprint’ that stretches well beyond our geographical location: it is equally the case that we have a social footprint that is not confined to our immediate vicinity.
But if our social and environmental footprint stretches out globally, then so too does our power.
We live in a global neighbourhood; our way of living affects our neighbours, and they affect us. It is the choices that we make, collectively, which shape the global economy. So we need not wait for a paradigm shift to be handed down from above: we can begin the transition here, now.
Find your nearest cooperatives and support them; join a trade union; save your money in a responsible bank; buy ethically sourced and certified goods; use public transport and demand investment in the network. Demand of your representatives in your local, regional, national and international political forums: stop turning the crank; start building economic democracy by injecting power horizontally, circulating through the grass roots of our local political economies and spreading into our wider, global neighbourhood.
Each action may seem small, almost trivial, rather like the image of the doughnut itself; but democratic movements – the Chartists, the anti-slavery campaign, the Civil Rights movement – always start with a few and then spread, sometimes in the teeth of fierce resistance.
That, after all, is what people-power is all about.
24 April 2017
Global Economic Democracy: a short starter pack
Klein, Naomi (2007), The Shock Doctrine: the Rise of Disaster Capitalism, Allen Lane, London.
Klein, Naomi (2014), This Changes Everything: Capitalism vs. the Climate. Simon and Schuster, New York.
Leonard, Annie (2010), The Story of Stuff: How our Obsession with Stuff is Trashing the Planet, our Communities, and our Health – and a Vision for Change, Free Press, New York.
Mason, Paul (2016), Postcapitalism: A Guide to Our Future, London, Penguin
Meadows, Donella, Meadows, Dennis, and Randers, Jorgen (2004) The Limits to Growth: the Thirty Year Update, Chelsea Green Publishing Company.
Raworth, Kate (2017), Doughnut Economics: Seven Ways to Think Like a 21st Century Economist, Random House Business
Sandel, Michael (2012), What Money Can’t Buy: The Moral Limits of Markets, Penguin, London.
Sanders, Bernie (2016), Our Revolution: A Future to Believe In, Profile Books, London.
Wilkinson, Richard, and Pickett, Kate (2010), The Spirit Level: why equality is better for everyone, Penguin, London.