Doughnut Economics – Quam Oeconomica

The Search for Oeconomica Phase III

The essence of Kate Raworth’s excellent book, Doughnut Economics, is that economics has to move from an understanding of the world in 18thor 19thC terms (based on a mechanical set of analogies) to a 21stC understanding based on how we understand evolution, our knowledge of systems theory and complexity.

Doughnut-Economics

In simple terms, the book suggests, that in order to develop from a perpetual journey to increase GDP and move to a world economy that “Thrives in balance”, we focus on critical issues such as inequality, changes in banking, CO2, new metrics and many other changes via a vast number of small experiments that will, under conditions of complexity, generate changes in our direction and potentially move us from this Phase of our economic experience (Phase II) via a phase transition to another. However, the range of changes that may be needed (this vast number of small experiments) do not appear to be extremely hopeful and each one is tiny compared to the enormous background material in which it exists. Any one may be successful or not and many, if successful together, may generate enough traction to propel society to the phase transition that it needs. However, it, or they, may not!

 

The dynamic set of changes that forged the industrial revolution, the move from a rentier society based around the ownership of land, to a capitalist-driven society based on the ownership of ideas, of speeding up production, of creating demand for goods and services, took on the form of a phase transition (if the continued use of analogies can be permitted). This dramatic change occurred over many years, but traction was firmly in place by the 1830’s in England. Years after this, by the time Karl Marx was writing das Kapital, capitalism had transformed the countries of western Europe and would do the same for the USA and elsewhere. While land remains a high value commodity, the demand for goods and services and the ability to pay for them has transformed most of the world and continues to do so.

 

However, this phase transition (Phase II) remains, even today, in a variety of stages of development. In the USA and western Europe, it is well entrenched. In India and China, it is feverish in its intensity. In sub-Saharan Africa and Afghanistan, it is well hidden. This means that prescriptions for moving beyond this Phase are unclear as different sections of the globe are at such different stages. No mention was made in the book of the Maslow hierarchy (that provides at least some analysis of the individual’s search for sustenance, from meeting purely physical needs to those of mental well-being) and it would be useful to seek some sort of understanding based on regional access to the Phase Transition of the industrial revolution before experimentations can be determined as useful.

 

This is because, while so much attention is given in the media, universities and in books, to the second and third industrial revolutions (supposed to be via computing and then via robotics, AI and bio-engineering), the real focus of Doughnut Economics is beyond this towards a third Phase – a post-capital-only phase. In driving towards that new Phase (if humans are to make it successfully), Doughnut Economics properly focuses on the Georgescu-Roegen notion of entropy being sufficiently understood so that the world  focuses on energy use and utilisation as the crucial underlaying of society, rather than the traditional notion of productivity (the making of goods and services in progressively more ‘economical’ ways). This is right but it is debatable whether this is the prime driver for change, at least from a human viewpoint. Humans exhibit potentially destructive tendencies when caught in a particular way of thinking. Kate Raworth described this in within the book (Easter Island as one example) and it seems that humans need to actually see and feel danger before they react. A good analogy is how the UK reacted to Germany before 1939. Rearmament did not take place until the enemy was rampaging through Europe. Why? Possibly, because the human tendency is not to give up on ways of life (having reached a reasonable plateau) unless forced by external change. Complexity theory would suggest that a plateau of living is only change when externalities require it – with ‘require’ being highly operative.

 

Phase II was driven by, as the book states, the notion of economic gain for those in charge of capital and ideas, focused on the desire of perceived need. This economic gain argument has been transformed over the last 200 years to permeate all of society not just through the notion of GDP at the macroeconomic scale but through accounting at the micro-level. Thus, financialization of the world at both micro- and macro-scales underpin everything that we do. Everything is priced and our utility (our desire for something) is only respected when it has a number against it. Recently, a charity worked out the value we place on parks. This notion of £974 per person per year is then used somehow to justify spending on parklands. The whole notion of natural capital flows from a need to show value of the aspects of life that make life worth living so that even companies and accountants can evaluate them in discounted cash flow techniques. This is where Phase II shows it has conquered the world or it may be showing that Phase II is nearing its end.

 

Changing this is an enormous challenge but Doughnut Economics, while preparing the way, seems to suggest that the world can be redirected by an understanding by economists about how the world is different to their theories and through the use of diagrams.

 

A more detailed analysis of the changes that induced the phase transition in England in the industrial revolution to Phase II would indicate the scale of the challenge now. The doughnut diagram is highly useful and the concepts that underpin Doughnut Economics are highly positive in that they speak in the language of the new century, even if hampered by the limits to our knowledge that such analogies provide.

 

However, if a phase transition in our model of living is required, and the book strongly argues in that way, then we need to assess how this can be done successfully in a world that it markedly at variance region by region and where, as a result, different nations and regions will adopt different attitudes. For example, those countries lower on the Maslow hierarchy (if it or something similar can be utilised on a national scale) will retain their pursuance of basic needs via growth in GDP for far longer than those countries that have reached higher levels of economic maturity, where post-quantitative norms may be considered. If this is the case, and it is highly likely to be, then how do the latter set of nations decide how to remain sufficiently competitive in productive means, assuming that they will not simply give up their desire to at least maintain a level of economic security in a world that will reward economic gains for many years because it is measurable?

 

Doughnut Economics posits, amongst many other things, repeated changes in GDP, up, down, level in no particular order and through a variety of changes in taxation from income and employment to energy usage or externalities. However, different countries will adopt different measures and taxes and there will be a vast range of unintended consequences in such a complex environment that will continue to drag down the impact of the desired moves to a new phase.

 

Of course, we do not even know what a new phase will look like. Doughnut Economics suggests some thoughts on this and they relate to the quality of life beyond the quantity of life that mature economies are building, where, having gained the basics (food, shelter, clothing), we have moved towards the second tier of luxuries (goods and services) and towards Maslow’s higher tiers of self-actualisation (although we would need to see this is national terms rather than individualistic).

 

What can economists and accountants (macro and micro) do for this future? Perhaps the role for such narrow providers of data is disappearing in the same way that the role of horses changed when the motor car appeared. To take us to the next Phase needs a whole new school of thought that understands the different levels of Phase II that has been achieved on a global scale and will address the new mix of qualitative and quantitative requirements of Phase III (against the background of natural resource despoliation and global warming). If the concept of ‘natural capital’ is the last cry of Phase II as an attempt to take a grip of the natural world by the accountants of Phase II, then Phase III has to develop a new breed of expert that can show how humans can retain the dynamism that ‘gain’ provided for many (although by no means all or even the majority) and moves us away from numeric (or financialized) gain towards a qualitative framework, from the historical meaning of economics – the art of managing a household (which, arguably, humans now understand) – to the art of managing quality of life.

 

This is likely to be back to the area of ‘political economics’, the relationship between the production of goods and services and the society within which they are produced and then forward towards an inclusion of the qualitative aspects of life (as individuals and communities) – ‘quam oeconomica’.

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The Spectre of Americanism

 

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With Donald Trump’s gracious acceptance of the GOP nomination, his speech was centred around the concept of Americanism. This ‘ism’ is nothing new but there is an ideology within the term that is no less concerning than many others of the same nature: a belief that there is one way of life, centred on an extreme form of an American ideal.

 

“Americanism: A World Menace” was the title of a book written in 1922 by a English writer and socialist (at the time, he was a Communist), William Thomas Colyer. He, together with his wife, Amy, had emigrated to the United States in 1915, a month after they were married, sick of the destruction of the First World War fought by elite monarchies and, perhaps naively, optimistic for the future in the new world. This hope was borne on the back of their reading of the American Constitution and the fight for freedom that those like Tom Paine had foreseen. William and Amy believed that the USA was ripe for Communism.

 

Until 1920, they worked for the cause of socialism, witnessing the Russian Revolution, with some equanimity, as a fight for the rights of common people against elite oppression. They saw the same in the capitalism of the USA, punctured by the need to value everything by its price, elitism and the corruption of business and politics. It was not too long before their naivety was shaken as the Palmer (or Red) Raids of 1920 shattered any remaining illusions.

 

In 1920, Charles Palmer, the left-leaning Attorney General, was almost killed by a bomb planted by some Italian anarchists. He secured the services of a young man to lead the fight against these terrorists and to round up all ‘alien communists’ living in the country. The young man, just twenty-four years of age, who we know as J Edgar Hoover, did as required and hundreds of such men and women were deposited in Deer Island Prison within Boston Harbour.

 

After enduring punishing conditions of extreme over-crowding, lack of food and drink, detailed cross-examinations and witnessing the suicides of several prisoners, William and Amy (two of a handful of English-speakers within a predominantly eastern European prisoner intake) were tried and sentenced to deportation. A group of human rights lawyers succeeded in having Judge Anderson reverse their sentence but Hoover was not one for giving up and a retrial succeeded in having them deported back to England in 1922.

 

William was an economist and, by now, a confirmed Communist. His book, Americanism, was published in that year and was a rasping attack on the American way of life as he had experienced it and which he compared to Prussianism, so soon after the First World War. He saw that the world had a decision to make: Americanism or Communism.

 

He saw Americanism as having a range of characteristics but these were simplified as:

 

  1. An overwhelming pride of race, based on the material development of the country achieved largely through the ability and industry of “foreigners”. Known locally as patriotism.
  2. The establishment of dollar-producing or dollar-collecting capacity as the absolute standard of value, covering every form intellectual and spiritual achievement. Known locally as “practical idealism” based on “equality of opportunity”.
  3. Glorification of “democracy” as an abstract idea, divorced from practical control by the rank and file. Known locally as “the union of efficiency and democracy under sane leadership”.
  4. General lawlessness and contempt for orderly procedure. Known locally under a great variety of flowery and meaningless names, of which “upsurging of the great heart of America” may be taken as an example.

 

When “Americanism” was published, Colyer was a Communist and had just suffered deportation. His vituperation should be seen in that light and he was, thankfully, mistaken in that the USA, for the next 94 years, pursued a direction of capitalism that (after the battles for human rights of the 1960’s) skated outside of rank Americanism, with due respect for a type of democracy, for basic human rights. While business and a dollar-focused valuation of everything remains, it is wrapped in a cushion of values that are often qualitatively robust even if the lack of scientific understanding amongst politicians (including a mistrust of climate change theory and evolution) rankles with other western nations.

 

Now, there is an attempt to revoke the balancing act that has been the USA and recoil into Trump’s Americanism. Based on patriotism, it is a businessman’s total and complete devotion to success measured by the dollar, a promise to provide a way out of the insanity of “political correctness”, an underlying refusal to condemn the gun lobby and the variety of vigilante attacks throughout the USA, that is seen as the natural outpouring of pent-up emotion.

 

Colyer’s four axioms, although written by a Communist, just deported, in 1922, are not too far from Trump’s Americanism of 2016.

 

Colyer wrote how, in “1920, the ‘Knights of the Klu Klux Klan’ began to make themselves felt as a power in modern American life. In that year, in pursuance of the purposes of their order “to maintain for ever white supremacy in all things” and “to keep eternally ablaze the sacred fire of a fervent devotion to a pure Americanism”, masked men wearing the dreaded white robe began to hold parades in southern cities, and to kidnap, flog, tar and feather men and women at will.”

 

That was 1920. Almost a century later, amongst the torment of the southern states as black men are arbitrarily killed by police and police are killed in retaliation, as terrorist atrocities are felt from France to America and, by their thousands upon thousands in the Middle East and Africa, as millions feel under-served by remote democratic institutions as shown by Brexit and the rise of Donald Trump, the spectre of Americanism rises again.

 

In 1848, Karl Marx wrote in The Communist Manifesto that the “spectre of communism” was “haunting Europe”. Donald Trump’s speech-writers could just as easily write, that in 2016:

“The spectre of Americanism is haunting the world. All the powers of the free world have entered into a holy alliance to exorcise this spectre.”

 

Americanism appears to be a far greater and more immediate danger today than Communism was in 1848 (although Communism’s perseverance and evolution into Stalinism and Maoism led to horrific disasters in the next century). The United States could be entering into a period of Americanism as much of the world reacts to the massive turmoil of banking failures in 2008, Syria, Iraq, Afghanistan, Nice, Crimea, Boko Harum, Daesh, and toys with the spirit of Brexit, Le Penn, Haider, and the cry of “everyone for themselves”. Trump’s new doctrines, based on Americanism, calls into question all of society’s safeguards.

 

Colyer’s answer to Americanism was to urge the workers of Great Britain to line up with the workers of the Soviet Union. In 1926, Colyer resigned from Communist Party as Stalin gripped the Soviets ever tighter. The challenge now is to establish a 21st Century response to Americanism (or similar calls to so-called ‘patriotism’) that does not reverse the serious gains made by most in the world since the end of the Second World War, which included the ending of Naziism, Fascism, Stalinism and Maoism (and most other forms of Communism).

An inclusive Democracy needs to be refreshed, not stymied, by a popularism that Americanism extols. It is for all those who have worked for the establishment of human rights and basic qualities of life to double those efforts now before the spectre of Americanism is upon us.