Doughnut Economics - Kate Raworth - Part 6 of 8

2020 Reading Challenge - Day 214

August 3, 2020

Book 58 - Doughnut Economics
Kate Raworth
Chapter 5 - pages 139-173

This chapter is called "Design to Distribute" and challenges the notion that "growth will even it up again". Rather, we need to look at how we can design the economy to be distributive.

The key graph here is one designed by Kuznets, who suggested that we need to push through gross inequality in order to create a richer, more equitable society for all. The idea could also be phrased as "no pain, no gain".

Raworth, however, challenges this notion and suggests that inequality is not a necessary phase.

Three quarters of the world's poorest no longer live in poor countries but in middle-income countries.... not because they have moved but because their countries have been reclassified as middle-income (e.g. China, Indonesia, India). But... what's really happened is that their countries have become more unequal with a growing super-rich category that has dragged the country from being classified as "poor".

Kuznets came up with a curve while trying to figure out inequality (see curve at left). He based it on a lot of assumptions and admitted that his conclusions were 95% speculation but... his curve was treated as a law for decades. In 1990, it was actually put to the test and found to have no basis in reality. There is no law that says we need to pass through a period of gross inequality to get back to equality. We already know that capitalism increases inequality and tends to divide society into two groups: those that own capital (land, housing, financial assets) and those that own only their own labour (only make wages). Wealth, very quickly, becomes concentrated in the owners because capital returns grow faster than the economy. The success to the successful rules unless the government takes action to offset it.

Inequality matters because it has systematically damaging effects on social, political, economic and ecological realms. It damages the entire social fabric of society and jeopardizes democracy by concentrating power in the hands of the few (wealthiest). Inequality does not make the economy grow faster but rather causes it to stagnate.

Raworth says that we can't wait for economic growth to reduce inequality because it won't. Rather, we need to create an economy that is distributive by design... and not just of income, but rather of wealth, time and power. Which means we need a network with structure and balance that flows in a system of efficiency and resilience. Diversity (no monopolies) and Distribution are key. Large scale business and monopolies make the economy fragile and we need to revitalize small-scale fair enterprise.

We also need to look at who controls land, who makes the money, who controls enterprise, technology and knowledge.

Land generates wealth but there is a limited supply so need to look at land taxes.

Our system of currency is only one of many possible currency designs. Right now, money is created (out of nothing) by banks offering loans or credit that are not backed by savings. I know... I thought they took my savings and loaned it out as mortgages too but no... they just create it out of nothing. But there are other ways too... Switzerland has an elder-care time bank... there is block chain which allows all sorts of digital currencies (not just Bitcoin).

Wages have been stagnant for decades while executive pay has ballooned. Right now, there are three players in business, worker, owner and shareholder... and the shareholder holds all the power. That is juts one design... what if workers were co-owners or shareholders? What about member-owned cooperatives.

Robots are putting jobs at risk - what if we taxed non-renewable resources (like steel) not labour? What about having a guaranteed income for all (we are already flirting with this thanks to Covid 19). What if everyone had a stake in robot technology, must of which is based on research done by the publicly funded government institutions. Look at Norway and what they have done with oil revenues.

Knowledge and ideas are also key but the current system of patents and copyrights is getting a bit ridiculous. Amazon patented their "one-click to buy" system. On the other hand, there is hope with Free Open Source options. Better to teach students social entrepreneurship, problem-solving and collaboration to prepare them for the new world.

Global inequality is still a problem but what about throwing a personal tax on extreme global wealth. What about closing tax havens and taxing global, multinational corporations. That would generate quite a bit of wealth that could then be distributed where needed most.