Goodbye Neoliberalism, Hello Doughnut
“There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder,” Reagan said. The narrative of limitless growth has been embedded into government, policy, and economic thought for decades. Western countries have, indeed, seen massive GDP growth, and many people see economic growth under President Trump as a sign that the US economy is “thriving”. At the same time, though, income inequality is spiking, millions of people are facing evictions and losing healthcare, and the industries that are fueling economic growth are the same industries that shamelessly deplete Earth of its resources.
Oxford economist Kara Raworth, author of Doughnut Economics, noticed that clearly, this notion that societies should strive for boundless growth to thrive is deeply flawed. She traced the origin of the linear model of economic growth back to a meeting in Monte Leren, Switzerland, in 1947. There, Milton Friedman and his colleagues developed the neoliberal theory of economics as the science of meeting society’s needs. They decided that the best way to do this was through laissez-faire economics. Essentially, they concluded that they would let the efficient market run itself. People demand things, and the market will supply.
That is the story economics students have learned for decades. Raworth observes that the men who developed this narrative had the privilege of being wealthy, white males, which distorted their perception of society’s needs. To them, economics was solely about markets, rather than about the household or the environment. This market-oriented lens shapes economic thought even today, despite being outdated. The economists in Monte Leren failed to recognize that GDP growth doesn’t guarantee equal opportunities for impoverished families and flourishing households, or that our planet cannot sustain unregulated polluting industries, even if the market looks prosperous. They saw the market as capable of exponential linear growth, and a theory that influenced politicians like Reagan and Margaret Thatcher.
Is this true? Can economies just grow exponentially? This is where Raworth wants to change the narrative. “From your children’s feet to the Amazon forest, nothing in nature grows forever,” she says. “We intuitively understand that when something tries to grow forever within a healthy, living, thriving system, it’s a threat to the health of a whole.”
Raworth proposes a different vision of economic growth. She calls it a doughnut economy, or a circular model. Inside of the doughnut are people who are financially unstable, and their basic needs aren’t met by the economy. Outside of the doughnut, the ozone layer is being depleted and industries are encouraged to continue taking resources, rather than reusing them, and CO2 emissions reach unprecedented levels. A thriving economy remains within the bounds of the doughnut, where corporations and businesses are connected through a web in which materials are shared and reused. Regenerative projects will require more labor, increasing employment. GDP won’t be the sole metric that measures successful societies. The doughnut model uses housing prices, income inequality, and sustainability as indicators of a healthy economy. By redirecting focus away from growth, a circular economy provides all residents with necessary living standards, meaning they aren’t forgotten as the economy grows. Simultaneously, industries honor the planet’s needs and focus on reusing resources, rather than taking them.
Amsterdam is the first city to officially embrace the doughnut model. In April, they launched the Amsterdam City Doughnut with the goal of redesigning the way the city uses raw materials while bolstering jobs and living standards for people from all economic backgrounds. According to Marieke van Doorninck, Amsterdam’s Deputy Mayor for Spatial Development and Responsibility, Amsterdam faces housing and climate crises. Amsterdam uses housing prices to calculate GDP, yet people can’t afford to live there. There is a disconnect between economic growth and city health. It’s a prosperous city, but not for every person. The fact that it is a prosperous city is what drives the lack of accessible housing but being prosperous does not say much about the state of the living conditions of the average person.
To address the housing crisis, Van Doornick’s vision involves building affordable housing using regenerative measures. 40% of new houses in Amsterdam must be affordable, 40% must be middle income, and 20% can be priced through the market. Construction companies are held to high sustainability standards, and are incentivized to repurpose structures like old, unused school buildings into multifamily housings instead of demolishing them. This circular approach redistributes and reuses resources, allowing people stable living conditions without polluting the environment.
Transitioning to clean energy requires consuming less and shortening supply chains-or, rather, consuming repurposed materials and making supply chains circular. For example, Amsterdam requires data companies to provide geothermal hot water waste as a heat source for city residents. Recycling resources will require more labor and increase employment. So, Amsterdam isn’t striving to increase their GDP, but is instead striving to grow into a thriving city that takes care of the world, pollutes less, and remains resilient.
In the United States, the income gap more than doubled between 1968 to 2018. Meanwhile, GDP has increased each year. The Raegan administration is partially responsible for high income inequality through their implementation of “trick-down economics,” an approach to policy that fully entrusted the market with sustaining society. His administration slashed taxes on wealthy people and corporations, arguing that their prosperity would “trickle down” to lower classes. Like the Monte Leren economists, they assumed that if the market were to grow, everyone would benefit.
Clearly, that is not the case, given the state of our environment and our inability to provide basic needs like healthcare and housing to millions of citizens.
Raworth, however, does not claim that the problem of growth-oriented thinking is partisan. Politicians on both sides of the aisle call for “green growth” and “inclusive growth.” Societies have become structurally dependent on unbounded growth as a means of achieving “green” and “inclusive” goals.
If we used accurate metrics to measure a thriving society rather than economic prosperity, perhaps companies would be more incentivized to innovate creative ways to reuse energy and resources and remain within the boundaries of the doughnut. Perhaps they would work together both with each other and citizens to foster a redistributive, regenerative economy, rather than just a large one. “The world’s most ingenuous people turn boundaries into their source of creativity,” Mozart said.