How Do We Create A Better Economy
Chat With Your XTutor About This Video Lesson
Lesson Article
Understanding a Healthy Economy
What does it mean for a country to have a healthy economy? What does a healthy economy even look like? These are questions that have been asked and answered in many different ways. Economist Kate Raworth, in her TED Interview podcast, offers an interesting perspective that challenges the conventional wisdom of most economists.
The Growth Paradigm
Raworth argues that we live in a society, particularly in the West, that has a strong belief that growth is a sign of progress. This belief has been prevalent for the last 150 years. While growth is a wonderful and healthy phase of life, in our economies, it seems we have adopted a Peter Pan approach – an economy that never wants to grow up. Instead, it wants to grow endlessly. This endless growth, however, is not without its problems. It is akin to a growth in our bodies, which if left unchecked, can threaten the health of the whole body. Similarly, our addiction to endless economic growth is leading to severe problems.
The GDP Measurement
In the 1930s, Simon Kuznets was asked by the US Congress to come up with a single number to measure the output of the economy. He came up with the concept of national income, now known as GDP. However, he warned that this number should not be confused with welfare. It does not account for the unpaid caring work of parents, the value created in communities, or the depletion of natural resources. Despite these caveats, the convenience of this single number led to a race to pursue GDP growth.
The Dream of Decoupling
The dream is that GDP can keep on increasing, and we can have increasing financial returns, but we can decouple from using Earth’s resources. We can use less carbon, metals, minerals, plastics, and less of the Earth’s land surface. However, we are at a time of climate emergency and ecosystem collapse. We need to radically reduce our use of Earth’s resources, and we’re nowhere close to achieving that.
The Doughnut Model
Raworth offers a new model for 21st-century prosperity, which she calls the Doughnut Model. This model represents humanity’s use of Earth’s resources. In the middle of the doughnut is a place where people don’t have enough resources to meet the essentials of life. The goal is to get everyone over a social foundation of well-being, so all people can lead lives of dignity, opportunity, and community. However, we must also be aware of the outer limit of humanity’s resource use, which represents ecological degradation. We must not overshoot this outer ring.
Balance as Progress
The shape of progress is fundamentally changed in this model. It’s no longer about exponential growth, but about balance. Our health lies in balance, and if we can apply this concept to our economies, we give ourselves a chance to understand the deep interdependence of our world.
Discussion Questions
- What are some common misconceptions about what it means for a country to have a healthy economy?
- How has the belief in endless economic growth affected our society and the environment?
- Do you think GDP is an effective measure of a country’s well-being? Why or why not?
- Why do you think we have failed to decouple economic growth from the use of Earth’s resources?
- What are some potential benefits and challenges of adopting the Doughnut Model for 21st-century prosperity?
- How can we shift our perspective on progress from exponential growth to balance in our economies?
- How might a focus on balance in our economies impact social inequality and access to resources?
- What personal actions can individuals take to promote a healthier economy and a more balanced approach to progress?
Lesson Vocabulary
Healthy economy – An economy that is characterized by sustainable growth, low unemployment rates, stable prices, and a high standard of living for its citizens. – The government’s policies have contributed to a healthy economy with low inflation and high employment rates.
Growth paradigm – A belief system or framework that emphasizes the importance of economic growth as a primary objective for societal progress. – The government’s economic policies are based on the growth paradigm, focusing on increasing GDP and promoting entrepreneurship.
GDP measurement – The process of calculating the total value of all goods and services produced within a country’s borders over a specific time period, usually a year. – The GDP measurement for the last quarter showed a significant increase in economic output.
Dream of decoupling – An aspiration or idea that economic growth can be achieved without causing negative environmental impacts or resource depletion. – Many environmentalists argue that the dream of decoupling is unrealistic without significant changes to our consumption patterns.
Doughnut model – A conceptual framework that combines social and planetary boundaries to define a safe and just space for humanity to thrive. – The doughnut model suggests that we should strive to meet the needs of all people without exceeding the Earth’s ecological limits.
Balance as progress – The idea that achieving a balance between economic growth, social well-being, and environmental sustainability is a true measure of progress. – The concept of balance as progress challenges the notion that economic growth alone leads to societal advancement.
Economist – An expert in the study of economics, who analyzes economic issues, formulates theories, and provides advice on economic policies. – The renowned economist published a groundbreaking research paper on income inequality.
Conventional wisdom – Generally accepted beliefs or opinions that are commonly held by a society or a group of people. – The conventional wisdom suggests that increasing government spending stimulates economic growth.
National income – The total income earned by individuals, businesses, and the government within a country’s borders during a specific time period. – The national income has seen a steady increase over the past decade, indicating economic growth.
Welfare – The state of well-being, prosperity, and happiness of individuals or a society, often associated with access to basic necessities and social support. – The government’s social welfare programs aim to provide assistance to those in need, ensuring a minimum standard of living.
