"Before we go on, let me tell you a joke," says Barbie. 'One day, the Teacher asks Little Johnny, 'Why did you get late to school again?' 'I dreamed I was on a trip around the world and woke up late!' Little Johnny answers.
'And, why are you late Little Rooney?'
'I waited at the airport for Little Johnny to arrive!' Little Ronny answers."
"Kate Raworth’s Doughnut Economics (Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, 2017, Random House) challenges traditional economic models that prioritise endless growth, advocating instead for a framework that balances human well-being with the planet's health. The "doughnut" metaphor represents a safe and just space for humanity: the inner ring ensures that no one falls short of life’s essentials (such as food, healthcare, education, and equity), while the outer ring sets ecological limits to prevent overshooting planetary boundaries (like climate change, biodiversity loss, and pollution).
Raworth's approach reimagines economics as a tool to serve humanity rather than as an engine for infinite GDP growth. She emphasizes seven key shifts in economic thinking, moving away from outdated paradigms like the reliance on self-regulating markets or fixating on linear growth. Instead, she calls for circular economies where waste is minimized, regenerative systems that replenish natural resources, and policies that prioritize collective well-being.
At its core, the model integrates social justice with ecological sustainability. By staying within the "doughnut" boundaries, societies can avoid ecological collapse while ensuring that all individuals have access to the resources needed for a dignified life. This requires rethinking metrics of success, embracing redistribution of wealth, and fostering innovation that aligns with both human and planetary needs. Raworth’s vision is not anti-growth but rather pro-balance, urging economies to grow until they meet essential needs and then focus on thriving without compromising the future.
Kate Raworth proposes "Seven Ways to Think Like a 21st-Century Economist," a transformative framework to rethink economics in a way that aligns with the challenges and opportunities of our time. These principles guide us to shift away from outdated economic paradigms and towards systems that ensure social equity and ecological sustainability.
First, change the goal. Traditional economics focuses on GDP growth as the ultimate measure of success. Raworth argues that the real goal should be creating a safe and just space for humanity, where everyone can thrive within the planet's ecological limits. This redefines progress to prioritize human well-being and environmental sustainability.
Second, see the Big Picture. Classical economic models often depict the economy as a self-contained system. Raworth highlights the importance of understanding the economy as embedded within society and the natural environment. This interconnectedness requires recognizing the roles of households, communities, and the planet, alongside markets and governments.
Third, Nurture Human Nature. Economic theories have long assumed humans are rational, self-interested actors ("homo economicus"). Raworth challenges this by emphasizing that human behaviour is shaped by diverse motivations, including altruism and cooperation. Economics should foster environments that nurture our potential for empathy and collaboration.
Fourth, Get Savvy with Systems. Rather than seeing economies as mechanistic systems with predictable outcomes, Raworth urges us to view them as complex, dynamic, and ever-evolving. This perspective encourages adaptive policies and feedback mechanisms to address issues like inequality or climate change effectively.
Fifth, Design to Distribute. Raworth critiques the assumption that growth will eventually reduce inequality (trickle-down economics). Instead, she advocates designing economies to distribute wealth, resources, and opportunities fairly from the outset, using tools like progressive taxation, universal basic services, and equitable ownership structures.
Sixth, Create to Regenerate. Instead of extractive and linear systems that deplete natural resources, Raworth promotes regenerative systems where waste becomes input and ecosystems are restored. This involves embracing circular economies and designing industries that work with nature, not against it.
Seventh, Be Agnostic About Growth. In the 20th century, economic growth was seen as synonymous with progress. Raworth argues that in the 21st century, economies should aim to grow only until they meet societal and ecological goals. Beyond that, the focus should shift to thriving without depending on perpetual expansion, which is unsustainable.
These principles invite economists, policymakers, and citizens to think differently about how economies function and what they aim to achieve. By adopting these approaches, Raworth believes we can address pressing global challenges like inequality, climate change, and resource depletion while fostering a more equitable and resilient world.
The fifth reason why development is important is Social Stability and Equity. Development reduces wealth gaps by creating opportunities for all, and fostering social harmony. Social programs funded by a developed economy can alleviate poverty and reduce crime, as desperation often drives individuals toward illegal activities.
Thomas Piketty, in his Capital in the Twenty-First Century (2014, Harvard University Press), explores the intricate relationships between economic growth, inequality, and societal stability. His work focuses on how wealth accumulation and distribution have historically shaped economies and how these patterns have implications for the future of social and economic systems.
Piketty argues that the relationship between economic growth and inequality is deeply influenced by the dynamics of capital accumulation. His central thesis is encapsulated in the formula r > g, where "r" (the rate of return on capital) exceeds "g" (the rate of economic growth). This inequality, he contends, is a structural feature of capitalist economies that tends to exacerbate wealth concentration over time. When the return on investments outpaces overall economic growth, wealth accumulates disproportionately among those who own capital, while the majority, who depend on wages, see comparatively little improvement in their economic standing.
During periods of high economic growth, such as the post-World War II era, inequality tends to narrow because growth provides more opportunities for upward mobility and a larger share of wealth is distributed among the population. However, as growth slows, the tendency for wealth to concentrate in fewer hands re-emerges, leading to heightened inequality.
Piketty emphasizes that extreme inequality poses significant risks to societal stability. When wealth becomes concentrated in the hands of a small elite, it leads to economic and political distortions that undermine social cohesion. Inequality limits opportunities for the majority, creating barriers to social mobility and fostering resentment among those excluded from the benefits of economic progress.
The concentration of wealth also translates into unequal political influence, as the wealthy use their resources to shape policies in their favor. This dynamic undermines democracy and leads to a feedback loop where inequality perpetuates itself. Piketty highlights the historical parallels of such dynamics, noting that periods of extreme inequality—such as the late 19th and early 20th centuries—were often followed by social unrest, political instability, and even revolutions.
Drawing on extensive historical data, Piketty shows that inequality has not been constant over time but has varied with economic conditions, policies, and societal structures. For instance, the significant reductions in inequality during the mid-20th century were driven by progressive taxation, social welfare policies, and the destruction of wealth during the World Wars. However, since the 1980s, rising inequality has been fueled by deregulation, globalization, and reduced taxation on capital. To address the destabilizing effects of inequality, Piketty advocates for policy interventions such as a global progressive wealth tax, stronger inheritance taxes, and greater investment in education and public goods. He contends that without such measures, the self-reinforcing cycle of wealth concentration will deepen inequality and jeopardize social and political stability.
Ultimately, Piketty shows that economic growth, inequality, and societal stability are deeply interconnected. Sustained and inclusive economic growth can mitigate inequality and foster stability, but unchecked inequality undermines these conditions, threatening not only fairness but also the broader functioning of economies and democracies. His work serves as a call to recognize these dynamics and implement policies that ensure a more equitable distribution of wealth, which is crucial for maintaining social harmony and long-term economic resilience.
In The Price of Inequality: How Today's Divided Society Endangers Our Future (2012, W. W. Norton & Company), Joseph Stiglitz explores the multifaceted ways in which economic inequality not only undermines fairness but also harms the social fabric, economic growth, and political stability of a society. He argues that reducing inequality is not merely a moral imperative but a practical necessity for building stronger and more stable societies.
Stiglitz defines inequality as the stark disparities in income, wealth, and opportunity within a society. He emphasizes that inequality is not just about income gaps between the rich and the poor but also encompasses access to education, healthcare, and political influence. This inequality, he argues, is not an inevitable outcome of market forces but a result of deliberate policy decisions, systemic failures, and the unequal distribution of power and resources.
He identifies several sources of inequality, such as monopolistic practices, tax systems that favour the wealthy, and deregulated financial markets. Stiglitz also critiques the "trickle-down economics" argument, noting that the concentration of wealth at the top does not benefit society as a whole but instead entrenches privilege and limits upward mobility.
Joseph Stiglitz provides a critical examination of how a deeply divided society—marked by significant economic and social inequalities—poses grave dangers to the future of democracy, economic stability, and societal cohesion. He defines a "divided society" as one in which wealth, power, and opportunities are heavily concentrated in the hands of a small elite, leaving the majority of the population marginalized, economically disadvantaged, and politically disempowered. This division extends beyond mere income disparities, encompassing gaps in access to education, healthcare, and political influence, and leads to the erosion of trust in institutions and shared values.
For Stiglitz, a divided society arises when systemic forces—such as policy decisions, market failures, and social inequities—enable a wealthy minority to dominate economic and political systems, often at the expense of the broader population. This results in a "dual economy," where one segment of society thrives while the rest struggle to access basic necessities or opportunities for advancement. Inequality, according to Stiglitz, is not just about differences in outcomes but also reflects unequal starting points and systemic barriers that perpetuate these divides over time.
Stiglitz argues that such stark divisions threaten the foundational principles and functioning of society in several interrelated ways. Extreme inequality undermines economic stability by reducing aggregate demand. When wealth is concentrated in the hands of a few, the majority lack the purchasing power to sustain economic growth. This leads to stagnation, underutilized resources, and an economy that serves the elite rather than the collective good. Furthermore, inequality fuels financial speculation, as the wealthy seek higher returns on their surplus wealth, often creating asset bubbles and financial crises.
A divided society distorts democratic institutions, as the wealthy use their resources to influence political outcomes and shape policies that serve their interests. This "political capture" undermines the principle of equal representation and leads to widespread disillusionment among citizens. As ordinary people lose faith in the system, populism and extremism can emerge, further destabilizing governance and social harmony.
Inequality weakens the bonds that hold societies together. When people perceive that the system is unfair and opportunities are inaccessible, it breeds resentment, mistrust, and social unrest. The lack of shared experiences and mutual understanding between the rich and the poor exacerbates divisions, making it difficult to build a cohesive and cooperative society.
Stiglitz highlights how inequality limits opportunities for the majority, depriving society of their potential contributions. When access to education, healthcare, and capital is restricted to a privileged few, it prevents a significant portion of the population from reaching their full potential, thereby reducing overall innovation and productivity.
A divided society challenges the ethical foundation of fairness and justice. Stiglitz argues that allowing extreme inequality to persist signals a lack of concern for human dignity and shared responsibility, leading to a society where individualism and greed overshadow collective well-being.
To address the dangers of a divided society, Stiglitz advocates for policies that prioritize equity and inclusivity. These include progressive taxation, investments in education and healthcare, financial regulation, and stronger social safety nets. He emphasizes that inequality is not an inevitable outcome of economic forces but a result of choices made by societies and governments. By addressing the structural causes of inequality, societies can rebuild trust, restore fairness, and ensure a sustainable future.
In essence, Stiglitz warns that a divided society is not only morally unjust but also economically inefficient and politically unstable. Its persistence threatens to erode the foundations of democracy and shared prosperity, making it imperative to confront and reduce these divisions for the benefit of current and future generations.
The sixth reason is Cultural and Intellectual Growth. Development provides resources for the preservation and promotion of cultural heritage. It also supports advancements in science, art, and philosophy, enriching the national identity and contributing to global knowledge."
