This article was written by Angus Harker a student at the University of Warwick. This article is part of his column 'The Other Side'.
Paul Donovan and Kate Raworth opened the Warwick Economics Summit on the 24th January with two scene-setting soliloquies about both the state of the world right now, why it is the way it is, and how we can navigate it. Donovan, the Global Chief Economist for UBS, kicked off his speech with historical allusions, noting that we as a society are in the midst of a 4th Industrial Revolution that seeks to reverse the effects of the first one. Where the first one led to a massive geographical shift from the countryside into the cities to find work, the 4th iteration is marked by a geographical relocating back into the countryside – helped by automation, the Internet of Things, and the Work from Home initiatives developed out of necessity in the midst of the pandemic. Whereas previously we focused on imports and the power of the supermarket, Donovan notes the prevalence of DIY and supporting local business. Such economic autarky might correspond well with increasing nationalism growing across the world right now, and Donovan once again drew upon historical precedent: in his analysis, all industrial revolutions bring insecurity, and new technological advances bring with them the fear of a loss of social status – and the need for easy answers to complex issues leads to the rise of populism, what he termed ‘prejudiced politics’.
It’s hard to find much to disagree with in the premise of Donovan’s work. What could be argued, however, is whether the current 4th Industrial Revolution has caused these insecurities, or if it is merely the result of economic downturn. It’s difficult to argue that an industrial revolution – ostensibly, a phenomenon marked as a period of rapid economic change – is the cause for insecurity, especially when few feel the benefits of the current global economy. It’s a chicken/egg dilemma, and drawing on historical precedent, as I have noted previously, support for extremes is tied with disillusionment with the ruling powers, and such support can exist separate of technological advancement. If prejudiced politics arises from a need for a scapegoat to explain the potential loss of social status, then it would stand to reason that populists such as Donald Trump would not be at the forefront of the very same technological developments that are seen with scepticism. Considering he has surrounded himself with “tech bros” such as Elon Musk and Mark Zuckerberg, Donovan’s conclusion is not entirely correct. This is probably because there is nuance in hard-right politics, and as Janan Ganesh has noted, “techno-libertarianism has much less purchase on the other side of the Atlantic” than it does in America. One side is hand-in-hand with the industrial revolution, the other is less clear.
In response to the need for scapegoating in populism, Donovan drew upon his own experience as a gay state-schooled man, an outsider when starting his career in a private school-dominated sector. He noted how to hide behind a facade was draining, and concluded his anecdote with how terrible it would be for productivity and mental wellbeing. The issue with prejudiced politics, then, is that its exclusionary nature is detrimental to society and the economy, which is perhaps the strongest argument for the diversity and inclusion initiatives that Trump has so recently scrapped; stripped of an appeal to pathos, diversity is logical. Yet Donovan noted the issue with quotas themselves, describing them as a box-ticking exercise that essentially alienates the voters from the establishment. His remedy, then, is for politicians to drop the jargon, to focus on holistic and long-term politics instead of single-issue mandates that distance parties from the middle ground. Such advice would be seen as instrumental to gaining the political centre, especially with political authenticity.
However, his premise to this was the most unstable, as he asserted that most people in the US, despite being comparatively well-off individually and as a state, the perception of the economy as worse was what motivated the want for prejudiced politics. This premise would need amending to be considered more accurate, especially as most of the US election hinges over the so-called Rust Belt states, which are titularly tied to economic hardship. It could even be argued that newly inaugurated Vice President JD Vance had a foothold in this state (from an authenticity standpoint, at least) with his memoir “Hillbilly Elegy”. It doesn’t seem likely that those pivotal states are marked by relative individual stability and voted for Trump largely because of a macroeconomic perspective. Regardless of the premise, however, Donovan’s perspective had a refreshing clarity to it and tactfully set the tone of the Summit – grappling with current issues by utilising a practical, down-to-earth, and honest take in contrast to the electoral perception of the establishment.
New ideas to grapple with current problems was a thread that certainly abounded with the next speaker, Kate Raworth. The pioneer of “Doughnut Economics”, her theory is perhaps best summarised in her own words: ‘Think of it as a compass for human prosperity in the 21st century, with the aim of meeting the needs of all people within the means of the living planet’. Raworth contextualised her idea with the issues arising during her student years, annoyed that the Ethiopian famine and climate change seemed to be pushed to the periphery at the time. Just like Donovan, Raworth located her theory in history, constructing the “character of economics” as it has been perceived, what she termed as the ‘Rational Economic Man’, who has growth on his mind, money in his hand, and thinks in supply and demand. Raworth’s reductionist summary of economics hitherto established (illustrated in her presentation with black and white lines opposing her colourful concentric circles) was followed by her more considerate conception in Doughnut Economics, which measured growth in relation to several other factors aside from an increasing line, mediated by the ecological effects of growth and considering social factors in the wellbeing of a nation (the precise nature of the Doughnut can be found in the link previously provided).
Raworth’s theory draws parallels to ancient philosophies such as Taoism in the strive for balance, and her diagram describes a “Goldilocks Zone” where our needs are cared for, all are equal in political voice and access to the basics, where growth is redistributed to the people so that everyone can relish in the fruits of their labour – without harming the environment.
One could be forgiven for thinking that Raworth’s theory is a brand of Eco-Socialism, a point that Raworth herself has rebutted: ‘Are these the only choices we have? The isms of the last century? Can we not come up with some ideas of our own?’ This is the eternal dilemma for anyone in academia, particularly the humanities – almost every thought in the course of human history has been iterated, reiterated, and engaged with. It’s impossible to locate one’s theory in history whilst also suggesting that that theory exists outside of history – so the comparison to the ‘isms of the last century’ will continue to persist.
That doesn’t necessarily mean that Raworth’s theory is negated because of its ghostly ties with the past. If the events of the LA wildfires can be used for anything, it’s that climate change has unbelievably detrimental effects to economies in a way that is hardly discussed in Raworth’s typical “character of economics”, and they must be addressed. However, contextualising her theory is essential to weighing up the pros and cons of it.
Perhaps the biggest hole in Raworth’s Doughnut is the examples that she uses – in her presentation, she pointed towards Costa Rica, Barcelona, and Cornwall, and their respective environmentally-minded initiatives that, if not inspired by Doughnut Economics, then are at least examples of her model working. However, the pattern that emerges from all these economies is that a substantial amount of their GDP comes from tourism. Barcelona is perhaps the biggest example. Tourism is also responsible for 8% of global carbon emissions. In reducing our carbon footprint, this would have a negative effect on these economies, which would necessarily impact on the regenerative environmental projects that Raworth previously mentioned. How can these regenerative, distributive projects be seen as environmentally sustainable if they are funded by environmentally unsustainable profits?
Raworth also pointed towards Vienna’s social housing as an example of redistributive projects done right, replete with affordable living and ease of access to Vienna’s amenities. What she doesn’t consider are the exclusionary policies necessary to get into this social housing – particularly with the Limited Profit Housing Associations (LPHA) that are most prolific in the city. As the Economist notes, applicants to such LHPAs must be an Austrian citizen (or equivalent), must have lived in Vienna for 2 years before applying, and must have an income – a job, in other words. Such policies necessarily exclude immigrants to the city, alongside the jobless. In fact, only 9% of renters in LHPAs are from poor incomes, and as the Economist notes, ‘the council has struggled to prevent tenants with houses elsewhere from renting out their municipal flats’, which is evocative of a capitalistic mindset. Beyond the façade of Vienna’s social housing, what emerges is an economically stable, homogenous demographic that is hardly equal and open to all.
There are legs to Raworth’s theory, in that governments must focus on the environment not just because of altruism, but because it is logical, because it will harm our economies and because it will harm our people. Like Donovan, the insistence on logic and common sense in these initiatives that are sneered at by those in power (at least in the US) will help combat and regain the centre ground and thus restore normality in the future. But we must be honest about what we talk about, and reflective in our assessments. What these two opening speakers to the Warwick Economics Summit showed was that we live in a society of great flux, and it is no longer economically viable to daydream about utopic worlds when the current one is in need of honest scrutiny. The turning point of 21st century history, the current 4th Industrial Revolution, thus predicates on the necessity of being honest, to help navigate the unsteady world in a truthful and stable manner.
The views and opinions expressed in this article belong solely to the writer and do not necessarily reflect the views and opinions of the Warwick Economics Summit.
References:
WES Journal-
Sustainable Travel-
DEAL (Doughnut Economics Action Lab)-
Financial Times-
InfoBarcelona-
The Economist-
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