Scarlet Todd explains Doughnut Economics

What is Doughnut economics?

Social media posts, news articles and reports about: climate change, social inequality, corruption, poverty, not forgetting global pandemics sway us to believe the world is doomed. I couldn’t help but wonder where did the world go so wrong? And, what can we do it make it right? This led me to discover the doughnut. One that didn’t just provide a short-term satisfaction for my Sweetooth but one that provides a long-term goal of balance in an economy in which in the words of its creator Kate Raworth is “to meet the needs of all within the means of the planet.”

Kate Raworth is a 21st century economist with a 21st century mindset. She is a senior research associate at Oxford University’s environmental change institute as well as holding many more senior research positions at other influential institutions. Her research and expertise have been largely dedicated to creating a model in which addresses both social and environmental issues. That model being the doughnut.  The idea is that within the green ring is the area in which all of humanity is above the social foundation and has met the basic essentials to live well those being the likes of food, water, education and health but is also within the ecological ceiling in which means earth’s natural systems are stable. Raworth has written various articles, attended many conferences, talks as well as performing a TED talk in which to display her doughnut model to a wide variety of people. She has also written a book ‘Doughnut Economics’ which explores seven ways to think like a 21st century economist which I would highly recommend as it explores in depth the mindset that is required to replicate this doughnut in the real world. I’d like to summarize the points raised in her book and contribute my own thoughts and ideas about why I think the doughnut is such an important image.

So, what are these seven ways?…

1- ‘CHANGE THE GOAL’

For a little under a century economic success has been determined by one figure, GDP (gross domestic product).  Kate Raworth recognizes that the GDP growth shouldn’t be our only if at all a determining factor for economic success because it fails to consider all the other values in which are not so universally measured but say a lot more about our wellbeing. Overall, our goal should be to simply live a good and happy life and how much does an ever-growing GDP really contribute to our happiness? The former politician Bobby Kennedy describes GDP as a metric in which ‘measures everything in short, except that which makes life worthwhile.’ Kate Raworth’s vision is that instead of aiming for ever growing GDP we should instead redirect our course to aiming for the safe and just space within the doughnut. Of course, there are benefits to GDP growth, but the idea is that it shouldn’t be our goal instead it should just be one of many measurements in which to analyze the wellbeing and balance of humanity and how it can help us to fit comfortably within the doughnut.

 

2 – ‘SEE THE BIG PICTURE’

In the 20th century Kate Raworth describes the economics mindset as a neoliberal script. Where economy is simplified to focusing purely on the monetary flow and leaves the household, the commons, society, earth and power hidden behind the curtain whilst the market, business, finance, trade and the state take centre stage. The issue with this ‘neoliberal script’ is that is out of date and doesn’t consider many of the factors in which make us thrive that should be considered in economic models. In order to reach a thriving planet, it is essential to find a balance with all the necessary components and respecting and recognizing each of their roles and potential in the functioning of the world. These components being’; Earth, society, the economy, the household, the market, the commons, the state, finance, business, trade, power. We need to take all of these into consideration in an embedded economy as shown on the diagram below.

Over the year’s economists have settled with a model in which to represent the average (or ideal) man in which they can use in economics models and theories. ‘economic man’ or ‘homo economicus’ is a self-interested man who is dominate over nature and makes decision which maximize his own happiness, doing nice things for others is only to fulfill his own satisfaction. His values and preferences are set in stone and he is well informed on all information regarding any decision he is making. This is a simple model of man which neglects any complex emotions which indeed every human experiences.  What Raworth believes is that because we are told this ‘rational economic man’ is representative of us then therefore researchers have discovered that we are becoming more like him since that is how our economic systems, models and equation have shaped us to be. When in fact homo economicus is not a good representative of humans at all.  We are social animals who feel empathy and social responsibility, what we value is varied and ever changing therefore our wants are not fixed. Humankind is not above nature but within it and we heavy rely on it for all our necessary life resources. What she suggests is that it is not accurate defining humans in our models and equation as homo economicus because we are so much more complex, adaptive and have so many more roles in society then one image could ever define us to.

4 – ‘GET SAVVY WITH SYSTEMS’

‘Today’s economy is divisive and degenerative by default.

Tomorrows economy must be distributive and regenerative by design.’ -pg156- Doughnut Economics, Kate Raworth

As the media has made us very aware, we have exceeded a lot of our planetary boundaries and the decisions that have led to this have been determined by mathematical models and equations which fail describe the whole story. Kate Raworth emphasizes that we are heading for collapse if we don’t create appropriate models in which are truly representative of all their effects and don’t neglect implications as externalities. In order to think like a 21st century economist we must design adaptive systems that deal with complexity.  Kate Raworth proposes that we think of the economy less like a mechanical machine and more like a garden which is much less predictable but nevertheless can be tendered to.

5 – ‘DESIGN TO DISTRIBUTE’

‘Don’t wait for economic growth to reduce inequality – because it won’t.

Instead, create an economy that is distributive by design.’ -pg174- Doughnut Economics, Kate Raworth

It is evident that in the world there are huge wealth inequalities. Past Economic theories have so far led us to believe that inequality is an inevitable effect of economic growth and will even out eventually. When in fact economists at IMF have found evidence to suggest in fact that inequality leads to slower GDP growth. The issue with inequality is that it wastes the potential of those from poorer backgrounds as they spend all their time providing basic needs for themselves and their families whilst the decisions and policies are led by those with higher income therefore leaving many in a poverty trap. Kate Raworth proposes that we must be all part of more distributive networks which allow more equitable flow of resources. They must be both efficient (reaching the desired targets) and resilient (meaning there are alternative connections in times of change). In this chapter Raworth explores many examples like; complementary currencies, employee-owned companies and broadening the knowledge commons which can help to make our economy more distributive by design. With creative ideas individuals and small corporations can create a network of trade which provides benefit to the community as a whole and not just to huge corporations.

 

6 – ‘CREATE TO REGENERATE’

For years it has come apparent that an economy grows first then it becomes more environmentally friendly later when we care enough to do so. This is true at least for developing countries which now know the environmental impacts developed countries didn’t know during their industrial revolution. This way of thinking like a 21st century economist is probably the widest spread. Its goal is to abolish the linear producer to consumer process: make, use, bin. Which is how the world developing a huge plastic crisis since we were obsessed with using products only once and chucking them to landfill sites from which they would stay for thousands of years. Thankfully we are becoming ever more aware of this and many different industries are encouraged to close the loop and recycle or reuse products that would otherwise be dumped. One of the most mediatized industry is fashion where we are being ever more encouraged to ditch fast fashion and buy second hand or buy clothes made from sustainable materials. This circular economy can be adapted and implemented on so many different scales and is a really important component to ensuring humanity reaches the safe space within the doughnut.

 

7 – ‘BE AGNOSTIC ABOUT GROWTH’

“no country has ever ended human deprivation without a growing economy.

And no country has ever ended ecological degradation with one.” pg245- Doughnut Economics, Kate Raworth

As I previously mentioned GDP growth is a universal target in economies with many people believing that the in order to succeed and thrive the only way is up.  Kate Raworth describes how the question ‘Is green growth possible?’ divides her classes since so many people are addicted to growth and it’s become an almost religious belief that growth is the answer to everything. Of course, there are many who oppose common beliefs but are timid in doing so. In 21st century economies we must promote human and ecological prosperity in spite of whether the GDP is rising or falling. This is being agnostic.  Another issue which arises is how long an economy keep growing for. At what point is the end of the exponential GDP-time curve? This is a question on many people’s minds however it’s necessary to step away from being addicted to focusing on GDP growth but look for solutions to the world’s problems whether their solutions really rely on GDP growth or not. Aims geared towards decoupling GDP growth and resource use where the relative decoupling provides a lot of jobs, innovation, and better resource which can provide ecological benefits sounds promising. However, there is a lot of evidence out there that currently countries are simply not doing enough to fit within planetary boundaries.

Above I have inserted an image from this chapter of Raworth’s book which displayed visually this idea and the fact that sufficient absolute decoupling should be the goal to return within our planetary boundaries. Its perhaps a faulty trait of society as a whole that we are addicted to growth in all aspects, searching for something more, wanting more and buying more to feed our consumerism culture which helps our economy growth. Evidently, we are largely influenced by marketing which manipulates us to keep wanting more goods and some countries have even banned advertising to under 12s to try and break this habitual consumerism. This is because it’s driving us to desire too many products from resources the earth can’t provide. And materialistic goods don’t always provide the long-term happiness that people seek.

To conclude I want to share my own thoughts and ideas on the subject of doughnut economics. I feel that the doughnut provides us with an optimistic goal for the future, it gives us an aim and visual way to present that living in prosperity for all may be possible but it’s not without its limitations. Obviously, I question how realistic this goal actually is and my findings weren’t hopeful. A simulation type model has been published on goodlife.leeds.ac.uk in which you can explore different scenarios by choosing the quality of life you would like (out of 10) and seeing how this would fit into planetary boundaries. This organization  explores ‘A good life for all within planetary boundaries’ which is a parallel goal to that of Kate Raworth. I tried it for myself: the results, well a lot of red.

The thing I’ve really learnt from exploring this topic is we live in exciting times. Many would say scary however I’d say exciting because the opportunity for change and the need for more innovative and creative ideas is ever growing. I loved learning more about circular economies and how important they really are for the modern world. The doughnut provides a goal and can be used to help people make decisions which will result in the best outcome on quality of life with consideration to the planet and its boundaries. For businesses this can be about the benefits they provide for society instead of simply how much money can be made. Since famously ‘money doesn’t buy happiness.’ The fact this idea is proposed in an image is also so powerful since it creates a visual goal and people can see directly the basic social necessities and ecological impacts all in one picture. I also believe that data like the data provided on goodlife.leeds.ac,uk should be more widely published and more widely referred too since I believe it would come as a huge shock to many that with our current economic climate, we cannot all live a satisfied life without damaging our planets ecosystems.

Blatantly everything is more easily said than done but thinking like a 21st economist for me means that we have to evaluate our all decisions made with the doughnut image in our minds. People, especially leaders and policy makers, need to be; more openminded, less set in their ways and adaptive since times are ever changing and we must satisfy our wants and be provided with our needs in a way that fits the time, considering all the complexity and create an economy which gives us all the best chance of feeling happy and safe both within society and within our planet.