Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist

by Kate Raworth

  From endless growth to thriving in balance

  ‘Onwards and upwards’ may be a deeply familiar metaphor for progress but, in terms of the economy that we know, it has taken us into dangerous terrain. ‘Humanity can affect the functioning of its own life-support systems,’ says the ocean scientist Katherine Richardson. ‘There are tipping points we are pushing on. How does this change our definition of progress?’32

  For over 60 years, economic thinking told us that GDP growth was a good enough proxy for progress, and that it looked like an ever-rising line. But this century calls for quite a different shape and direction of progress. At this point in human history, the movement that best describes the progress we need is coming into dynamic balance, by moving into the Doughnut’s safe and just space, eliminating both its shortfall and overshoot at the same time. That calls for a profound shift in our metaphors: from ‘good is forward-and-up’ to ‘good is in-balance’. And it shifts the image of economic progress from endless GDP growth to thriving-in-balance in the Doughnut.

  The image of the Doughnut, and the science behind it, may be new but the sense of dynamic balance that it invokes resonates with decades of thinking about sustainable development. The idea of Earth as a spaceship – a self-contained living capsule – gained popularity in the 1960s, prompting the economist Robert Heilbroner to point out that, ‘As in all spaceships, sustained life requires that a meticulous balance be maintained between the capability of the vehicle to support life and the demands made by the inhabitants of the craft.’33 In the 1970s, the economist Barbara Ward – a pioneer of sustainable development – called for global action to tackle both the ‘inner limits’ of human needs and rights and the ‘outer limits’ of the environmental stress that Earth can endure: she was effectively drawing the Doughnut with words rather than with a pen.34 Later, in the 1990s, the campaigning organisation Friends of the Earth advocated the concept of ‘environmental space’, arguing that all people have the right to an equitable share of water, food, air, land, and other resources within the carrying capacity of the Earth.35

  In some cultures, the idea of thriving in balance goes back much further. Pan metron ariston said the Ancient Greeks: ‘all things in good measure is best’. In Maori culture, the concept of well-being combines spiritual, ecological, kinship and economic well-being, interwoven as interdependent dimensions. In Andean cultures, buen vivir – literally ‘living well’ – is a worldview that values ‘a fullness of life in a community with others and with Nature’.36 In recent years, Bolivia has incorporated buen vivir into its constitution as an ethical principle to guide the state, while Ecuador’s constitution became the world’s first, in 2008, to recognise that Nature, or Pachamama, ‘has the right to exist, persist, maintain and regenerate its vital cycles’.37 Such holistic and balanced conceptions of well-being are reflected in the traditional symbols of many ancient cultures, too. From Taoism’s yin yang and the Maori takarangi to Buddhism’s endless knot and the Celtic double spiral, each design invokes a continual dynamic dance between complementary forces.

  Western cultures seeking to oust the cuckoo goal of GDP growth cannot simply put an Andean or Maori worldview in its place, but must find new words and pictures to articulate an equivalent vision. What might the words for that new vision be? A first suggestion: human prosperity in a flourishing web of life. Yes, that is a mouthful to say – and it’s telling that we lack more concise ways of expressing something so fundamental to our well-being. As for the new picture? The Doughnut, I discovered, has a role to play.

  Ancient symbols of dynamic balance: the Taoist yin yang, Maori takarangi, Buddhist endless knot, and Celtic double spiral.

  In late 2011, in the run-up to a major United Nations conference on sustainable development, I headed to the UN in New York in order to present the Doughnut to representatives from a wide range of countries, to gauge their reaction to it. I met first with the Argentinians since they were, at the time, chairing the Group of 77, the largest negotiating bloc of developing countries at the UN. As I explained the Doughnut to the Argentine negotiator, she tapped the picture firmly with her finger and said, ‘I have always thought of sustainable development like this. If only you could get the Europeans to see it this way too.’ So the following day I went, with curiosity, to present the Doughnut to a roomful of European officials. Once I had projected the Doughnut on to the screen and explained its core idea, the British representative spoke up. ‘This is interesting,’ he said. ‘We hear the Latin Americans talk of “Pachamama” and find it all a bit fluffy’ – waggling his hands in the air as if to illustrate – ‘but I can see that this is a science-based way of saying something that’s actually not so different.’ Sometimes pictures can bridge a divide that words cannot cross.

  Given just how far out of balance we currently are – transgressing both sides of the Doughnut – the task of coming into balance is daunting. ‘We are the first generation to know that we’re undermining the ability of the Earth system to support human development,’ says Johan Rockström. ‘This is a profound new insight and it is potentially very, very scary … It is also an enormous privilege because it means that we are the first generation to know that we now need to navigate a transformation to a globally sustainable future.’38

  Imagine, then, if ours could be the turnaround generation that started putting humanity on track for that future. What if we each were to mentally map our own lives on to the Doughnut, asking ourselves: how does the way that I shop, eat, travel, earn a living, bank, vote and volunteer affect my personal impact on social and planetary boundaries? What if every company strategised around a Doughnut table, asking itself: is our brand a Doughnut brand, whose core business helps to bring humanity into that safe and just space? Imagine if the G20 finance ministers – representing the world’s most powerful economies – met around a Doughnut-shaped conference table to discuss how to design a global financial system that served to bring humanity into that sweet spot. These would be world-changing conversations.

  In some countries, companies and communities, such conversations are actually under way. From the UK to South Africa, Oxfam has published national Doughnut reports, revealing how far each nation is from living within a nationally defined safe and just space.39 In Yunnan Province, China, research scientists have made a Doughnut analysis of the social and ecological impacts of industry and farming around Lake Erhai, the region’s key source of water.40 Companies ranging from Patagonia, the US-based outdoor clothing manufacturer, to Sainsbury’s supermarkets in the UK, have used the Doughnut to help rethink their corporate strategies. And in Kokstad, South Africa – the fastest-growing town in KwaZulu Natal – the local municipality has teamed up with urban planners and community groups in using the Doughnut to envision a sustainable and equitable future for the town.41

  Initiatives like these are ambitious experiments in reorienting economic development, but is the Doughnut’s planetary scale simply too ambitious for economics to handle? Not at all: it is a scale whose time has come. Back in Ancient Greece when Xenophon first posed the economic question, ‘How should a household best manage its resources?’ he was literally thinking about a single household. Towards the end of his life he turned his attention to the next level up, the economics of the city state, and proposed a set of trade, tax and public investment policies for his home town of Athens. Jump forward almost two thousand years to Scotland, where Adam Smith decisively raised the focus of economics to the next level up again, the nation state, asking why some nations’ economies thrived while others stagnated. Smith’s nation-state economic lens has gripped policy attention for over two hundred and fifty years, and is entrenched by those yearly statistical comparisons of national GDP. But now faced with a globally connected economy, it is time for this generation of thinkers to take the inevitable next step. Ours is the era of the planetary household – and the art of household management is needed more than ever for our common home.

  Can we live within the Doughnut?


  The Doughnut provides us with a twenty-first-century compass but what determines whether or not we can actually move into its safe and just space? Five factors certainly play key roles: population, distribution, aspiration, technology and governance.

  Population matters, and in an obvious way: the more of us there are, the more resources it takes to meet the needs and rights of all, and that is why it is essential for the size of the human population to stabilise. But here’s the good news: although the global population is still growing, since 1971 its growth rate has been falling sharply. What’s more, for the first time in human history, its fall has been due not to famine, disease or war, but to success.42 Decades of public investment in infant and child health, in girls’ education, in women’s reproductive healthcare, and in women’s empowerment have at last enabled women to manage the size of their families. Seen through the lens of the Doughnut, the message is clear: the most effective way to stabilise the size of the human population is to ensure that every person can lead a life free of deprivation, above the social foundation.

  If population matters, distribution matters just as much because extremes of inequality push humanity beyond both sides of the Doughnut’s boundaries. Thanks to the scale of global income inequality, responsibility for global greenhouse gas emissions is highly skewed: the top 10% of emitters – think of them as the global carbonistas living on every continent – generate around 45% of global emissions, while the bottom 50% of people contribute only 13%.43 Food consumption is deeply skewed too. Around 13% of people worldwide are malnourished. How much food would it take to meet their caloric needs? Just 3% of the global food supply. To put that in context, 30%–50% of the world’s food gets lost post-harvest, wasted in global supply chains, or scraped off dinner plates and into kitchen bins.44 Hunger could, in effect, be ended with just 10% of the food that never gets eaten. From these examples it is clear that getting into the Doughnut calls for a far more equitable distribution of humanity’s use of resources.

  A third factor is aspiration: whatever people consider necessary for a good life. And one of the biggest influences on our aspirations is how and where we live. In 2009, humanity went urban, with over half of us living in cities and towns for the first time in history, and 70% of us are expected to be urbanites by 2050. City living tends to amplify the influence of surrounding crowds and of advertising billboards whose images promise that a better life is just a purchase away, stoking up desire for faster cars and slimmer laptops, for exotic holidays and the latest-craze gadgets. As economist Tim Jackson deftly put it, we are ‘persuaded to spend money we don’t have on things we don’t need to make impressions that won’t last on people we don’t care about’.45 Given a fast-growing global middle class, the lifestyles that people aspire to will have clear ramifications for our collective pressure on planetary boundaries.

  Urbanisation may fuel consumerism but it also offers an opportunity to meet many of people’s needs – such as for housing, transport, water, sanitation, food and energy – in far more effective ways. Around 60% of the area expected to be urban by 2030 has yet to be built so the technologies used to create that infrastructure will have far-reaching social and ecological implications.46 Can new transport systems replace traffic queues of private cars with fast and affordable public transport? Can modern urban energy systems replace fossil-fuel power with rooftop networks of solar power? Can buildings be designed to be largely self-heating and self-cooling? Can food for the city be produced in ways that help to store more carbon in the soil, and provide good jobs at the same time? It depends a great deal upon the technological choices that are made.

  Governance also plays a pivotal role, from local and city scales to the national, regional and global. Designing governance that is suited to the challenges we face raises deep political issues that confront the long-standing interests and expectations of countries, corporations and communities alike. The global scale, for example, needs governance structures that can reduce humanity’s pressure on planetary boundaries in ways that are equitable with respect to the distribution of their regional and national impacts. At the same time, they must be able to take account of complex interactions such as the inextricable linkages between the food, water and energy sectors. And they must be able to respond far more effectively to unexpected events, such as global food price crises, while steering a wise course on emergent technologies. Much will depend upon the twenty-first century creating far more effective forms of governance, on every scale, than have been seen before.

  All five of these factors – population, distribution, aspiration, technology and governance – will significantly shape humanity’s prospects for getting into the Doughnut’s safe and just space, which is why they are all at the heart of ongoing policy debates. But they cannot bring about the scale of transformation required unless we also transform the economic thinking that we bring to bear. We have left this transformation late in the day – some would say too late. But today’s economics students could well be the last generation with a chance of achieving our twenty-first-century goal. They deserve, at the very least, to be equipped with an economic mindset that gives them the best possible chance of succeeding. And so do we all.

  The cuckoo goal of GDP growth emerged from an era of economic depression, world war, and cold war rivalry, but it dominated economic thinking for over 70 years. In a few decades’ time we will look back, no doubt, and consider it bizarre that we once attempted to monitor and manage our complex planetary household with a metric so fickle, partial and superficial as GDP. The crises of our own times demand a very different goal and we are still in the early days of reimagining and renaming just what that goal should be.

  If the goal is to achieve human prosperity in a flourishing web of life – and it looks rather like a doughnut – then how can we best think of (and draw) the economy in relation to the whole? As we will discover, the way that economists have traditionally drawn the economy – determining what’s included and what’s left out of the economic story – has had profound consequences for all that follows.

  2

  SEE THE BIG PICTURE

  from self-contained market to embedded economy

  For four hundred years, William Shakespeare’s plays have captivated theatre-goers worldwide, thanks to their unforgettable characters, gripping plots and poetic verse. To keep his actors on their toes, Shakespeare handed each member of the troupe only their own lines and cues to learn, intentionally leaving them in the dark about the unfolding plot.1 Soon after his death, however, over-zealous editors added in complete lists of characters and, in plays such as The Tempest, introduced many parts along with their telltale traits:2

  PROSPERO, the right Duke of Milan

  ANTONIO, his brother, the usurping Duke of Milan

  GONZALO, an honest old counsellor

  CALIBAN, a savage and deformed slave

  STEFANO, a drunken butler

  MIRANDA, daughter to Prospero

  ARIEL, an airy spirit

  Describe a character as an ‘usurping duke’ and the actors already suspect that past wrongs are waiting to be righted. Name another as ‘an honest old counsellor’ and they know his word is to be trusted. Introduce a third as a ‘drunken butler’ and they are waiting for the slapstick comedy. With such a character list, the play is pregnant with plot and the story ahead almost self-fulfilling.

  What does this have to do with economics? Everything. ‘All the world’s a stage,’ Shakespeare famously wrote, ‘And all the men and women merely players.’ He had that right: today’s economic actors play out their roles on the international stage, and so enact the economic drama of our times. But who got to set that stage, who defined the telltale traits of the leading roles – and how can we now rewrite the story?

  This chapter reveals the cast of characters, the script, and the playwrights behind the economic story that came to dominate the twentieth century – the one that has pushed us to the brink of collapse. But it also sets the stag
e for a twenty-first-century economic play – one whose characters and script can help bring us back, and into a thriving balance.

  Economics may be theatre, but the play’s leading roles are never explicitly spelled out in the opening pages of the textbooks. Instead, the key characters are tacitly named through the most iconic diagram in macroeconomics, the Circular Flow. First drawn by Paul Samuelson, it was originally devised simply to illustrate how income flows round the economy. But it quickly came to define the economy itself, determining which economic actors were placed centre stage and which were shunted to the wings. Intentionally or not, Samuelson drew up the twentieth-century cast list. But it was his neoliberal rivals Friedrich Hayek and Milton Friedman who – just like Shakespeare’s editors – imbued each part with such telltale traits that the rest of the script almost wrote itself. In their resulting laissez-faire story of who the economy’s actors are and how best to let them work, the plot was loaded from the very start.

  We are all well versed in its line-up of characters, having been told that the market is efficient, that trade is win–win, and that the commons are a tragedy. Given such a cast, the triumph of the market seems almost inevitable in the unfolding plot. However, we were all also told that finance is infallible – but that part of the story unravelled so publicly during the 2008 financial crash that even the scriptwriters had to admit it rang false. It has become increasingly clear that the neoliberal economic plot – in an ironic echo of The Tempest itself – has whipped us into a perfect storm of extreme inequality, climate change and financial crash.

  These global crises have opened up a rare chance to rewrite the entire script and perform a new economic play. The place to begin is by revisiting the cast of characters who feature in the Circular Flow. It’s time to shake up macroeconomics – armed with nothing more than a pencil – by redrawing its most prized picture.