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Doughnut Economics: 21st Century Economics
Gary Wong, Consultant, Canada, Premium Member
Kate Raworth’s book "Doughnut Economics" is a wake-up call to transform our capitalist worldview obsessed with growth into a more balanced, sustainable perspective that allows both humans and our planet to thrive.
She lists 7 ways to start thinking like 21st century economists:
1. CHANGE THE GOAL: from GDP growth to the Doughnut.
For over half a century, economists have fixated on GDP as the first measure of economic progress, but GDP is a false goal waiting to be ousted. The 21st century calls for a far more ambitious and global economic goal: meeting the needs of all within the means of the planet. Draw that goal on the page and – odd though it sounds – it comes out looking like a doughnut. The challenge now is to create local to global economies that ensure that no one falls short on life’s essentials – from food and housing to healthcare and political voice – while safeguarding Earth’s life-giving systems, from a stable climate and fertile soils to healthy oceans and a protective ozone layer.
2. SEE THE BIG PICTURE: from self-contained market to embedded economy.
It’s time to write a new economic story fit for this century – one that sees the economy’s dependence upon society and the living world. This story must recognize the power of the market—so let’s embed it wisely; the partnership of the state—so let’s hold it to account; the core role of the household—so let’s value its contribution; and the creativity of the commons—so let’s unleash their potential.
3. NURTURE HUMAN NATURE: from rational economic man to social adaptable humans.
The character at the heart of 20th century economics—‘rational economic man’—presents a pitiful portrait of humanity: he stands alone, with money in his hand, a calculator in his head, ego in his heart, and nature at his feet. Worse, when we are told that he is like us, we actually start to become more like him, to the detriment of our communities and the planet. But human nature is far richer than this, as emerging sketches of our new self-portrait reveal: we are reciprocating, interdependent, approximating people deeply embedded within the living world. It’s time to put this new portrait of humanity at the heart of economic theory so that economics can start to nurture the best of human nature.
4. GET SAVVY WITH SYSTEMS: from mechanical equilibrium to dynamic complexity.
Economics has long suffered from physics envy: awed by the genius of Isaac Newton and his insights into the physical laws of motion, 19th century economists became fixated on discovering economic laws of motion. But these simply don’t exist: they are mere models, just like the theory of market equilibrium which blinded economists to the looming financial crash of 2008. That’s why 21st-century economists embrace complexity and evolutionary thinking instead. Putting dynamic thinking at the heart of economics opens up new insights for understanding the rise of the one percent and the boom and bust of financial markets. It’s time to stop searching for the economy’s elusive control levers (they don’t exist), and instead start stewarding the economy as an ever-evolving system.
5. DESIGN TO DISTRIBUTE: from ‘growth will even it up again’ to distributive by design.
In the 20th century economic theory whispered a powerful message when it comes to inequality: it has to get worse before it can get better, and growth will eventually even things up. But extreme inequality, as it turns out, is not an economic law or necessity: it is a design failure. Twenty-first century economists recognize that there are many ways to design economies to be far more distributive of value among those who help to generate it. And that means going beyond redistributing income to pre-distributing wealth, such as the wealth that lies in controlling land, enterprise, and the power to create money.
6. CREATE TO REGENERATE: from ‘growth will clean it up again’ to regenerative by design
Economic theory has long portrayed a clean environment as a luxury good, affordable only for the well-off—a view that says that pollution has to increase before it can decline, and (guess what), growth will eventually clean it up. But as with inequality there is no such economic law: environmental degradation is the result of degenerative industrial design. This century calls for economic thinking that unleashes the potential of regenerative design in order to create a circular, not linear, economy—and to restore ourselves as full participants in Earth’s cyclical processes of life.
7. BE AGNOSTIC ABOUT GROWTH: from growth-addicted to growth-agnostic.
Mainstream economics views endless GDP growth as a must, but nothing in nature grows forever, and the economic attempt to buck that trend is raising tough questions in high-income but low-growth countries. That’s because today we have economies that need to grow, whether or not they make us thrive. What we need are economies that make us thrive, whether or not they grow. That radical flip in perspective invites us to become agnostic about growth and to explore how our economies—which are currently financially, politically and socially addicted to growth—could learn to live with or without it.
Sources:
Raworth, Kate, "Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist", 2018, Chelsea Green Publishing.
Raworth, Kate, "Seven Ways to Transform 21st-Century Economics — and Economists", May 2017, evonomics.com.
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Early Adopters of Doughnut Economies
Prasad Chundi, Consultant, India, Member
It is a brilliant thought process. We can see that some countries have embraced at least some of these principles quite early and the benefits are reflected in a clean environment, wealth distribution, happiness of the people and their principle-centric life styles prevailing in those countries.
Study of the economies of Canada, Switzerland and some Scandinavian countries will surely provide good insights.
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Doughnut Economics Has to Happen
Cockburn, Manager, United Kingdom, Member
Well put. I have said for years we shouldn't solely focus on GDP growth (and I'm not even an economist). I especially like the change in image of human beings. Go on all you economists out there, get together and make it happen!
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Change is Happening
Gary Wong, Consultant, Canada, Premium Member
@ Cockburn: Here’s the rub. It took a band of university students to revolt against courses being taught that did little to explain why economists failed to warn about the 2008 global financial crisis. In 2011 students at the University of Manchester formed the Post-Crash Economics Society. The rethinking movement has gone viral generating many similar sites. Personally I follow Evonomics.com.
We're now seeing academics at major universities dividing. Ha-Joon Chang, who teaches economics at Cambridge University, is backing the students. He said “The teaching of economics was increasingly confined to arcane mathematical models. Students are not even prepared for the commercial world. Few [students] know what is going on in China and how it influences the global economic situation. Even worse, I've met American students who have never heard of Keynes."
Paul Krugman, a Nobel prize winner and professor at Princeton university has attacked the complacency of economics in the US.
I find it unnerving (but curiously exciting!) that many Business Management practices are founded on the principles of traditional economics and a profession that has gone astray. In light of the realities of a non-linear complex world, I'm encouraged that venerable business concepts such as strategic planning, business case, performance management, are being challenged.
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Donut Economics
Mark Ianni, United States, Member
Socialist redistribution of wealth disguised as 21st century economics. Don't fall for it!
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Please Explain your Point of View
Jaap de Jonge, Editor, Netherlands
@ Mark Ianni: Mark, I don't see that this economic doughnut model has any relation with socialism or redistribution of health. Could you please backup your statements with some facts or arguments?
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Donut Economics
Mark Ianni, United States, Member
@ Jaap de Jonge: Of course you don't see socialism or redistribution of Wealth in this model. You're from the Netherlands. The United States went through 8 years of socialist dystopian misery via Obama. Wealth was redistributed via Obamacare. If you believe Paul Krugman's economic philosophies are good then you are a socialist. If you think Keynesian economics is good then you are a socialist.
I heard my economics degree here in the United States in 1981. My professor was from Yugoslavia & experienced socialism and communism. I've grown up in a capitalist constitutional republic that works. Socialism does not work and if you read between the lines this economic donut model is all about spreading socialism.
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Donut Economics
Shawna-Lee Lawrence, Entrepreneur, Jamaica, Member
@ Mark Ianni: There is an innate and purposeful drive to always evolve. If capitalist economics worked so perfectly, then why the disastrous recession in 2008?
I think what Raworth refers to is not to rely only or primarily on making money because there are limits to the world's reserves and resources. America has sought many ways to acquire and maintain their wealth. I've seen other countries than the US and they seem to know what they are doing. Maternity leave is for 9 weeks after birth and paid, well. Not only that, garbage disposal and food waste are controlled because they value the ENVIRONMENT as well. They do have a higher tax rate but they value quality of life not money.
Those whose rely excessively on wealth tend to not care about these issues.
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