Book Review: Doughnut Economics: 7 ways to Think Like a 21st Century Economist by Kate Raworth

by Terrance Hunsley

Kate Raworth teaches at Oxford University Environmental Change Institute,  and at Schumacher College, and was for several years a Senior Researcher at Oxfam.

The author presents two interwoven narratives. One is that we cannot continue to pursue growth as the main economic goal of societies. We have to respect the natural limits of the planet to sustain human life. We also have to rectify the glaring inequalities and deprivation that growth has not solved. 

The second narrative addresses the profession of economics and the role of economists as advisors to the decision-makers of the world. She feels that economists have been remiss in worshipping GDP growth as a means to achieve better living standards for all and eventually to also be able to clean up the environment and reduce inequities. She critiques GDP as a measure of progress of society because of its narrow focus on quantity of money exchanged, while ignoring the distribution of benefits and the impact on the environment.  

In the critique of economics, she reviews the writing of the heroes of the profession, showing that many were generally aware of and even warned against, putting too much emphasis on GDP. But she observes that the profession became too focussed on mathematical measures and equations, and lost an appreciation of the wider academic world. She notes that psychology, political science, sociology, and other social science disciplines have important understanding of human behaviour, and have supported some recent adaptation of economics through development of nudge theory and behavioural economics.

She proposes as a new guide for both the profession and for public policy – the image of a doughnut. The goal is to get everyone into the doughnut, which she defines as a safe and just place. Safe because going beyond the outer edges would breach the environmental and ecological limits for sustaining human life.  Just, because we would bring the people out of the hole in the centre, where they are excluded from livable income and access to health care, education, and dignity.   

The obstacles to achieving her vision are large. She summarizes statistics on increasing levels of inequality, especially the growing gap between the stagnant incomes of ordinary wage earners, and the huge increases in wealth at the top of the global economic pyramid. Moreover, public policy has tended to favour capital over labour, thus adding to a growing power imbalance.  As for moving away from growth, she points out that the global middle class is projected to grow from  2 billion people a few years ago, to 5 billion by 2030. So a massive increase in demand for consumer goods and energy supply can be anticipated, with increased pressure on the environment and more momentum to reduce labour and increase automation.  

The solutions? 

The author proposes several initiatives, many of which are innovative and all of which I like.

She advocates for a circular or regenerative economy, where goods are produced to be repaired, repurposed and reused, and only lastly, recycled. Where housing and urban infrastructure  become multifunctional. For example, housing that absorbs CO2 emissions, pavement that absorbs and reuses rainwater, urban farming, investment in renewable energy. Businesses that are owned by employees, or in which they are shareholders. 

The author suggests that cities are a good focus for change. They can assess their environment, their infrastructure, their economy, their social problems, and devise integrated multifunctional solutions. The projects they devise can also support good and sustainable jobs.

A vision put forward is an expansion of what she calls “The Commons” – areas where collaborative work can be undertaken with open source infrastructure. The digital commons is an area of great hope, where the combination of access to the internet and to such things as 3d printers can permit people anywhere to create their own enterprise. Social and cooperative enterprise can also use and sustain these kinds of creative commons. 

The author unsurprisingly suggests that we should also move income taxation toward taxing of wealth. As well, she endorses, almost in passing, an adequate Basic Income for all.

She proposes a renewed commitment to the UN Global Development Goals and that nations commit to reaching their long-forgotten targets of 0.7% of GDP given to international aid.

As well as asking that her discipline, economics, redefine GDP, she suggests that economic advisors take a step back and include the contributions of other scientific expertise in formulating advice.

She wants a shift from “rational economic man” maximizing consumption, to collaborative economic activity which nurtures human nature.

Shortcomings?

Despite some rays of hope, I feel that like so many of us, the author has been better at describing the problems than providing solutions.

There are indeed some interesting and very promising initiatives, including the digital commons and many social and cooperative enterprises. But without dramatic intervention they are not going to outpace Facebook, Amazon and Microsoft.  The momentum of the global economy is massive. 

The only actors with power to change the course of economic and environmental history are in my opinion, the current nation state governments, and they are all but ignored in this book.  i would have liked her advice on domestic economic policies, domestic social policies, environmental policies, international trade agreements, and international collaboration on regulation of industry. 

I would have liked some advice on how to separate government and business, to avoid regulatory capture, to keep business money and elite personal wealth out of political campaign contributions. How to avoid having politicians and senior public officials looking forward to lucrative corporate jobs after they leave office or retire. 

I would have liked some solutions to the problem she referred to in the patenting of almost any form of intellectual property, which provides monopoly power to many businesses – and where national governments have little capacity to challenge, for example, the pharmaceutical or digital service giants.  She does advise that governments who finance the early research which leads to valuable advances in any field, should prescribe in grants and contracts that the results be open sourced. I would suggest an alternative, which is to take an equity percentage ownership of findings, which results in partial public ownership of new advances that stem from government investment.    

The book was written in 2017, so of course it does not deal with COVID. She does make reference to the role of the corporation and its shareholders and stakeholders. I would be curious to see what she thinks of the recent statement on the role of the corporation by the (US) Business Roundtable, which has most of the biggest corporate players in the world. The statement says that the corporation’s role is no longer just to serve its shareholders, but also to serve the best interests of its stakeholders – employees, customers and the community. A number of business leaders see this as signalling a major shift for the role of business in society. You can look at this positively, as a step toward more enlightened enterprise.  Or if you are like me and a bit skeptical, you might see in this an exercise to reassure governments and consumers that big business can regulate its own behaviour. I would prefer to see more government regulation, not less.

Changing the course of the global economy and domestic policies that support it will take some heavy duty political courage, or some very creative alternative solutions. 

All in all, the book is a good read, and covers a lot of ground. If it influences decision makers, that will be good. However, the route from here to there is not well described.

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