Is the Future of the Economy a Doughnut?

It looks like you're using Microsoft Internet Explorer 8.
We are sorry but This Video does not work with Internet Explorer 8.

Why you should care

Because long-held economic notions may be derailed by thinking outside the box and inside a circle.

Economies of the Future: What's next for capitalism and currencies, poverty and the planet?What's next for capitalism and currencies, poverty and the planet? Find out with this OZY original series: Economies of the Future.

What if the reason the planet is in such a mess boils down to nothing more than a series of misunderstandings? And how quickly would things turn around if these bugs could be fixed? Kate Raworth thinks false assumptions made by the men who began devising modern economic theory 250 years ago explain much of the inequality, environmental destruction and social injustice rampant in the world today. Correct these errors, she argues, and a new way of thinking about money could start to change the world.

An economist at the University of Oxford’s Environmental Change Institute, Raworth scored a surprise hit in 2017 when she published her manifesto for a new economics — a book based on two circles she had doodled then stuffed in a drawer and forgotten about five years earlier.

Called Doughnut Economics: Seven Ways to Think Like a 21st Century Economist, the book has been translated into 15 languages and has won a cult following among executives, government officials and urban designers. The book’s success was all the more astonishing given the bluntness of its message: Flaws embedded in conventional economic theory are behind everything from extreme inequality to the exploitation of women to the climate breakdown and pollution that threaten life on Earth.

But Raworth, 47, did not stop at dynamiting the widely accepted economic wisdom. She set out a new philosophy summed up in the image of the doughnut. The inner circle represents the “social foundation” — the natural resources that the human race needs to thrive. The outer circle represents the “environmental ceiling” — the limits of what nature can safely give. Inside the doughnut hole, people are deprived; while outside the doughnut, they are consuming too much.

Raworth believes that if we can retool economics to keep us somewhere safely between these two extremes, then we may yet avert civilization-collapsing disaster. “The bar is to make the goal of the 21st century to meet the needs of all people within the means of the planet — and I see that as the generational challenge,” Raworth says.

Unlimited growth is never considered healthy in natural systems. “In our bodies, we call it cancer,” Raworth says.

Growing up in a suburb of southwest London, Raworth wasn’t born a rebel: Her teenage activism did not stretch much further than corralling friends to pick up litter along the banks of the Thames. She knew she wanted to devote her career to something bigger than herself and thought studying economics would teach her the language she would need to influence public policy. But after earning a master’s degree from Oxford, she began to see the discipline’s most cherished tenets as dangerously outmoded.

“I found the framework so narrow that I became embarrassed to ever introduce myself as an economist,” Raworth says. “I became a sort of ‘nothing.’ I didn’t have a label.”

Raworth spent four years in New York as a co-author of the United Nations Human Development Report, grappling with big questions about how to measure societal progress, before going on to work for Oxfam in Oxford for a decade. There she was introduced to the work of Johan Rockström, former director of the Stockholm Resilience Center. In 2009, Rockström had led a group of 28 scientists to identify the nine processes that regulate the Earth’s life-support systems. The team began to quantify safe limits in terms of climate change, ocean acidification, species loss and so on, that humanity must not breach if we want to pass on a livable home to future generations. The scientists created a circular diagram to represent these planetary boundaries and how much we have already violated them. Raworth’s first thought: “This is the beginning of new economics.”

But she could see there was something missing. At a subsequent meeting with environmental scientists, she jumped up and said: “Can I draw a picture?” She sketched out a new version of the “planetary boundaries” diagram with a second circle in the middle representing the minimum resources the global population will need to live a decent life. Raworth recalls that it got an unexpectedly warm reply from one of the scientists, who said: “This is the diagram we’ve been missing all along — and it’s not a circle; it’s a doughnut.”

At the core of doughnut economics is the recognition that the whole edifice of conventional economics rests on a flawed premise: that endless growth is the natural order of things. For decades, the damage done to the natural world in the process has been casually dismissed as “externalities.” That approach may have made sense a century ago when the human race had a relatively light footprint. Not now.

Raworth calls this old thinking “Peter Pan economics” — because an economy is never considered to have reached maturity; it must keep growing forever. But unlimited growth is never considered healthy in natural systems. “In our bodies, we call it cancer,” Raworth says.

Other economists have also pointed out the devastation to people and nature caused by the blind pursuit of profit. What sets Raworth apart is her instantly persuasive pictures, from the doughnut to a series of animations and diagrams to show why so many of the assumptions that shape the way governments, companies and financial journalists see the world need to change. Describing these visualizations as a kind of “intellectual graffiti,” Raworth believes they are far more potent change agents than even the most carefully chosen words.

“She recognizes the scale of the trouble we’ve got ourselves into from the outset — and starts to develop the contours of a solution. She’s started to kindle the fires of hope in my generation,” says Laurie Laybourn-Langton, the 29-year-old co-chair of the trustees of Rethinking Economics, a network of students, academics and professionals promoting smarter economic thinking in the classroom and wider society.

Raworth has presented the doughnut to audiences as diverse as the World Economic Forum in Davos, the U.N. General Assembly and the Occupy movement. Politicians from the Netherlands to New Zealand — where the associate minister for finance gave a speech this year saying it was time to create “a doughnut economy” — are showing interest. Multinational companies have started to integrate its principles into strategic planning. And in Sweden, design company Urban Minds and property developer Vasakronan are building a new district of Stockholm in accordance with doughnut economy principles.

Nevertheless, some believe that Raworth could use her platform to sound an even louder alarm. Giorgos Kallis, an environmental scientist at Universitat Autònoma de Barcelona, says economies will need to shrink dramatically by standard measures if we are going to live sustainably. He wants Raworth to join him in championing the term “de-growth” — a word so at odds with today’s economic discourse that it makes even the most progressive politicians blanch. “Consuming 20 percent of what we consume now, one way or the other, will not be like having a doughnut, a nice night out,” Kallis says.

Raworth’s vocabulary may be less significant than the sense of possibility she projects. Speaking with the energy and urgency of an accidental visionary, she can’t quite believe how many people see different things in the doughnut: a map, a mandala, a symbol of hope.

“I don’t share an employer, but I share a purpose with so many people. That’s the lovely thing when you realize you’re hitting a paradigm change,” Raworth says. “This is the only doughnut that actually turns out to be good for us.”

OZYRising Stars

People who are accelerating our culture and advancing the conversation – for good or for ill. You may not have heard of them yet – but you'll soon need to know 'em.