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

by Kate Raworth

For those in the prepare-for-landing crowd, the upshot of all these trends is that green growth in high-income countries is nowhere on the horizon: it is time to go green without growth instead. But this is where they tend to be over-optimistic themselves: certain that endless GDP growth is not possible, some are too quick in concluding that it therefore cannot be necessary, and point to the so-called Easterlin Paradox as evidence that higher incomes do not make us happier anyway.

And that is precisely why we have a problem. Because over the past couple of centuries, just as Rostow spelled out, capitalist economies have restructured their laws, institutions, policies and values so that they are geared to expect, demand and depend upon continual GDP growth. Let’s revisit that conundrum we find ourselves facing: We have an economy that needs to grow, whether or not it makes us thrive. We need an economy that makes us thrive, whether or not it grows.

They promise business that they will ‘cut red tape’, but end up dismantling legislation that was put in place to protect workers’ rights, community resources and the living world. They privatise public services – from hospitals to railways

But some innovative economic thinkers have started to put their minds to the task by asking, in the words of the ecological economist Peter Victor, can we ‘go slower by design, not disaster’? Or even – in the name of agnosticism – what would it take to design an economy that can handle GDP growth without hankering after it, deal with it without depending upon it, embrace it without exacting it?

Financially addicted: what’s to gain? Let’s start at the heart of the matter: with the financial addiction to growth. Because every decision in the world of finance revolves around one underlying question: what’s the rate of return?

The search for gain – which drives shareholder returns, speculative trading, and interest-bearing loans – lodges dependency upon continual GDP growth deep within the financial system. For John Fullerton, the banker who walked away from Wall Street, here lies the source of the problem. ‘We’ve reached the logical conclusion of this expansionist economic paradigm,’ he says. ‘Unless we can achieve magical decoupling we have an exponential function on a closed system planet … yet the finance system has no in-built plateau, it can’t “mature” – and none of the experts in finance are even thinking about this.’

First, reframe the purpose of taxes to help build social consensus for the kind of higher-tax, higher-returns public sector that has been a proven success in many Scandinavian countries. And remember, the verbal framing expert George Lakoff advises, to choose your words wisely: don’t oppose tax relief – talk about tax justice. Likewise, the notion of public spending is often used by those who oppose it to evoke a never-ending outlay. Public investment, on the other hand, focuses on the public goods – such as high-quality schools and effective public transport – that underpin collective well-being.57 Second, end the extraordinary injustice of tax loopholes, offshore havens, profit shifting, and special exemptions that allow many of the world’s richest people and largest corporations – from Amazon to Zara – to pay negligible tax in the countries in which they live and do business. At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing an annual loss of more than $156 billion in tax revenue, a sum that could end extreme income poverty twice over.58 At

Socially addicted: something to aspire to Lastly, how are we socially locked in, addicted to, and stuck on GDP growth? Through the culture of consumerism and the tensions created by inequality, which in turn are rooted in the need for something to aspire to. Despite being far richer than kings of old, we are too easily trapped on a treadmill of consumerism, continually searching for identity, connection and self-transformation through the things that we buy. Keeping up with the Joneses has us forever chasing the promise of that next purchase.

Reversing consumerism’s financial and cultural dominance in public and private life is set to be one of the twenty-first century’s most gripping psychological dramas.

He talked about promoting GDP growth in high-income countries as if it were an obvious necessity. When I questioned him about it, his answer was simple. ‘We have a deep-seated drive for growth,’ he said. ‘People need something to aspire to.’ I agree: people need something to aspire to. But is an ever-growing income really the best aspiration on offer? It was Alfred Marshall, back in Chapter 3, who endowed rational economic man with insatiable wants and desires. Thanks to Edward Bernays, that particularly seems to be the case among the WEIRD ones today – people in Western, educated, industrial, rich, democratic countries that are now the homelands of consumer society. Yet anthropologists can name both historical and contemporary examples of traditional societies that have lived by a principle of sufficiency instead, such as the Cree in northern Manitoba in the nineteenth century whose response to European traders defied economists’ expectations. In the hope of acquiring more furs, the Europeans offered them higher prices: in response the Cree brought fewer furs to the trading post, since a smaller number were now needed to obtain the goods that they wanted in exchange.71

If Bernays were here and willing to help try creating or recovering a similar sense of material sufficiency in WEIRD societies, which deep human values would he attempt to trigger? What might we aspire to instead, if not more possessions?

‘Wherever and whenever we are excessive in our lives it is the sign of an as yet unknown deprivation,’ argues the psychoanalyst Adam Phillips. ‘Our excesses are the best clue we have to our own poverty, and our best way of concealing it from ourselves.’72 When it comes to consumerism, perhaps the poverty that we aim to c...

The psychotherapist Sue Gerhardt would certainly agree. ‘Although we have relative material abundance, we do not in fact have emotional abundance,’ she writes in her book, The Selfish Society. ‘Many people are deprived of what really matters.’73 There are many views on what really matters to us in life – from using our talents and helping others, to standing up for what we believe in. Drawing on a wide array of psychological research, the New Economics Foundation has distilled the findings down to five simple acts that are proven to promote well-being: connecting to the people around us, being active in our bodies, taking notice of the world, learning new skills, and giving to others.74 Perhaps these are first steps towards the kind of...

WE ARE ALL ECONOMISTS NOW Doughnut Economics sets out an optimistic vision of humanity’s common future: a global economy that creates a thriving balance thanks to its distributive and regenerative design. Such an aspiration may seem foolish, even naive, given the intertwined crises of climate change, violent conflict, forced migration, widening inequalities, rising xenophobia, and endemic financial instability that we face.

The twenty-first-century task is clear: to create economies that promote human prosperity in a flourishing web of life, so that we can thrive in balance within the Doughnut’s safe and just space. It starts with recognising that every economy – local to global – is embedded within society and within the living world.

By deepening our understanding of human nature we can create institutions and incentives that reinforce our social reciprocity and other-regarding values, rather than undermine them.

The smartest economists have always understood the importance of such intellectual maypole dancing. John Stuart Mill believed that his 1848 book Principles of Political Economy was acclaimed in his own day because it treated political economy, ‘not as a thing in itself, but as a fragment of a greater whole; a branch of social philosophy, so interlinked with all the other branches that its conclusions, even in its own peculiar province, are only true conditionally, subject to interference and counteraction from causes not directly within its scope’.

Some prominent contemporary economists echo this view, such as Joseph Stiglitz, who has advised prospective students to ‘study economics, but study it with skepticism and study it within the broader context’.

This intellectual inertia at the top has left Yuan far from satisfied. ‘We have to storm the citadels,’ she told me, ‘we can’t just build our camps outside. You can have as many extra-curricular reading groups and MOOCs as you like but unless the university accepts that what you are doing is economics then it’s not seen as economics. In the end, we don’t just want to talk about the narrowness of the current teaching, we want to change it.’

Economic evolution: one experiment at a time Yuan’s frustration with the privileged position still given to old economic theory is palpable. ‘Many university departments – such as sociology or political science – teach their students to think in different ways about the economy,’ she told me, ‘but only people who study neoclassical economic theory in economics departments go out into the world labelled as “economists”, with all the power that the label grants them. We have to break down the power of the expert which is concentrated in that title and make it mean lots of different things.’5 One promising way of redefining the meaning of ‘economist’ is to look to those who have gone beyond new economic thinking to new economic doing: the innovators who are evolving the economy one experiment at a time. Their impact is already reflected in the take-off of new business models, in the proven dynamism of the collaborative commons, in the vast potential of digital currencies, and in the inspiring possibilities of regenerative design.

The Doughnut of social and planetary boundaries is a simple visualisation of the dual conditions – social and ecological – that underpin collective human well-being. The social foundation demarks the Doughnut’s inner boundary, and sets out the basics of life on which no one should be left falling short. The ecological ceiling demarks the Doughnut’s outer boundary, beyond which humanity’s pressure on Earth’s life-giving systems is in dangerous overshoot. Between the two sets of boundaries lies the ecologically safe and socially just space in which humanity can thrive.