Doughnut Economics: CI Business Brief Book Review Column

Originally published in 2017, Kate Raworth’s Doughnut Economics has gained fresh relevance as we seek new ways to address challenges in a world unimaginable five short years ago.  This interesting, engaging and thought-provoking book appeals for us to adopt a broader way of thinking, both within economics and throughout our lives as a whole.  As the book’s subtitle, Seven Ways to Think Like a 21^st-Century Economist suggests, Doughnut Economics doesn’t assume an in-depth prior knowledge of economic theory.  Rather it sets out to make clear the all-encompassing influence of economics on our lives.  In Raworth’s words, ‘economics is the mother tongue of public policy, the language of public life and the mindset that shapes society’.

Raworth is a firm believer in the power of pictures to convey a message and Doughnut Economics is replete with diagrams and images that help unpack some of the more complex concepts.  Central to this is Raworth’s own creation, The Doughnut, establishing a social foundation of well-being that no one should fall below and an ecological ceiling of planetary pressure we should not go beyond; ‘a world in which every person can lead their life with dignity, opportunity and community – and where we can all do so within the means of our life-giving planet’.

 

In many ways the Doughnut model echoes Abraham Maslow’s hierarchy of needs, identifying a set of basic requirements for individuals to have the opportunity of engaged and meaningful lives.  However, while Maslow’s hierarchy had a clear upward progression, Raworth sets out a circular system where the varying factors interact with each other to influence the overall outcome.  A second key difference is the ecological parameters with which Raworth borders the Doughnut with, linked to the nine control factors set out by Earth-system scientists Johan Rockstrom and Will Steffen in 2015.  No longer can we single-mindedly pursue the self-actualisation proposed by Maslow without reference to the environment that supports us.

 

Having established the Doughnut model Raworth moves on to consider seven key economic and social concepts that she believes need to be addressed if a fairer and more sustainable economic model is to evolve.  This is primarily a question of reframing and expanding current thinking to include considerations beyond the drive for economic growth that has dominated neo-liberal thinking for the past fifty years.  Raworth argues that we need to move beyond the definition of man as ‘Home Economicus’, driven by rational self-interest, quoting Adam Smith himself to point out that people flourish when we display ‘our humanity, justice, generosity and public spirit’.

 

Raworth calls for us to become agnostic about growth, putting forward a conundrum that is at the heart of this book, no country has ever ended human deprivation without a growing economy: no country has ever ended ecological degradation without one.  This is acerbated by the fact that we may be nearing the end of exponential economic growth.  Governor of the Bank of England, Mark Carney, stated in 2016 that many Western economies appear to be trapped in a “low-growth, low inflation, low interest rate equilibrium.”  The key questions now are how our societies will manage the distribution of limited assets if growth really is plateauing and whether that plateau will be within an environmental window that the Earth can sustain. 

 

The answers Raworth offers don’t make comfortable reading and are certain to provoke debate. Shortened working weeks, planned economies and guaranteed universal incomes hark back to a level of state involvement in the markets not seen since the 1970s.  But, as Raworth points out, economics ‘is not a matter of discovering laws: it is essentially a question of design’.  Whether there is sufficient political will to embrace wide-ranging change is an open question.  As Raworth concedes, Upton Sinclair had a point when he commented that ‘it is difficult to get a man to understand something, when his salary depends on his not understanding it’.  

 

Doughnut Economics offers an invaluable insight into the cultural and historical basis of many of the economic assumptions that underpin our society and sets out pressing questions to address.  As Raworth points out, ‘now is a great moment for unlearning and relearning the fundamentals of economics.’