What would a sustainable, universally beneficial economy look like? "Like a doughnut," says Oxford economist Kate Raworth. In a stellar, eye-opening talk, she explains how we can move countries out of the hole -- where people are falling short on life's essentials -- and create regenerative, distributive economies that work within the planet's ecological limits.
This talk was presented at an official TED conference, and was featured by our editors on the home page.
00:10
Have you ever watched a baby learning to crawl? Because as any parent knows, it's gripping. First, they wriggle about on the floor, usually backwards, but then they drag themselves forwards, and then they pull themselves up to stand, and we all clap. And that simple motion of forwards and upwards, it's the most basic direction of progress we humans recognize.
00:35
We tell it in our story of evolution as well, from our lolloping ancestors to Homo erectus, finally upright, to Homo sapiens, depicted, always a man, always mid-stride.
00:48
So no wonder we so readily believe that economic progress will take this very same shape, this ever-rising line of growth. It's time to think again, to reimagine the shape of progress, because today, we have economies that need to grow, whether or not they make us thrive, and what we need, especially in the richest countries, are economies that make us thrive whether or not they grow. Yes, it's a little flippant word hiding a profound shift in mindset, but I believe this is the shift we need to make if we, humanity, are going to thrive here together this century.
01:36
So where did this obsession with growth come from? Well, GDP, gross domestic product, it's just the total cost of goods and services sold in an economy in a year. It was invented in the 1930s, but it very soon became the overriding goal of policymaking, so much so that even today, in the richest of countries, governments think that the solution to their economic problems lies in more growth.
02:01
Just how that happened is best told through the 1960 classic by W.W. Rostow. I love it so much, I have a first-edition copy. "The Stages of Economic Growth: A Non-Communist Manifesto."
02:18
(Laughter)
02:20
You can just smell the politics, huh?
02:23
And Rostow tells us that all economies need to pass through five stages of growth: first, traditional society, where a nation's output is limited by its technology, its institutions and mindset; but then the preconditions for takeoff, where we get the beginnings of a banking industry, the mechanization of work and the belief that growth is necessary for something beyond itself, like national dignity or a better life for the children; then takeoff, where compound interest is built into the economy's institutions and growth becomes the normal condition; fourth is the drive to maturity where you can have any industry you want, no matter your natural resource base; and the fifth and final stage, the age of high-mass consumption where people can buy all the consumer goods they want, like bicycles and sewing machines -- this was 1960, remember.
03:15
Well, you can hear the implicit airplane metaphor in this story, but this plane is like no other, because it can never be allowed to land. Rostow left us flying into the sunset of mass consumerism, and he knew it. As he wrote, "And then the question beyond, where history offers us only fragments. What to do when the increase in real income itself loses its charm?" He asked that question, but he never answered it, and here's why. The year was 1960, he was an advisor to the presidential candidate John F. Kennedy, who was running for election on the promise of five-percent growth, so Rostow's job was to keep that plane flying, not to ask if, how, or when it could ever be allowed to land.
04:13
So here we are, flying into the sunset of mass consumerism over half a century on, with economies that have come to expect, demand and depend upon unending growth, because we're financially, politically and socially addicted to it. We're financially addicted to growth, because today's financial system is designed to pursue the highest rate of monetary return, putting publicly traded companies under constant pressure to deliver growing sales, growing market share and growing profits, and because banks create money as debt bearing interest, which must be repaid with more. We're politically addicted to growth because politicians want to raise tax revenue without raising taxes and a growing GDP seems a sure way to do that. And no politician wants to lose their place in the G-20 family photo.
05:03
(Laughter)
05:05
But if their economy stops growing while the rest keep going, well, they'll be booted out by the next emerging powerhouse. And we are socially addicted to growth, because thanks to a century of consumer propaganda, which fascinatingly was created by Edward Bernays, the nephew of Sigmund Freud, who realized that his uncle's psychotherapy could be turned into very lucrative retail therapy if we could be convinced to believe that we transform ourselves every time we buy something more.
05:38
None of these addictions are insurmountable, but they all deserve far more attention than they currently get, because look where this journey has been taking us. Global GDP is 10 times bigger than it was in 1950 and that increase has brought prosperity to billions of people, but the global economy has also become incredibly divisive, with the vast share of returns to wealth now accruing to a fraction of the global one percent. And the economy has become incredibly degenerative, rapidly destabilizing this delicately balanced planet on which all of our lives depend. Our politicians know it, and so they offer new destinations for growth. You can have green growth, inclusive growth, smart, resilient, balanced growth. Choose any future you want so long as you choose growth.
06:32
I think it's time to choose a higher ambition, a far bigger one, because humanity's 21st century challenge is clear: to meet the needs of all people within the means of this extraordinary, unique, living planet so that we and the rest of nature can thrive.
06:53
Progress on this goal isn't going to be measured with the metric of money. We need a dashboard of indicators. And when I sat down to try and draw a picture of what that might look like, strange though this is going to sound, it came out looking like a doughnut. I know, I'm sorry, but let me introduce you to the one doughnut that might actually turn out to be good for us. So imagine humanity's resource use radiating out from the middle. That hole in the middle is a place where people are falling short on life's essentials. They don't have the food, health care, education, political voice, housing that every person needs for a life of dignity and opportunity. We want to get everybody out of the hole, over the social foundation and into that green doughnut itself. But, and it's a big but, we cannot let our collective resource use overshoot that outer circle, the ecological ceiling, because there we put so much pressure on this extraordinary planet that we begin to kick it out of kilter. We cause climate breakdown, we acidify the oceans, a hole in the ozone layer, pushing ourselves beyond the planetary boundaries of the life-supporting systems that have for the last 11,000 years made earth such a benevolent home to humanity.
08:10
So this double-sided challenge to meet the needs of all within the means of the planet, it invites a new shape of progress, no longer this ever-rising line of growth, but a sweet spot for humanity, thriving in dynamic balance between the foundation and the ceiling. And I was really struck once I'd drawn this picture to realize that the symbol of well-being in many ancient cultures reflects this very same sense of dynamic balance, from the Maori Takarangi to the Taoist Yin Yang, the Buddhist endless knot, the Celtic double spiral.
08:45
So can we find this dynamic balance in the 21st century? Well, that's a key question, because as these red wedges show, right now we are far from balanced, falling short and overshooting at the same time. Look in that hole, you can see that millions or billions of people worldwide still fall short on their most basic of needs. And yet, we've already overshot at least four of these planetary boundaries, risking irreversible impact of climate breakdown and ecosystem collapse. This is the state of humanity and our planetary home. We, the people of the early 21st century, this is our selfie.
09:29
No economist from last century saw this picture, so why would we imagine that their theories would be up for taking on its challenges? We need ideas of our own, because we are the first generation to see this and probably the last with a real chance of turning this story around. You see, 20th century economics assured us that if growth creates inequality, don't try to redistribute, because more growth will even things up again. If growth creates pollution, don't try to regulate, because more growth will clean things up again.
09:58
Except, it turns out, it doesn't, and it won't. We need to create economies that tackle this shortfall and overshoot together, by design. We need economies that are regenerative and distributive by design. You see, we've inherited degenerative industries. We take earth's materials, make them into stuff we want, use it for a while, often only once, and then throw it away, and that is pushing us over planetary boundaries, so we need to bend those arrows around, create economies that work with and within the cycles of the living world, so that resources are never used up but used again and again, economies that run on sunlight, where waste from one process is food for the next.
10:41
And this kind of regenerative design is popping up everywhere. Over a hundred cities worldwide, from Quito to Oslo, from Harare to Hobart, already generate more than 70 percent of their electricity from sun, wind and waves. Cities like London, Glasgow, Amsterdam are pioneering circular city design, finding ways to turn the waste from one urban process into food for the next. And from Tigray, Ethiopia to Queensland, Australia, farmers and foresters are regenerating once-barren landscapes so that it teems with life again.
11:18
But as well as being regenerative by design, our economies must be distributive by design, and we've got unprecedented opportunities for making that happen, because 20th-century centralized technologies, institutions, concentrated wealth, knowledge and power in few hands. This century, we can design our technologies and institutions to distribute wealth, knowledge and empowerment to many. Instead of fossil fuel energy and large-scale manufacturing, we've got renewable energy networks, digital platforms and 3D printing. 200 years of corporate control of intellectual property is being upended by the bottom-up, open-source, peer-to-peer knowledge commons. And corporations that still pursue maximum rate of return for their shareholders, well they suddenly look rather out of date next to social enterprises that are designed to generate multiple forms of value and share it with those throughout their networks. If we can harness today's technologies, from AI to blockchain to the Internet of Things to material science, if we can harness these in service of distributive design, we can ensure that health care, education, finance, energy, political voice reaches and empowers those people who need it most. You see, regenerative and distributive design create extraordinary opportunities for the 21st-century economy.
12:48
So where does this leave Rostow's airplane ride? Well, for some it still carries the hope of endless green growth, the idea that thanks to dematerialization, exponential GDP growth can go on forever while resource use keeps falling. But look at the data. This is a flight of fancy. Yes, we need to dematerialize our economies, but this dependency on unending growth cannot be decoupled from resource use on anything like the scale required to bring us safely back within planetary boundaries.
13:21
I know this way of thinking about growth is unfamiliar, because growth is good, no? We want our children to grow, our gardens to grow. Yes, look to nature and growth is a wonderful, healthy source of life. It's a phase, but many economies like Ethiopia and Nepal today may be in that phase. Their economies are growing at seven percent a year. But look again to nature, because from your children's feet to the Amazon forest, nothing in nature grows forever. Things grow, and they grow up and they mature, and it's only by doing so that they can thrive for a very long time. We already know this. If I told you my friend went to the doctor who told her she had a growth that feels very different, because we intuitively understand that when something tries to grow forever within a healthy, living, thriving system, it's a threat to the health of the whole. So why would we imagine that our economies would be the one system that could buck this trend and succeed by growing forever? We urgently need financial, political and social innovations that enable us to overcome this structural dependency on growth, so that we can instead focus on thriving and balance within the social and the ecological boundaries of the doughnut.
14:50
And if the mere idea of boundaries makes you feel, well, bounded, think again. Because the world's most ingenious people turn boundaries into the source of their creativity. From Mozart on his five-octave piano Jimi Hendrix on his six-string guitar, Serena Williams on a tennis court, it's boundaries that unleash our potential. And the doughnut's boundaries unleash the potential for humanity to thrive with boundless creativity, participation, belonging and meaning.
15:30
It's going to take all the ingenuity that we have got to get there, so bring it on.
15:36
Thank you.
15:37
(Applause)
The definition of economics that I was taught in my introductory microeconomics class was simply, “the study of the allocation of scarce resources.”
The definition’s focus on scarce resources has led many to see endless growth as a positive – after all, “more is better.” But what does economics look like when resources are no longer scarce? And how do we react when increasing abundance is no longer the solution to the problem of scarcity, but instead creates intractable problems of its own, like environmental destruction and the fraying of community?
We need to update and rethink economics, and move towards a system that centers itself not on maximizing growth in an effort to overcome scarcity, but on creating a society that utilizes resources in a way that could continue for all future generations. A book that I read this summer, Doughnut Economics: Seven Ways to Think Like a 21st Century Economist, by Kate Raworth, offers such a vision.
Doughnut Economics: From Scarcity Thinking to Problems of Abundance https://frontiergroup.org/blogs/blog/fg/doughnut-economics-scarcity-thinking-problems-abundance
The aim of economic activity, she argues, should be “meeting the needs of all within the means of the planet”. Instead of economies that need to grow, whether or not they make us thrive, we need economies that “make us thrive, whether or not they grow”. This means changing our picture of what the economy is and how it works.
The central image in mainstream economics is the circular flow diagram. It depicts a closed flow of income cycling between households, businesses, banks, government and trade, operating in a social and ecological vacuum. Energy, materials, the natural world, human society, power, the wealth we hold in common … all are missing from the model. The unpaid work of carers – principally women – is ignored, though no economy could function without them. Like rational economic man, this representation of economic activity bears little relationship to reality.
So Raworth begins by redrawing the economy. She embeds it in the Earth’s systems and in society, showing how it depends on the flow of materials and energy, and reminding us that we are more than just workers, consumers and owners of capital.
The embedded economy ‘reminds us that we are more than just workers and consumers’. Source: Kate Raworth and Marcia Mihotich
This recognition of inconvenient realities then leads to her breakthrough: a graphic representation of the world we want to create. Like all the best ideas, her doughnut model seems so simple and obvious that you wonder why you didn’t think of it yourself. But achieving this clarity and concision requires years of thought: a great decluttering of the myths and misrepresentations in which we have been schooled.
The diagram consists of two rings. The inner ring of the doughnut represents a sufficiency of the resources we need to lead a good life: food, clean water, housing, sanitation, energy, education, healthcare, democracy. Anyone living within that ring, in the hole in the middle of the doughnut, is in a state of deprivation. The outer ring of the doughnut consists of the Earth’s environmental limits, beyond which we inflict dangerous levels of climate change, ozone depletion, water pollution, loss of species and other assaults on the living world.
The area between the two rings – the doughnut itself – is the “ecologically safe and socially just space” in which humanity should strive to live. The purpose of economics should be to help us enter that space and stay there.
As well as describing a better world, this model allows us to see, in immediate and comprehensible terms, the state in which we now find ourselves. At the moment we transgress both lines. Billions of people still live in the hole in the middle. We have breached the outer boundary in several places.
- Inner Ring: Twelve essentials of life that no one in society should be deprived of;
- Outer Ring: Nine ecological limits of earth’s life-supporting systems that humanity must not collectively overshoot;
- Sweet Spot: The space both environmentally safe and socially just where humanity can thrive.
The author positions this book as contrarian and revolutionary, and it dissects seven fundamental principles of economics that she feels need to be updated to make economics a useful discipline. Raworth explains that:
rethinking economics is not about finding the correct [school of thought] (because it doesn’t exist), it’s about choosing or creating one that best serves our purpose – reflecting the context we face, the values we hold, and the aims we have.
In her attempt to bring economics more up-to-date, as the subtitle of the book suggests, Raworth depicts humanity’s goals as a doughnut.
The doughnut has social foundation and human well-being in the middle, and is itself ‘the safe and just space for humanity’ and for a ‘regenerative and distributive economy’, surrounded on the outer edge by the ecological ceiling of ‘critical planetary degradation’. The overall target should be to remain within the doughnut to ensure that we neither fall into conditions of social inequality and suffer shortfalls, such as in water and food, nor allow growth to overshoot into threatening environmental collapse. In her words, this model ‘draws on diverse schools of thought, such as complexity, ecological, feminist, institutional and behavioural economics’. This multidisciplinary promise was the most appealing element of the book for me.
The book is neatly organised around the ‘seven ways to think like a twenty-first century economist’, which are listed on page 26. These principles are underlined by a broad assumption that economics as we know it doesn’t care about either humans or the environment, and therefore
- The first thing we should do is ‘change the goal’ from GDP growth to the doughnut.
- The second principle is ‘seeing the big picture’, where Raworth explains that the market is not self-contained, and that the economy is more embedded in society than some economists assume.
- The notion of the ‘rational economics man’, which she suggests we need to replace with ‘social adaptable humans’.
- The fourth principle is that we need to ‘get savvy with systems’, and appreciate that the real economy doesn’t comply with the supply-demand equilibrium but is instead embedded in dynamic complexity.
- The fifth is ‘design to distribute’ and
- The sixth is to ‘create to regenerate’, growth from 5 and 6 reduces inequality and facilitates environmental improvements is false. Finally,
- The seventh recommendation is that we should be ‘agnostic about growth’: 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.
Not surprisingly, three of the seven principles claim that growth doesn’t lead to redistribution of wealth or environmental regeneration and is overall not a helpful goal, which is why Raworth suggests we should rather be redistributive and regenerative by design.
Biophysical Boundaries and Social Thresholds
We have downscaled five planetary boundary indicators (climate change, phosphorus loading, nitrogen loading, freshwater use, and land-use change) to per capita equivalents, and compared these to consumption-based environmental indicators (i.e. footprints) at the national scale. In addition to these, we have included two separate footprint indicators (ecological footprint and material footprint) and compared these to their suggested maximum sustainable levels. The result is seven biophysical indicators in comparison to their respective boundaries (Table 1). The per capita boundaries assume a global population of seven billion people. All seven indicators are consumption-based measures that account for international trade.
To assess social outcomes, we have used a set of eleven social indicators that are common to studies following the safe and just space framework, and the social objectives contained in the United Nations Sustainable Development Goals. For each of these indicators we have identified a threshold value consistent with a “good life” for a nation’s citizens (Table 2). Although the choice of the social thresholds is undoubtedly subjective, we believe each constitutes a reasonable assessment of a level of performance consistent with meeting basic needs. See the scientific journal article for more information, including a full discussion of the biophysical and social indicators, data sources, and analytic framework. Feel free to contact us with any questions or comments.
A Good Life For All Within Planetary Boundaries https://goodlife.leeds.ac.uk/about/
In 1990, Raworth, now 50, arrived at Oxford University to study economics. She quickly became frustrated by the content of the lectures, she recalls over Zoom from her home office in Oxford, where she now teaches. She was learning about ideas from decades and sometimes centuries ago: supply and demand, efficiency, rationality and economic growth as the ultimate goal. “The concepts of the 20th century emerged from an era in which humanity saw itself as separated from the web of life,” Raworth says. In this worldview, she adds, environmental issues are relegated to what economists call “externalities.” “It’s just an ultimate absurdity that in the 21st century, when we know we are witnessing the death of the living world unless we utterly transform the way we live, that death of the living world is called ‘an environmental externality.’”
Almost two decades after she left university, as the world was reeling from the 2008 financial crash, Raworth struck upon an alternative to the economics she had been taught. She had gone to work in the charity sector and in 2010, sitting in the open-plan office of the antipoverty nonprofit Oxfam in Oxford, she came across a diagram. A group of scientists studying the conditions that make life on earth possible had identified nine “planetary boundaries” that would threaten humans’ ability to survive if crossed, like the acidification of the oceans. Inside these boundaries, a circle colored in green showed the safe place for humans.
But if there’s an ecological overshoot for the planet, she thought, there’s also the opposite: shortfalls creating deprivation for humanity. “Kids not in school, not getting decent health care, people facing famine in the Sahel,” she says. “And so I drew a circle within their circle, and it looked like a doughnut.”
Could Amsterdam's New Economic Theory Replace Capitalism? | Time https://time.com/5930093/amsterdam-doughnut-economics/
