Doughnut Economics

Decreasing relevance of mainstream economy

The reasoning and explanations of economics concerns the life of all people across the world, as Michaels states ‘economic beliefs, values and assumptions are shaping how we think, feel and act’ (Michaels, 2011, p. 9). However, economic theory evolved and changed its perspective and arguments several times over history, placing a very different role on the public institutions (the ‘state’) and market forces, particularly visible through movements between a free-market organization and central-planning economic ideology (Michaels, 2011, p. 37). The ideological dispute between ideas of Marxism and mainstream economic theory explaining capitalism is the clearest indication of the difference in ‘world views’. Nevertheless, for both theories it is common to see ‘growth’ as the ultimate goal and measurement for economic success. Nowadays it can also be defined as the study of choices made in the presence of scarcity because the planet and its resources are limited and the earth system might eventually crash in its whole if we do not change the existing economy system and thereby continue to exhaust the natural resources. Therefore, many economists, scientists and other researchers are concerned and try to find proper solutions to this. Most of them agree that it is necessary to act sustainably and hence look at economy not separated from but quite on the contrary tightly related to the environment and the social dimension, like illustrated through the sustainable development triangle (Gough, 2017, p. 4).

Already since about 50 years the debate on the ecological limits of our economic system has started and the common understanding of our current and future challenges regarding ecological and social circumstances has risen a lot since then. At present a majority of people is aware of those demanding tasks and requirements for changes and approves to take action to tackle them. One important precondition for change is a shift in our understanding about measuring progress in society. For several years, experts seek to provide evidence that the amount of production alone, and measurement of our economic success through the indicator of Gross Domestic Product (GDP) is misleading and does not tell us enough about the well-being within a specific region. The economist and philosopher Amartya Sen argued that we should aim at “advancing the richness of human life, rather than the richness of the economy in which human beings live” (Sen, 1999, p. 285). After the crisis of 2008 considerations and studies to find alternatives intensified (e.g. Stiglitz et al., 2009) and extended to concepts questioning the previous capitalist approach, particularly through calls for “post-growth” or even “de-growth” action (D’Alisa et al., 2015).

The Doughnut Economics model

Picture Copyright by https://www.kateraworth.com/doughnut/

After many years of misinterpretation and overestimation of the value of GDP these ideas on new measurement approaches for the goals of our society gained influence. In 2011 Kate Raworth, a former development expert at Oxfam, a global development support organization, drafted a new model to adapt our economic system and activities more adequately to social needs and the required changes. She did not start with moral appeals to limit and reduce the production and consumption level, but based her concept on a balanced view of minimal and maximal resource use. She explained the resource limitations along nine planetary boundaries which were identified by an international expert group (Steffen et al., 2015). Many of these indicators are particularly reinforced by human behavior and action: climate change, ocean acidification, chemical pollution, nitrogen and phosphorus loading, freshwater withdrawals, land conversion, biodiversity loss, air pollution and ozone layer depletion (Raworth, 2017, pp. 297ff.). This list of crucial factors for our global development limitations have already been identified and approved as the major social issues to achieve human progress through UN’s 2030 Sustainable Development Agenda (UN, 2015). Particularly inequality in different aspects of human life is the major challenge to overcome and to achieve the set of 17 Sustainable Development Goals (SDG).

The concept presented by Raworth uses “seven ways to think like a 21st-century economist” and provides a new perspective to look at economy with various crucial aspects/dimensions to consider. However, she notes that this approach needs to be adapted to future changes and needs to be further refined. The purpose of the Doughnut Economics system is to meet all our needs without exhausting the planet, meaning to create a balanced relationship between people and environment. The illustrating diagram of the planetary boundaries is called doughnut as it looks like an American doughnut. It consists of two circles, the inner one building the social foundation and the outer one signifying the ecological ceiling. The space of the ring in the middle between these two circles represents the area of the ‘safe and just space for humanity’ where people can live a happy life, meeting individual and social needs and acting in harmony with natural resources and the environment.

SWOT analysis

Let us have a critical look at the doughnut economics now: Probably one of the most important features of the doughnut economics model is that it is all about how to achieve balance in our socio-economic development. Hence it is no surprise that arguments about the right level of the needs of all people on the planet and the limitations of the planet natural resources are a crucial consideration of the system. Another strength of the concept is that it advocates an approach of sustainable development as core aim, meeting thereby the needs of humanity and the planet. This is highlighted through the joint view on environment, society and economy which is still not always the case in policy implementation so far, although many other experts also notice the importance of addressing and embedding environmental sustainability and social justice into economic practices. These three aspects build the framework for sustainability, which are often referred to as the three E’s of sustainability (environmental, economic and ethical). The graphical presentation of the ‘doughnut’ can be regarded as either a strength or a weakness. The model with its circle shape is very easy to understand whereas some economists argue that the model seems oversimplified (The Alternative UK, 2018). When seen as strength it would enhance accessibility to a wider share of population, especially people not so familiar with economic reasoning before. Raworth argues that economics is about ‘household management’ in its origin, and so a logical consequence would be to involve households (people) more directly in economic decisions (Raworth, 2018).

Nevertheless the model also shows some weaknesses or aspects which could be improved. Beyond the aspect of oversimplification, mentioned above, a famous environmentalist from Latin America, Eduardo Gudynas (2012), doubts the usefulness and novelty of the concept for different parts of the world as the model favors Western thinking in his perspective. The book offers many interesting solutions to various issues, however it misses clear practical tools to implement these. Additionally it doesn’t mention priorities for political actions, which makes it almost impossible to figure out what the most important aspects are and in what order issues needed to be combined and changed. Neither the book nor the author’s personal website (Raworth, 2018) offers a clear orientation for individuals and smaller groups to act and behave accordingly to address the current challenges.

Yet, the concept includes a range of opportunities. Depending on who is arguing, some say that this model could most likely be applicable to various cultural contexts, as culture takes a common role in underlying respective action. Furthermore the model can be adapted to different units to measure their impact more precisely. Its application is possible for businesses, governments, cities and communities. There is an opportunity that probably soon people will be able to use it for different units as well. Due to its circular shape and various elements it is indicated that these are interacting in various ways with each other. This makes it open to required changes, new ideas and perspectives. Raworth herself admits that the model is not completed yet and needs continuous adaption to changes on the Earth. Therefore, it encourages many young people to think outside the box and shows them different alternatives to obsolete and mainstream theories which most of them still learn in university.

Despite these opportunities the perspective faces threats too. Nowhere the processes to achieve the required changes are clearly mentioned and so they are not well understood by the public. The willingness to accept transition is limited as some people do not want to give up their wealth as they predominantly think of their status and personal well-being and consequently hardly care about environmental impacts. Not only rich, influential individuals may be a risk, also politicians might reject the model as too ‘superficial’. When reading through it, it seems too easy to achieve required and desired changes, which might lead people in power to the assumption that it is too radical to implement. The result will be that social contradictions will impede swift implementation.

Strengths Weaknesses
Ø  Balanced system (needs of people & limits of planet)

Ø  Highlights joint view on environment, society and economy

Ø  Model – easy to understand

Ø  Enhances accessibility of approach of wider share of population

 

Ø  Model seems oversimplified

Ø  No clear practical tools and priorities for political actions

Ø  Model favors too much Western thinking

Ø  Missing action orientation for individuals

Opportunities Threats
Ø  Applicable to various cultural contexts

Ø  Open to changes, new ideas and perspectives

Ø  Encourages many young people to think outside the box

Ø  Model can be adapted to different units (e.g. for businesses, government, city, communities)

Ø  Process to achieve required changes is not understandable

Ø  Willingness to accept transition is limited

Ø  Social contradictions will impede swift implementation

Ø  Politicians might reject model as too ‘superficial’

 

Conclusion

With her approach of ‘Doughnut Economics’ Raworth presents a new image of how to address current socio-economic and ecological challenges. She argues that we need to focus on balancing the personal needs and planetary boundaries. This is not a new model, but convincingly combines many recent arguments about the urgent requirement to shift our political, social and personal action in order to address global challenges. Criticism is mainly oriented at the readiness of the approach for implementation. But the overall assessment focuses on the ability of the concept to raise awareness and target at the “balanced” degree of development.

References

D’Alisa, G., Demaria, F. and Kallis, G. (2015). Degrowth, a vocabulary for a new era. New York and London: Routledge.

Gough, I. (2017). Heat, Greed and Human Need. Climate Change, Capitalism and sustainable wellbeing. Cheltenham, UK: Edward Elgar publishing.

Gudynas, E. (2012). Is doughnut economics too Western? Critique from a Latin American environmentalist. Views & Voices, Analyses and debate on international development issues. Blog, Oxfam. https://views-voices.oxfam.org.uk/2012/02/is-doughnut-economics-too-western

Michaels, F. S. (2011). Monoculture: How one story is changing everything. Canada: Red Clover Press.

Raworth, K. (2017). Doughnut Economics. Seven Ways to Think Like a 21st-Century Economist. London: Penguin Random House.

Raworth, K. (2018). Kate Raworth. Exploring doughnut economics. Personal website. https://www.kateraworth.com/doughnut/

Sen, A. (1999). Development as Freedom. New York: Alfred A. Knopf.

Steffen, W., Richardson, K., Rockström, J., Cornell, S.E., Fetzer, I., Bennett, E.M., Biggs, R., Carpenter, S.R., de Vries, W., de Wit, C.A., Folke, C., Gerten, D., Heinke, J., Mace, G.M., Persson, L.M., Ramanathan, V., Reyers, B. and Sörlin S. (2015). Planetary boundaries: Guiding human development on a changing planet. In: Science 347(6223), 1259855. https://openresearch-repository.anu.edu.au/bitstream/1885/13126/3/1259855.full.pdf

Stiglitz, J.E., Sen, A. and Fitoussi, J.-P. (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris. https://ec.europa.eu/eurostat/documents/118025/118123/Fitoussi+Commission+report

The Alternative UK (2018). Are there holes in “doughnut economics”? Kate Raworth takes on a major critic (28.Juni 2018). https://www.thealternative.org.uk/dailyalternative/2018/6/28/raworth-doughnuts-critics

United Nations – UN (2015). Transforming our world: the 2030 Agenda for Sustainable Development. Resolution adopted by the General Assembly on 25 September 2015. Document A/RES/70/1. New York.

This article was written by Elena Dax in context of my lecture rethinking economy: globalization and consumer patterns at the University of Applied Sciences in Kufstein.