Kate Raworth is an English economist working for the University of Oxford and the University of Cambridge. She is known for her work on the ‘doughnut economics’, which she understands as an economic model that balances between essential human needs and planetary boundaries. Full bio here.
Below is the full text of Kate Raworth’s talk titled ‘Why It’s Time for ‘Doughnut Economics” at TEDxAthens conference.
Kate Raworth – TEDx Talk Transcript
If you wanted to change the world, what language would you learn to speak? That’s the question I asked myself as a teenager, in the 1980s, when the TV news showed pot-bellied children born into Ethiopia’s famine and a hole opening up in the ozone layer.
And I wanted to be part of changing that world, and I thought I knew the language I needed to speak.
I needed the mother tongue of public policy. And so I went to University to study Economics. But the economic theories on offer didn’t give me the words I was looking for because they sidelined or brushed aside or ignored most of the issues that I actually cared about.
And if you’ve never studied economics, now’s your chance. Because I’m going to give you a crash course with a twist.
I’m going to show you in three minutes what they never tell you in three years of a degree. So if you would please open your text books to page 23, and study with me the circular flow of goods and money.
And as you can see in this diagram, households provide their labor and their capital to firms and in return they get wages and dividends. And with that income, they spend it on goods and services, and so, the resources go round and round and so does the money.
It’s simple and it’s important because this diagram is at the heart of macro-economic analysis and is the basis for measuring economic growth.
It’s so simple that it goes right into the back of the head of every economist, so quietly, that you don’t even realize that it’s there. But it’s there, and that’s a problem because this diagram is fundamentally flawed.
Now I can add in a financial sector, bringing with it wild speculation and the magical creation of money. And we could watch it wreak havoc in the real economy. We could add in a government sector, and talk about taxes and austerity and the damage that you can do.
But even without adding these two sectors, there are four fundamental flaws with this diagram.
First, the economy is not floating on a white background. It’s deeply embedded in the environment, drawing in matter and energy and spewing out waste and pollution at every juncture. And the fundamental flow is not money going round and round, it’s energy coming in from the Sun, hitting Earth, fueling life, and some of it bouncing back out into the universe. And it’s up to our ingenuity to capture that energy and put it to use.
Second, anybody who gets kids up in the morning and off to school, knows that not all work is paid. The unpaid caring work of parents raising kids, the next generation of workers, is at the heart of family life, but it’s almost completely ignored by mainstream economics.
And this woman has a bucket on her head, because across Sub Saharan Africa and South Asia women carry their body weight in water, in fuel, in firewood, with a child on their backs, all for no pay. And if you ignore that, you’re ignoring the work of millions of the world’s women which keeps their families alive everyday.
Third, there’s a lot of value that we create that doesn’t get monetized. We love to cooperate and collaborate with no money changing hands. If you baby-sit for me tonight, I’ll feed your cat at the weekend. Does that sound trivial?
OK. How about, we go online and create the world’s biggest Encyclopedia, ever for free? How about, we deliver world-class education to any student, in any country, for free, online? If you ignore the power of the collaborative commons, you’re ignoring one of the most dynamic and disruptive parts of modern economy.
And fourthly, those happy households getting wages and dividends, hasn’t really turned out like that. As we know, in most high-income countries for some decades now, ordinary households have seen their wages stagnate, while just the tiny few have got high wages and high dividends and rents.
In fact, these households are worlds apart and so too are the firms with a gulf between local business and global corporations. And hidden behind this flow of income is the accumulation of wealth, and that wealth rapidly turns into power over the economy and who it’s run for.
So if you take these four critiques to your typical Economics professor, what will they say? “Hmm, environmental externalities. Well spotted! You can study those in an optional paper in the second year if you like. Unpaid care economy? That sounds a bit feminist. And as for wealth and power, I think you actually want the politics department?”
I mean, all these critiques, they’re interesting, yes, but they’re distracting us from the real concepts we have to master which are utility and efficiency and growth. And the complexities, they get in the way of the modeling and the maths that economists love to do, because it turns economists into scientists.