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Home » Kate Raworth: Why It’s Time for ‘Doughnut Economics’ (Full Transcript)

Kate Raworth: Why It’s Time for ‘Doughnut Economics’ (Full Transcript)

Kate Raworth

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.

Below is the full text of Kate Raworth’s talk titled ‘Why It’s Time for ‘Doughnut Economics” at TEDxAthens conference.


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.

So, can we just use this diagram anyway?” Well that’s why I threw away my Economics text books and I walked away from Economics and I immersed myself in real-world challenges. I spent three years working in the villages of Zanzibar with entrepreneurs who had to earn their living with nothing but their wits, the forest and their community.

I spent four years at the United Nations in New York and I witnessed the bare-faced power that would stall global negotiations. And then I became a mother of twins, and I spent a year knee-deep in nappies, immersed in the bare bum economy of raising infants. And I got gender like never before.

And then I worked for Oxfam for a decade, campaigning to tackle climate change and I met farmers in Southern Africa whose harvest had just turned to bare soil because the rains had never come.

And from all of this I realized the obvious, that you can’t walk away from economics. Because it’s all around us, it’s the mentality that our societies are run by.

So I decided to start walking back towards economics, but to flip it on its head.

What if economics didn’t start with money, but started with human well-being? And there are two sides to that story.

On the one hand, our well-being depends on each one of us having the resources we need to meet our human rights to food, water, health, education, housing, energy. And on the other hand, our well-being also depends on this lady, our planetary home.

For the last 12,000 years, the conditions on this planet have been incredibly benevolent to human well-being. We’ve had a stable climate, plentiful water, clean air, bountiful biodiversity and a protective ozone layer. And we’d be crazy to put so much pressure on these life-support systems that the planet gives us that we actually kick ourselves out of the very sweet spot that we know as home.

I wanted to bring these two ideas together and draw a new picture for economics, the kind of picture I did want to have in the back of my head. And I apologize, but it looks like junk food, and I apologize but it just looks like a doughnut.

What we see at the center of that picture is the space where humanity is putting no pressure on the planet. But with 7 billion of us alive today that would be a place of death and destitution for millions.

We can’t meet our human rights without using the planet’s resources. We need to get everybody alive over that inner ring of human well-being, the social foundation, so that we each have the resources to meet our human rights.

But we must stay below the outer ring, the environmental sealing of human well-being, and that’s defined by the nine planetary boundaries that have been put forward by leading Earth system scientists, including Johan Rockström and Will Steffen.

So we must protect the life-support systems of this planet, making sure we don’t put so many greenhouse gases in the atmosphere that we cause climate change or massive deforestation or chemical pollution.

So this doughnut, you can think of it as a compass for humanity in the 21st Century. How do we ensure that we all have the resources to meet our human rights, but within the means of the planet? And that’s the challenge we face, getting everybody out of poverty and coming back within what this one planet can provide us.

And it changes our idea of progress. For 60 years now, economics has told us that we can measure progress with economic growth. And that what it looks like is a line, ever rising as the global economy grows.

But the doughnut tells us something different. It tells us that progress looks like balance between using resources to meet our rights and protecting the planet’s life-support systems.

And if it’s that balance that matters, then the fundamental question is where are we now in relation to that balance? Well, the answer is not for the faint-hearted. Because as you may well guess, we’re outside of those boundaries on both sides.

Millions of people live below that social foundation. One person in eight doesn’t have enough food to eat, one person in five has no access to electricity, and more than one in five lives off less than $125 a day.

So we’ve got a long way to go to getting everybody out of that space of deprivation. And yet we’ve already pushed ourselves over planetary boundaries. According to the Earth system scientists we’ve gone over on climate change, we’ve gone massively over on the amount of nitrogen that we’re using in fertilizers and over on biodiversity loss.

And if you look at those two pictures together, it’s a pretty strong indictment of the economic development path we’ve followed to date. And we have to figure out how, for the first time in human history, to get all people out of poverty at the same time as bringing ourselves back within those planetary boundaries.

But imagine if we could be the turnaround generation that actually started putting humanity back on track into that space. That would be the achievement of the century.

Imagine if each of us put our own lives on this doughnut table and asked ourselves, how does the way that I shop, eat, travel, earn a living, vote, volunteer, bank, affect humanity’s ability to come into the doughnut?

What if every company, when it sat down to do its business strategy, sat down around this doughnut table, and said, “Is our brand a doughnut brand? Is our core business model helping to bring humanity into that safe and just space between planetary and social boundaries or at the very least, not profiting by pushing people out of it?”

And what if the finance ministers of the most powerful countries met and negotiated around a doughnut negotiating table? I know this looks crazy but it’s actually completely sane. Those finance ministers should be asking themselves, how can we create a global financial system that doesn’t profit by undermining and destabilizing human well-being, but actually serves society and the economy and our common interest?

And there’s a lot of common interest that we need to work on between now and 2050. We’ve got a growing global population, we’ve got three billion more people expected to join the global middle class by 2030, we know we’re facing impacts of climate change, of water stress. We need a generation of policy makers coming through who are really equipped to take on this challenge.

Αnd that’s why I’m really worried about the economics students. Because they’re still having this diagram put in the back of their heads. So if you want to help the next generation of policy makers have a smarter language and a better mindset, I invite you to join a guerrilla campaign to re-write economics. And all you need is a pencil.

So here’s what you do. You sneak into the room of every economics student that you know, and into the study of every economics professor and you go over to the bookshelf and you take down that textbook and you open it on the page of the circular flow of goods and money.

And with your pencil, you draw a circle around the economy and you label it ‘the biosphere.’ And you draw in the unpaid care economy, you draw in the collaborative commons and you divide those households and those firms into the 1% and the 99%.

And with those few strokes of your pen, you will have transformed the mindset of the coming generation of policy makers. You want to go a step further? Stick a doughnut picture in their textbook.

And now we can really start over. You want to be an economist? Fantastic! Leave money aside for a moment, let’s talk about human well-being and what it takes to achieve that, that each of us has human rights, and that takes resources and let’s talk about the planet and the life-support systems that keep us alive.

And once you’ve got those fundamental values in place, now your task as an economist is a crucial one. We need you to design the markets, the regulations, the financial system, the public services that will help bring humanity into the safe and just space between planetary and social boundaries. Imagine what a transformation that would be.

Now, you might be thinking, this planetary scale, isn’t this too big for economics? Not at all. This is a scale whose time has come. Back in Ancient Greece, Xenophon coined the term ‘economics’ to mean household management. And he was literally talking about a household, a single household. But later in his life, he raised his sight to the next level up, the City-State, and he recommended policies for the economy of Athens, his home town.

Two thousand years later, in Scotland, Adam Smith raised our sights a level again to the Nation-State, and he asked what makes the economy of one country thrive while another is stagnating? Today’s economy is 300 times bigger than the one that Adam Smith knew and it’s banging into the biosphere with impacts ricocheting back on us.

If Xenophon and Adam Smith were here, I think they’d be laughing at us. They’d say ‘Get with the times, folks! We moved from the household, to the City-State, to the Nation-State. You’ve got to take the next step! Yours is the era of the planetary household, and you need the economic thinking to go with that!’

And I think that’s the most exciting task for this generation of economists. What is the economic thinking for our planetary household? So I invite you, if you want to help transform the next generation of economics get busy with your pencils.

And if you want to help every future economist, offer them a doughnut.

Thank you.

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