Doughnut Economics: Rethinking 21st-Century Sustainability

Doughnut Economics: Shifting the paradigm for sustainable growth and wellbeing in the 21st century. Explore the concept.

The framework of today’s growth-based economic system was established with the formation of the Bank of England in the late 17th century as the world’s first central bank. An agreement was made between the bankers and King William III, allowing the bankers to issue money as a debt, repayable with interest. Debt is a key driver of growth.

As the long-standing argument goes, it is impossible to have infinite growth on a finite planet. The shortcomings of exponential population and economic growth were most famously highlighted in the 1972 book Limits to Growth, which used a computer model to predict ecological overshoot and a crunch in resource availability in the first half of the 21st century. A 2014 update by Graham Turner, a research fellow at the University of Melbourne, found that trends were running close to the Limits to Growth “standard run” that led to a crisis scenario.

Growth cannot be factored into policy without being quantified, and gross domestic product (GDP) figures were first introduced in the 1930s in the US by American economist Simon Kuznets. At the time, he added a disclaimer about the shortcomings of GDP as a measure of a country’s wellbeing. A crude metric, it omits all valuable unpaid work for example. But over the decades Kuznets’ message was largely forgotten, before recently being dusted off and reinvented by the wellbeing economy movement.

Putting the model together

Kate Raworth is a British economist at Oxford University who made a name for herself by inventing Doughnut Economics, a visual model outlining how a sustainably operating economy could function.

Currently aged 52, in the 1990s she studied economics at Oxford, and later worked for Oxfam in the overseas development field. The Doughnut model took shape from a range of influences, and was developed during the early 2010s. It was first unveiled in her 2012 report for Oxfam, A Safe and Just Space for Humanity.

One formative influence was her growing doubts about mainstream economics as it was taught to her and continues to be taught to students. Based on 1950s models, its market-based thinking is rooted in simple concepts of supply and demand, and people who are driven by individual self-interest. These ideas were overdue for an overhaul that factors in issues such as “externalities”, including negative impacts by industry on people and the environment that are passed on to the taxpayer in the form of healthcare and clean-up costs.

Raworth was also influenced by Herman Daly, an American steady-state ecological economist who developed the holistic concept of the economy being a subsystem of the environment. From this derives the idea of embedding the economy within the Earth’s ecological regeneration capacity.
She later left her Oxfam job to write the book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, which was published in 2017, and has since been translated into more than 20 languages. Another challenging task was to translate a diagram drawn on a piece of paper into an organisation designed to advance the concept, the Doughnut Economics Action Lab (DEAL.) This body runs workshops with corporations, city administrators and NGOs. Any individual who is interested in exploring the field of Doughnut Economics can join its online community.

How the Doughnut works

The Doughnut is a kind of circular ring, representing the “safe and just space for humanity” referred to in the Oxfam report. It is bounded on the outside by the objective of avoiding overshooting ecological limits, and on the inside by the mission of avoiding 12 development deficiencies (the social foundation). These both work like guardrails to guide strategy.

Its development deficiencies are modelled on the UN’s Sustainable Development Goals, and range from water, food and energy to intangibles such as peace, democracy and social equity. Poorer countries generally have the most marked shortfalls.

The ecological limits are based on the Nine Planetary Boundaries concept formulated as a result of efforts by the Stockholm Resilience Centre. First drawn up in 2009, they were updated in 2015 and 2022. Addressing these limits is more of a challenge for affluent countries. Globally speaking, three boundaries have already been crossed and are in the danger zone:

• Phosphorus and nitrogen flows into the biosphere and oceans.
• Biodiversity loss and extinctions.
• Novel entities, such as chemicals and radioactive material; GMOs could arguably be included.

Others have been crossed but are currently considered to be some distance outside the danger zone:

• Climate change.
• Fresh water change (green water): this includes rainfall, evaporation, soil moisture and the water in plants.
• Land-system change, a term for the conversion of a range of different vegetation types into agricultural land

Two keywords that Raworth frequently uses are “regenerative” (going beyond environmental sustainability into finding ways of reversing previous damage) and “distributive” (sharing opportunity and value, leading to greater equality; this can be facilitated via decentralised network structures instead of old-style power hierarchies).

Road-testing

A number of countries are using the Doughnut model to guide their policies and are at various stages, pursuing it through diverse approaches. These include:

• Wales: The group Wellbeing Economy Alliance Cymru is working to decentralise the Doughnut model down to the local community level, as a means of maximising involvement.
• New Zealand: Here the model is being promoted by the politically non-aligned group Doughnut Economics Advocates New Zealand (DEANZ.)

In an interesting exercise, the Doughnut diagram was reimagined from a Mãori perspective, with the inner and outer boundaries flipped around.

• Costa Rica: This central American nation plans to become one of the world’s first “regenerative countries”, using the Doughnut model to get there.
• Curaçao: This is a small island country in the Caribbean, with a population of about 170,000.

Downscaling the Doughnut to the city level has been another challenge. The first step is to create a “data portrait”, a starting snapshot of where things stand, and which limits and foundations need to be locally addressed. Four central questions are asked as part of this process:

1. What would it mean for the people of the city to thrive?
2. What would it mean for the city to thrive within its natural habitat?
3. What would it mean for the city to respect the wellbeing of people worldwide?
4. What would it mean for the city to respect the health of the whole planet?

The first city to adopt the model was Amsterdam in 2020, near the start of the COVID-19 pandemic. Since then, it has incorporated the Doughnut into its operations as a whole, resolving to put it at the heart of the city’s future planning via measures such as embracing the circular economy.

Amsterdam is a global hub for denim clothing production, and several brands have signed on to an initiative to use at least 5 per cent recycled content in denim garments by 2023. The city has plans to open a denim repair shop. In another move, houses being built now will be required to have their materials fully recycled upon demolition.

Other participating cities include Copenhagen, Brussels, Barcelona, Dunedin (New Zealand), and Nanaimo (British Columbia, Canada). Also involved are Cornwall County Council in the UK, and in southern China the catchment for Erhai Lake, which is facing environmental pressures including water pollution.

A 2018 investigation of 150 countries through the lens of the Doughnut found that none of them was meeting its citizens’ basic needs while operating within planetary boundaries. The best performer was Vietnam, which met six social thresholds while overshooting in only one area. Australia has all of its thresholds in the danger zone, with the only one within the safe zone being “blue water”, a term for the water in lakes, rivers and groundwater. New Zealand is in a slightly better position, but with land-system change in a state of minor overshoot, and blue water also in the safe zone.

Endorsements and considerations

Raworth’s book has received widespread critical praise for changing the conversation on economics in a manner that can be understood by the general public while avoiding the traps of becoming too complex, dry or technical.

George Monbiot, the British journalist and author, has described her as “the John Maynard Keynes of the 21st century”. Pope Francis, who has been proactive in urging environmental action, has praised Raworth for her fresh thinking.

Some observations regarding Doughnut Economics include:

• It is a simple visual model for guiding decisions within a sustainability and human development framework, rather than a fully designed economic system that takes into account markets and human behaviour.
• Tackling both the shortfall and overshoot areas is a little like comparing apples and oranges. Raworth has acknowledged that the planetary boundaries concept doesn’t take human wellbeing into account, and is looking for a way to integrate the two, despite this being hard to do in a meaningful way.
• The success of the Doughnut model at scale would probably require large numbers of people in rich countries to voluntarily cut back on their consumption, unless this is enforced via government policies.
• Using scientifically determined regeneration capacity as a guide may lead to some shocks, if it becomes evident that precipitous cutbacks will be needed. In The Guardian, Richard Toye asked the rhetorical question, “What if humankind can only survive in the long-term at subsistence levels of consumption that would seem unendurable to most of us?”

The growth dilemma

Work on the Doughnut overlaps with the movement towards de-emphasising the primacy of GDP and growth in favour of a wellbeing-centred economy. Many organisations have come together under the Wellbeing Economy Alliance, which has six national governments as members: Scotland, Wales, Iceland, Finland, Canada and New Zealand. For this type of initiative to work, metrics are needed, and Scotland has 81 wellbeing-measuring indicators as part of its National Performance Framework.

The Doughnut has much in common with degrowth and the steady-state economy. However, Raworth takes a non-prescriptive stance on how to tackle economic growth directly, despite being highly critical about it. The last of Raworth’s seven ways to get into the mindset of a 21st century economist is to “Be agnostic about growth”. This view is echoed in David Attenborough’s book A Life on Our Planet, which devotes a chapter to post-growth ideas.

It is easy to view growth incorrectly as an optional add-on to the present economy caused by consumerism, rather than one of the biggest cogs in the economic machine, driven by the debt-based financial system instituted by the Bank of England. Taking the growth element out of a growth-dependent economy would leave it in a non-functional state and is liable to create more unemployment and inequality while jeopardising democracy.
Meanwhile, the calculation of GDP and similar economic metrics remains necessary so long as the world continues to maintain the floating exchange rates between currencies that have existed since 1973. Any meaningful reform to end growth will have to occur at a fundamental level and may require a detailed design for a new replacement post-growth economic system. In 2020 the UK-based monetary reform group Positive Money put out an important report titled The Tragedy of Growth, which looked at ways to address the financial drivers of growth.

Can the Doughnut shift the economic paradigm sufficiently while operating within the current growth-based framework? Or is it at some point going to find its own limits when it comes head-to-head with the growth imperative?

Resources

Doughnut Economics Action Lab (DEAL)doughnuteconomics.org.
Doughnut Economics Advocates New Zealand (DEANZ) doughnuteconomicsnz.com.
Kate Raworth kateraworth.com.
“A Good Life for All Within Planetary Boundaries” (University of Leeds) goodlife.leeds.ac.uk.
Wellbeing Economy Alliance weall.org.
The Tragedy of Growth (report) positivemoney.org/publications/tragedy-of-growth.
Martin Oliver is a writer and researcher based in Lismore.

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