Review: Doughnut Economics by Kate Raworth

Kate Raworth, Doughnut Economics: 7 Ways to Think Like a 21st Century Economist (Chelsea Green Publishing Company, 2017)

The economy. That giant mess of a topic. What is it? How does it function? What are its goals? If you asked most political leaders, they’d tell you the point of the economy is to grow. Lots of voters in America and world-wide vote on who they believe will deliver the best economic results: the number of jobs created, investments in the stock-market, and Gross Domestic Product (GDP), just to name a few economic measurements. 

But can the economy be narrowed down to a few indicators? Does the economy comprise more important values than just stocks, jobs, capital, and profit? Kate Raworth certainly thinks so. 

In her paradigm-shifting book, Doughnut Economics: 7 Ways to Think Like a 21st Century Economist ecological economist Kate Raworth dedicates seven chapters to rethinking and redrawing how economics is done, who it benefits, and what its purposes can be. Her solution? Grab a pencil and draw a doughnut. 

The central thesis of Doughnut Economics is that 21st century economics demands new ways of thinking given global problems like climate change, ecological collapse, or the still 2 billion people still lacking clean drinking water, to name a few examples. 20th century ideas are not equipped to handle 21st century problems, says Raworth. 

In fact, many of our 21st century problems stem from the economic thinking of the 20th century, making economics and economists culprits for today’s global issues. In the words of the 20th century inventor Buckminster Fuller, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete” (3). Dougnut Economics takes up that challenge. 

Before explaining the doughnut of Doughnut Economics, what is the economic paradigm we live in now? What are the ideas our economic models follow, even still today? 

Arguably, the most important metric our current economic models follow is the pursuit of economic growth, specifically GDP (Gross Domestic Product). Doughnut Economics first chapter, “Change the Goal” explores the history and reasons why global economies have such a fanatic dedication to Gross Domestic Product and how we can get out of thinking with it. 

GDP is measured as the market value of goods and services produced within a nation’s border in a year (27). As an example, if a nation produces 100 gallons of orange juice in a year, then the next year produces 150 gallons, they have increased their GDP by 50%. Most nations look to expand their whole economy by 2-5% a year. In the case of the US, our economy would be double what it is today in less than 20 years if it were to meet a 2% growth rate over that time. That’s huge.  

Why the fixation on GDP? Raworth argues economics, focused less on goals and more on laws

Envious of physics, 19th and 20th century economists started believing there were absolute and objective laws to how economies do and should function. Ranging from assumptions like human nature is self-interested, to economic growth is required for human well-being, or wealth inevitably trickles down from rich to poor, our economic ideas have been predicated on a search for “laws” that go against empirical evidence and everyday reality. Chief among these laws were the belief that growth cures all: or as the saying goes, “a rising tide lifts all boats.”

Since the goal of economics essentially became growth itself, predicated on the “laws of economics and human nature” this left the question of social well-being, ecological health, human happiness, or other ways to measure economies to the side, according to Raworth. “The portrait we paint of ourselves clearly shapes who we become,” writes Raworth. “That is why it’s essential for economics to portray humankind anew” (88).  

Rather than offer specific policy prescriptions like a universal basic income or a jobs guarantee (though she does that too), Raworth uses Doughnut Economics to provide an intellectual toolkit for 21st century economists. 

Aside from abandoning the absolute objective of growth, Raworth believes 21st century economists need to be savvy with “systems thinking”—a way of thinking that emphasizes complex dynamics between things and how they interconnect and affect one another. By doing so, we can, for instance understand more clearly the effect human populations have on wildlife or waterways, and how they have effects on humans.

More than just getting familiar with systems thinking, economics needs to be thinking about how it distributes, says Raworth. From materials to wealth, we live in the most unequal of times. This again, according to Raworth, is largely from the ideas and images we’ve inherited about how economics is supposed to work. 

One powerful idea and image is the Kuznets Curve: the economic theory that extreme inequality needs to occur before absolute equality can be reached. Developed by Simon Kuznets in 1955, the idea was that workers would begin in low-paying urban jobs owned by the wealthy, until workers would eventually be able to demand higher wages, thereby lessening inequality. The idea was dead-wrong but it stuck. In order to achieve social well-being the problems of extreme wealth and income inequality need to be solved, says Raworth. That starts with how wealth and resources are shared and owned from the beginning.

“The twenty-first-century task is clear: to create economies that promote human prosperity in a flourishing web of life so that we can thrive within the Dougnut’s safe and just space,” (244) writes Raworth in her concluding chapter, “We are all economists now.” And so we might all have to be. The problems of ecological limits and human prosperity concern us all now. Our world is too interconnected, too dependent on one another for it not to be. 

Doughnut Economics is not just an academic exercise. Governments in Amsterdam and Ireland for instance have embraced this model for their economies. It would seem some countries are hearing the call to shed our old economic thinking in favor of new ways—ones that put people and planet first. 
In this book Kate Raworth challenges our ideas, implants new images to our economic thinking, and has created an instant classic that will be vital for our social and ecological survival this coming century. Thanks to Doughnut Economics we know where our social and ecological well-being start and end. Here’s to a century predicated on boundaries, limits, and thriving for all!

Doughnut Economics by Kate Raworth
Doughnut Economics by Kate Raworth

Financial Times “Best Book of 2017: Economics”

800-CEO-Read “Best Business Book of 2017: Current Events & Public Affairs”

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