What comes to mind when you hear the phrase ‘learning economics’? When peers were leafing through the UCAS yellow pages of all undergrad degrees I didn’t stop at ‘E’. Economics was for the more hard-nosed students who really loved applied maths and words like ‘policy, macro and business’. They went to brainy unis like LSE, Kings College, UCL in the big city.
My feeling in 2004 wasn’t isolated. You might not have heard of it but PPE, (politics, philosophy and economics) is an undergrad course with plenty of connotations of power. Perhaps you know Ed Milliband, David Milliband, David Cameron, Jeremy Hunt, William Hague, Aung San Suu Kyi, Malala Yousafzai, Vikram Seth, Rupert Murdoch, John Sergeant, Krishnan Guru-Murthy? What do they all have in common? They’ve all graduated from PPE at Oxford University.
That’s an intimidating list.
But as my current path is showing me, I can’t just avoid things because it feels intimidating. And the more I learn, the more I realise how our current situation is connected to economics.
Cue Kate Raworth and the concept of ‘doughnut economics’: a quick accessible visual and a TED talk from someone who sounds human. I’ve known about this for a few years now but took the dive into the book last summer. Slowly, chapter by chapter.
It felt like a very visceral entry into old and new economic ideas bang in the middle of the Covid-19 induced ‘economic downturn’, and it has blown my mind.
What follows is a brief summary of Doughnut Economics: Seven Ways to Think Like a 21st- Century Economist and the four big learnings I had while reading. At the end I’ll explore the ‘and so?’: what am I going to do with all this new information? Also, what you might like to explore.
Seven ways to think like a 21st century economist
1. Change the goal.
For too long, economic thinking has orientated itself around GDP and its growth as a way of tracking “the value of goods and services produced in the economy”. In a previous blog I explored what’s wrong with GDP via Rutger Bregman’s Utopia for Realists . What I learnt there is that this narrow goal is taught in all Econ 101 (Intro to economics courses) and why the goal has rarely been questioned.
Raworth instead offers us the doughnut:
a new way of looking at what our goals could be. The inner doughnut is where we are falling short of people’s minimum standard of health, access to education, housing, safety, decent jobs, political voice and justice. Raworth invites us to think of ways to pull everyone up into the dough of the doughnut; a “safe and just space for humanity”. But within ecological boundaries, because if we continue to overshoot we threaten our very ability to survive.
Another way of looking at it is the UN Sustainable Development Goals agreed by 193 nations in 2015 (“blueprint to achieve a better and more sustainable future for all“) bounded by 9 critical processes that regulate Earth’s ability to maintain stable human-friendly conditions (as identified in 2009 by Earth-scientists Johan Rockstrom and Will Steffan).
Where the doughnut’s taking off:
- Amsterdam City Council is using a Doughnut analysis – May 2020
- President of Ireland, Michael D. Higgins talks doughnuts – October 2020
- Women’s Equality party adopts Doughnut Economics – October 2020
2. See the big picture.
Another basic economics idea is explored in chapter two: “the circular flow diagram which for 70 years was the defining depiction of macro economy.” Although the diagram itself was new to me the idea that “the market is efficient, that trade is a win-win and that the commons are a tragedy” is not. The focus of the diagram to the flow of money is, Raworth suggests, no longer fit for purpose – we need something more encompassing.
What Raworth offers is the Embedded Economy that accounts for our life-giving energy we receive from the sun and raw materials found on Earth (think fish, think oil and gas, think iron and cobalt); the value of core work carried out in households that enables us all to thrive (think how good your sales pitch might be without having a decent breakfast); the commons where much creativity is released and shared often without the marketplace being involved (think Wikipedia); and society where we build meaningful connections and rely on each other (think local sports club, the WI, anti-oppression movements).
And aspects of our economy that have had free rein need to be re-oriented. For example, finance should be in service of society. The 2008 financial crash busted the myth of traditional finance offering investments on people’s savings as a stable, valuable service. Finance has come to dominate the economy, breeding a generation of financial elites “controlling the public good of money creation and profits handsomely from it, while often destabilising much of the wider economy in the process”. Business can be innovative so it needs to lead with purpose, and the market is a double-edged sword so it needs to be embedded in our economy wisely.
It begs the question, why in 2020 does it still feel hippy-dippy to say we are embedded in the natural world? We are not distinct from environments but intertwined with them. How uncomfortable have we become with this idea, that we roll our eyes (mine included) when someone rattles on about this issue. The more I think about it, the more it feels like a socially acceptable form of denial.
3. Nurture human nature.
Once more, I was aware of the economic concept of the rational man via stereotypes. Due to the desire at the time to make economics a hard science, human behaviour was reduced to a caricature so it “could be described mathematically”. Raworth summarises that by the 1960s “the caricature clearly depicted a solitary man, ever calculating his utility and insatiable in his wants”, and “all knowing with perfect foresight”. Raworth quotes the economist Robert Frank: “by encouraging us to expect the worse in others, it brings out the worst in us: dreading the role of chump, we are often loath to heed our nobler instincts”. This idea seems to fit into so many aspects of modern life: politics, social media, driving! We have become our own self-fulfilling prophecy.
Raworth picks the rational man apart, from his WEIRD (Western educated industrialised rich and democratic) narrow perspective, to history’s trail of collaboration and altruism, and our internal biases and dependency on others. Pulling on Schwartz’s research into the value complex, she explores the idea that our values aren’t fixed. The research from across 80 countries found that 10 universal human values, present in all of us to varying degrees, can be prompted and can shift over a lifetime and even times of the day.
Raworth calls for some introspection: “we need to meet ourselves again”.
4. Get savvy with systems.
To fit simple laws that were in vogue at the time, economists sought out rules to liken their subject to a pure science. The supply and demand graph is just once such example and highlights how much we’re ignoring when we opt for simplicity.
The call to get savvy with systems feels particularly pertinent to me in my work to help people get to grips with the climate science, a deeply complex system.
We are not very well practised at systems thinking and “we pay a high price when we don’t understand the dynamic systems on which our lives and livelihoods depend”. The current system we’re in perpetuates inequality with reinforcing feedback loops and big corporate monopolies: “a pattern of concentration that prevails from many industries too, from media and computing to telecoms and supermarkets”.
Raworth invites economists to think of themselves instead as gardeners, as stewards. Experiment and find leverage points to “those places in a complex system where making a small change in one thing can make a big change in everything”. Citing Donella Meadows, there are three properties of effective systems: healthy hierarchy, self-organisation and resilience.
A code of ethics for economists is proposed – though I can see it applying far more widely:
- Act in service
- Respect autonomy
- Be prudential
- Work with humility
“The future can’t be predicted but it can be envisioned and brought lovingly into being. Systems can’t be controlled, but they can be designed and redesigned.”Donella Meadows
Get started with learning systems:
- Play C-Roads, a systems game “to help governments see the impact of their policy plans” but you can play too: https://www.climateinteractive.org/tools/c-roads/
- Enroll in a free OU course: Systems thinking: Understanding sustainability
- Watch Last Call, based on Limits to Growth study in 1972. (Disclaimer: I haven’t found the full film yet)
5. Design to distribute.
Our current system is based on an ‘economic law’ that as societies grow they get more unequal and then balance out. Or as Raworth helpfully illuminates, we take the ‘no pain, no gain’ approach. Inequality is baked-in and it’s bad for all of us. It’s not only bad for people but it turns out it’s bad for planet as well: “higher levels of national inequality, also tend to go hand in hand with increased ecological destruction”.
Raworth invites us to instead create an economy that is distributive by design. We need more small-scale enterprise networked together and fewer monolith corporations. It will allow for more flexibility and resilience. And importantly, wealth can be more distributed. But wealth isn’t only in the form of money but also time, land ownership, knowledge, enterprise technology etc and they can all be rethought in a more distributive way as well. Raworth rethinks the system of money, introducing ideas like ‘Green Quantitative Easing’: an idea where “central banks could channel new money into national investment banks for ‘green’ and social infrastructural projects” as opposed to the current system of paying into commercial banks. And alternative currencies are explored such as the Bristol Pound, blockchain currencies, and even time-banking. Patents’ monopoly on ideas are being reimagined in Creative Commons licensing and via 3-d printers,
New business models are transforming into employee-owned initiatives and co-operatives redistributing wealth, transforming businesses into employee-owned initiatives or co-operatives redistribute enterprise ownership
Distribution in action:
- Time banking for elderly care in Switzerland.
- The Kenyan Bangla Pesa, an alternative currency making communities more resilient
- QE for People – another alternative to Quantitative Easing
- The Giving What You Can Pledge – individuals and businesses donating 10% of their income or profit every year. Read how I donated my largest sum yet as part of the pledge.
6. Create to regenerate.
“Too poor to be green” is an economic story that has been circulating for decades, Raworth argues, as 90s economists noticed a trend a bit like inequality, as an economy grows pollution must rise before it falls: “grow now, clean up later.” But closer inspection and more data show that “it’s people power, not economic growth per se that protects local air and water quality. Likewise, it’s citizen pressure on government and companies for more stringent standards, not the mere increase in revenue that compels industries to switch to cleaner technologies”.
What’s Raworth’s response? We’ve got to shift away from the linear industrial system which “runs counter to the living world” to the circular. She calls for “changing the paradigm that gives rise to the system’s goals”. If we’re looking for bigger leverage, we need a paradigm of “regenerative design”.
She proposes “The Corporate To-Do List” for businesses to thrive within the doughnut, progressing through each step or ideally leapfrogging to the end:
- Do nothing
- Do what pays
- Do your fair share
- Do no harm
- Be generous
Can we set up “enterprises that are regenerative by design…whose core business helps to reconnect nature’s cycles and gift as much as they can”? They can start by not asking, “what’s my fair share to take…but what other benefits can we layer into this so we can give some away.”
It feels like a revolutionary rethink of the enterprise and pushes today’s more progressive businesses to do more. Raworth states it will need to be underpinned by “regenerative economic design” and rethinking finance, allowing the state to regulate and take risks.
Initiatives on their way to generosity:
7. Be agnostic about growth.
The traditional graph of GDP growth is an exponential upward curve. Even if you’re not an economist we’re all more familiar with these curves in a pandemic – but back to growth – can we really continue to grow exponentially? Is green growth possible? Where does it end?
“The greatest shortcoming of the human race is our inability to understand the exponential function”physicist Al Bartlett
I admit I fell for this one hook, line and sinker. When I realised that growth for the sake of growth was unsustainable I jumped to the idea that degrowth needed to be the way forward. I had switched teams but was still playing the same game. Raworth points out it’s a false dichotomy still based on the old story with the goal being upward or downward growth.
When we focus on improving the right things, like thriving in a safe and just world, then growth can go up or down and that’s ok. It feels like a radical idea, especially when you’ve absorbed all the good growth ideas of our culture. Upton Sinclair states that “It is difficult to get a man to understand something, when his salary depends on his not understanding it”.
“We need an economy that makes us thrive, whether it grows or not.” GDP growth is falling in many high-income economies already, so the timing seems right. This mindset shift requires economists and all of us to think differently and transform our systems accordingly.
Enterprises can think of themselves as trees rather than just rewarding growth, as ex-Wall Street banker John Fullerton explains, “once it is mature, it stops growing and bears fruit – the fruits are just as valuable as the growth was”. Another approach is rethinking savings such as having disincentives for holding onto them to accumulate interest and instead reward investment into sustainable projects. Culturally we need to model and encourage the notion of ‘enough’ and appreciate that many of our unmet needs are not satisfied by consumption. What do we need to feel enough? New Economics Foundation research gives us a starting point, with their findings giving us 5 acts that improve our wellbeing:
- Connecting to the people around us
- Being active in our bodies
- Taking notice of the world
- Learning the world around us
- Giving to others
If we had these needs met, could we unhook from our addiction to growth?
Emerging ideas which are agnostic about growth
- Evergreen Direct Investing
- New Zealand’s world-first ‘wellbeing’ budget to focus on poverty and mental health
- Campaign for 4 day work week
Big learning #1 – I know neoliberal economic ideas without realising it
If there’s one thing that really struck me it was how familiar many of these ideas in the book were to me, even if the diagram, theory or author were not. Economics is embedded in our culture: women are not equal to men because men earn more; women don’t get paid to do the housework or look after children; housework is not valuable; I must always be looking to earn more and more money; my productivity is tied to my worth; everyone else is competition; other people are selfish and not to be trusted etc etc. The link between culture and economics is deep and messy.
Big learning #2 – the power of image, metaphor, story and language
I was already learning this but had not considered how economics messages had become too ingrained and absorbed unquestioningly.
Consider the phrase ‘onwards and upwards’. Not only is it the notion of continual growth but it is a throwaway comment for when we hit any snag, or deal with an awkward sadness from a friend or neighbour, and it’s often what we want for ourselves and loved ones. Continuous growth is the cultural norm.
Another is ‘no pain, no gain’. An approach used by Kuznets and Grossman and Krueger for the environmental equivalent in economic terms to justify why inequality and pollution must rise before it falls – all in the pursuit of a growing economy and once it’s grown, equality and waste will sort itself out. But it’s a cultural idea too as Raworth suggests: the phrase was mainstreamed in the 80s by Arnold Schwarzenegger regarding his fitness regime. The more I reflected the more I saw this notion that we need to suffer in order for a later reward permeate further and further. It has us staying in awful jobs we despise, hating our own bodies until they are 2 stone lighter and assuming work must be hard and grueling. It also diminishes the role of play and orientates us to focus on the outcome not the process.
It even boils down to individual words. The word ‘consumer’ overtook the word ‘citizen’ in UK media in the 1970s. And you wonder why so many well-meaning people are preoccupied by which soap to buy and which peanut butter to avoid. Raworth quotes Lewis, “unlike the citizen, the consumers’ means of expression is limited: while citizens can address every aspect of cultural, societal, social and economic life…consumers find expression only in the market place”.
Raworth highlights the power of imagery to capture our imagination without realising it and hence why she has created a compelling visual alternative. I’ve been explaining the doughnut idea since reading the book and it’s easily understood. I love that Raworth often takes a doughnut blow-up swim float with her on talks – you might forget a lot of the detail, but you won’t forget that shape.
We absorb graphics we are exposed to and that’s determined by what is culturally deemed important – how many of you can recognise more logos than you can tree leaves? (Me too!) If it were the other way round do you think there might be a bit less deforestation and a bit more control of rampant capitalism?
And the role of story here is profound and Raworth harnesses it powerfully. She can be explaining big macro economics theory and then tell a story that exemplifies it and I’ve got it. She often bookends each chapter with a cultural reference or story to contextualise her idea. It makes her ideas easier to digest, because story is our oldest form of learning.
Big learning #3 – the danger of a cautious idea that gets set in stone
This is an evolving idea of mine although someone has probably written a thesis on it. The more I learn about how this modern world came to me the more I learn about the cautious ideas of original thinkers – often missing hard data to back up their ideas – get swept up, morphed, maybe exaggerated, and then set in stone. Here are 4 mentioned in this book:
- GDP’s original creator was to become its most vocal critic by the 1960s. Simon Kuznet warned, “the welfare of a nation can scarcely be inferred from a measure of national income.”
- Chicago-school economist Frank Knight, turned the Rational Economic Man into a caricature admitting his depiction that “humanity was loaded with ‘a formidable array’ of artificial abstractions, resulting in a creature who’ treats other human beings like slot machines”.
- Kuznet who also drew the curve suggesting increased inequality was an inevitable part of growth, admitted his explanations came “perilously close to guesswork” based on “5% empirical data and 95% speculation, some of it possibly tainted by wishful thinking”. Raworth points out that Grossman and Krueger who theorised a similar curve for pollution “were careful to add caveats to their findings”. Their data was only based on local air and water pollution not greenhouse gas emissions or deforestation.
This blows my mind – and reminds me of how potent an idea can become, even when it is completely decoupled from fact.
Big learning #4 – father of neoliberalism was in for the long-haul and so we need to be too
Milton Friedman founded the Mont Pelerin Society in his twenties, in 1947. It wasn’t until 1980 when Margaret Thatcher in the UK and Ronald Regan in the US came to power that the tide turned fully towards embracing many of his ideas.
One of their main tactics: education. From Naomi Klein’s The Shock Doctrine I learned that the Chicago boys set up schools in Latin America and Chicago and built power through educational institutions over time.
Recalibrating to a “safe and just space for humanity” that thrives within planetary boundaries isn’t going to happen overnight. Just like the short-termism that came with blind consumption and neoliberalism – we are no longer a patient culture.
And education may well be the centre piece of the pivot towards justice. Except maybe this time it’s not saved for an elite few but accessible in the commons, interactive, and appealing to different kind of learners at different stages with different needs.
Some explanations that helped me understand things so much easier
Raworth has, in my opinion, a gift of explaining big ideas succinctly and accessibly. The comms person within can’t help but fan girl. 🤓
Here are a few definitions and explanations lifted directly from the book that really helped me grasp these concepts:
A system: “Simply a set of things that are interconnected in ways that produce distinct patterns of behaviour. It is the relationships between the individual parts – shaped by their stocks and flows, feedbacks and delay – that give rise to their emergent behaviour.”
Quantitative Easing: “In deep recessions, once interest rates have already been cut very low, central banks attempt to further boost the money supply by buying back government bonds from commercial banks.”
Block chain: “A digital peer-to-peer decentralised platform for tracking all kinds of value exchanged between people. Its name derives from the blocks of data – each one a snapshot of all transactions that have just been made in the network- which are linked together to create a change of data blocks, adding up to a minute-by-minute record of the network’s activity. And since that record is stored on every computer in the network, it acts as a public ledger that cannot be altered, corrupted or deleted, making it a highly secure digital backbone for the future of e-commerce and transparent governance.”
Why shareholder primacy makes no sense: “Employers who turn up for work day in day out are essentially cast out as outsiders: a production cost to be minimised, an input to be hired and fired as profitability requires. Shareholders,meanwhile, who probably never set foot on the company premises, are treated as the ultimate insiders: their narrow interest of maximising profits comes before all. No wonder that, under this set-up the average worker has been losing out, especially since trade unions in many countries were stripped of their bargaining power from the 1980s onwards.”
And so… what to do with all this knowledge?
I’m on a mission now to turn all my recent non-fiction reads into resources of this kind – something between a book review and summary. Primarily to reinforce my own understanding so I can hold onto these big ideas and perhaps they may be helpful to other people who are curious.
Here are some suggested next steps for you:
- Read the full book. Even better, read it with a friend. There are a lot of big ideas here, I found it really helpful to chew over each chapter with a friend. https://www.goodreads.com/book/show/29214420-doughnut-economics?ac=1&from_search=true&qid=QtNtToAGsO&rank=1
- Watch 2040: Kate Raworth is an interviewee and there is a cute animation of the doughnut in action. https://www.youtube.com/watch?v=p-rTQ443akE
- Watch Sorry We Missed You: Ken Loach’s latest film that explores the social consequences of the gig economy; a delivery truck driver and a zero-hours care worker. Particularly powerful when so many of us have relied on these industries during the pandemic. This feels like a powerful combination because the story nudges us to feel the devastating impact the current economy can have on people through the lens of one family.
- Start a conversation about economics with a friend or colleague, not because you are an expert now but because you’re a curious citizen. Economics is doing you regardless so it can feel empowering to share what you’re learning and hear from others.
- Notice when you see old economic ideas seeping into your mindset unchallenged.
- Keep learning. Here’s a few resources I’ve pinned to explore next:
- Systems Thinking for Sustainability: An Introduction to the Symbiosis in Development (SiD) Theory – a FutureLearn Course
- Organising for the Sustainable Development Goals (SDGs)
- What is feminist economics? Watch this interesting panel discussion hosted by the Womens’ Equality party: Mandu Reid In Conversation With Katrine Marçal, Polly Trenow and Sharonjit Clare: https://youtu.be/EtMOaviKPec [90 mins] (Thanks to Annie for introducing me to this one)
- Pitchfork Economics podcast: https://open.spotify.com/show/64JsQ35Gnc9Nl7jVsr78J7?si=IMxSh9iXR-m11cIIwAsngA (Thanks to Allison for introducing me to this one)
- How to do business with doughnuts – Kate Raworth – World Economic Forum
- Join the community. In September 2020 the Doughnut Economics Action Lab was launched. There they are “turning Doughnut Economics from a radical idea into transformative action. It’s a place to connect, share, inspire and get inspired.” Find out more: https://doughnuteconomics.org/discover-the-community
I’m exploring ways I can use the infrastructure of my business With Many Roots to experiment with these different ideas. While I’m focusing on building it up, I want to now zoom out and review its “living purpose”. How many benefits can I generate through my enterprise? Can I build in “design to distribute” and “create to regenerate”?
It’s providing a canvas for some of the good stuff I am already doing, like donating 10% of my annual profit to charitable causes.
I was super thrilled that in Raworth’s chapter 5 the new image was a network – that element is in my logo, along with the earthy patterns embedded in a natural leaf shape and in balance. So on some level back in 2015 I was channelling some of these ideas, now it feels time to be really intentional and work on a way to bring these elements to the front and centre of how I work.
First things first, my reading partner and I are going to put my business through a Doughnut Economics workshop: think pens, post-it notes and a shed loads of ideas and connections.
So watch this space.
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Sophia Cheng With a decade of communications experience across the for profit and nonprofit sectors, agency and in-house, Sophia has made a habit of making ‘the hard stuff’ more accessible. Since 2018, she has reorientated her life around the climate crisis. She has forged her decade of communications experience into offering workshops, mentoring, blogging, and more, on the biggest issues of our time. View all posts