Gross Domestic Product (GDP): who isn’t used to hearing about the ups and downs of this metric, commonly understood as the most important indicator of economic health? This statistic—the monetary value of finished goods and services produced within a country’s borders over a specific period—and the pursuit of its growth is embedded at the center of mainstream economic theory. But the question of whether GDP is still a meaningful metric in a world of persistent income inequality, intractable environmental challenges, and human exploitation is at the heart of Kate Raworth’s Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. Despite the title, this book offers a thoughtful, practical advice that any concerned citizen can use.
Raworth proposes a new economic model that removes GDP from its pedestal and focuses on social justice and our planet’s carrying capacity: the doughnut. In this model, the doughnut’s inner ring acts as a “social foundation,” including basic amenities such as clean water and sufficient food, to which every human should have access. The outer ring of the doughnut is the “ecological ceiling” representing planetary boundaries concerned with climate change, biodiversity, and other areas in which human activity is burdening the Earth’s systems. Between these two boundaries is the doughnut’s substance, the “safe and just space for humanity.” Raworth asserts that the goal of 21st-century economics should be to bring all of humanity into this space, instead of the endless growth GDP.
The “seven ways” referenced in the title are broad conceptual shifts that Raworth proposes as a guide for transitioning to the socially and environmentally just doughnut model. The book’s greatest strength is the expansive and holistic vision encompassed in these recommended transformations. Relying heavily on systems-thinking methods, these shifts relocate the economy within the context of the social and environmental systems that propel and maintain it. Raworth does an exceptional job of recognizing the many players in a dynamic, complex economy (including unpaid laborers, usually women, who enable waged labor), and also assigning them concrete, realistic roles to play in the transition to the doughnut economy. For instance, the state is given a re-imagined role of catalyzing cross-sector investment in renewable energy sources; the market is made subject to stronger regulation to reduce social inequities.
What’s not as clear is the theory of change Raworth that assumes will enable these monumental changes to be accomplished. The political and social muscle needed to replace GDP with a fairer and more inclusive economic model would necessarily be massive and centralized. While Raworth celebrates the reach and accessibility of the digital commons, it is difficult to see how the emergence of isolated, uncoordinated actions facilitated by online communities will gather enough momentum to create lasting change with a global impact. Further explanation of the mechanisms needed drive the planetary-scale change Raworth proposes would strengthen her case.
To that end, investing and the financial sector play an important role in Raworth’s framework; she offers a vision of “finance in service to life,” or regenerative finance, that looks beyond the sole aim of generating value for shareholders. A key focus of regenerative finance is curbing practices that are speculative and short term, replacing them with strategies that build multiple kinds of long-term value—“human, social, ecological, cultural, and physical” —in addition to a fair return. These include separating customer deposits from speculative activities, imposing a global financial transactions tax, and increasing investor support of community-minded banks and credit unions.
Doughnut Economics is a bold and inspiring book that isn’t afraid to tackle head-on the biggest challenges facing our planet and our society. Kudos to Raworth for outlining the scope of the change needed and providing some practical starting points for creating these global transformations.
Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
320 pages. Chelsea Green Publishing; Reprint edition
