Doughnut Economics

Doughnut Economics is a wake-up call to transform our capitalist worldview obsessed with growth into a more balanced, sustainable perspective that allows both humans and our planet to thrive.

Among the thousands of economic diagrams, which humans have developed over centuries, one has really cemented itself into not just textbooks, but the backs of our brains: the circular flow of labor, capital, goods and services. It usually pictures two parties, firms and households, who exchange work for wages, rent, and dividends. The money then flows back to those firms as consumer spending on goods and services.

According to Kate Raworth, there’s only one problem with it: it’s wrong. She names four major factors that this diagram, which dominates economic education, neglects:

Ecological context. Our economy is embedded into the environment. We draw on the planet’s resources, like sun and water, and turn them into pollution and waste. Parenting. Ungodly amounts of hours go into helping our children, caring for our family, and maintaining our households. All of them add to the economy, but aren’t accounted for anywhere. Unpaid work. We’re social. We like doing things for others, even for free. Look at Wikipedia. Or Reddit. Or your simple neighborhood quid-pro-quo. But all of that adds value too. Inequality. GDP growth is hailed as the holy grail all nations should strive for, but so far, it’s failed to eliminate inequality and, in most cases, has widened the gap between the rich and the poor.

But if our economic theories are really that outdated, how can we update them? Of course, Kate doesn’t just point out the problem, but also suggests a solution.

To account for the missing factors in classic economic theories, Kate proposes a model she calls ‘the Doughnut of social and planetary boundaries.’ It looks like this:

Inside the doughnut hole lies our social foundation, which consists of 12 basic, human needs, like water, food, justice, or an education. Around the doughnut are nine planetary boundaries, which represent our ecological ceiling. If we overshoot on things like ocean acidification, land conversion, air pollution, and climate change, we’re hurting the planet to the point where it won’t be able to sustain us in the future.

Therefore, the ideal space for our economies to be in is the ‘dough’ of the doughnut, the space right between the social foundation and the ecological ceiling. As long as we’re in that safe and just space, we’re both satisfying our needs, as well as maintaining earth’s health.

We’ve already overshot in several important dimensions, which means so far, we’re not doing enough!