Doughnut Economics

Dr Declan Jordan Senior Lecturer in Economics at Cork University Business School

Doughnut Economics Shows How we can Build Thriving Economies and Societies

It is almost a cliché now that the pandemic has created a new normal and that we cannot go back to old ways of organising our economy and society. Just as Keynes warned that “the difficulty lies, not in the new ideas, but in escaping from the old ones” we may be too optimistic about the extent to which we can break past habits and structures.

One aspect of our economic mindset that will be difficult to change is our addiction to growth as our measure of economic success.

Think about how we most commonly discuss the impact of the pandemic. We measure it by the decline in GDP. We hope for a rapid recovery measured by the time it takes to get back to previous levels of economic activity. Irish and international governments express the hope that the debt incurred to support citizens and businesses through the pandemic will become manageable by rapid GDP growth reducing our debt/GDP ratio.

So this fixation with economic activity and the relentless rise in GDP becomes something we take as given, without asking why we need or want a perpetually growing economy.

In her 2017 book, Doughnut Economics: Thinking like a 21st Century Economist, Kate Raworth presented a new approach in which our economies should work to serve society and people. Her ideas are gaining attention and she challenges many of the long-established touchstones of economics. President Higgins has encouraged Ireland to embrace the doughnut as a way of designing a more sustainable and just post-pandemic society. The Doughnut Economics approach places the economy within the context of society and environment. It sets an economic objective of meeting the needs of all within the means of the planet.

The economy is not an end in itself but serves society to enhance wellbeing. Our economies need to be redistributive and regenerative by design, and leave behind the idea that a growing economy is the solution to greater inequality and the climate emergency.

We need to replace rational economic man as our idea of how people operate in reality and instead recognise that people are social and adaptable. The pandemic has shown us the extent to which people rely on and are interdependent of each other.

Kate Raworth also argues we need to be agnostic about economic growth, instead of addicted to it. This means we need to shift from envisaging economies that need to grow whether or not they help people thrive, to economies that help people thrive, whether or not they grow.

One of the obvious implications of this is that persistent growth in GDP needs to be replaced as the primary measure of economic success. Just as modern businesses now assess performance using a range of metrics or a balanced scorecard, it is sensible to consider a range of indicators for a well-functioning and thriving economy and society. The doughnut is a way of thinking about the elements of a thriving society in a sustainable way. The inside of the doughnut represents the extent to which we are underproviding the needs of all citizens, including access to clean water, energy, enough food, quality healthcare, housing, decent work and a living income, social equity, and gender and racial equality. These are the social foundations.

Outside the doughnut represents the extent to which we are overshooting the planet’s environmental boundaries, including air pollution, biodiversity loss, climate change, ocean acidification, and ozone depletion. This provides an ecological ceiling.

Between the social foundations and ecological ceiling is the safe and sustainable space for a thriving economy and society that enhances the wellbeing of all citizens.

Increasingly we are seeing the doughnut concept applied at the level of the city. Amsterdam and Brussels are using the doughnut to rethink their approaches to urban development. Using this concept the city becomes more than an engine of economic activity for its region, but instead a place where people can thrive. People in the city are healthy, connected, empowered, and enabled.

Decent jobs and incomes, strong communities, safe spaces, equality in diversity, access to education, access to healthcare, and good quality housing are the elements that make a city thrive whether or not it is growing economically. The city is designed for the wellbeing of the people living there rather than seeing a city as a source of labour, ideas, or markets.

Though it has yet to gain traction at a lower level of aggregation, the doughnut is potentially a useful way for managers to consider a more sustainable business model. They would be prompted to ask what it would mean for their business to thrive, what would it mean for their business to respect the wellbeing of people worldwide, and what would it mean for their business to respect the health of the planet.

The strength of the doughnut as a new way of economic thinking is that it challenges the economic ideas that emerged from models of unconstrained growth and unlimited natural resources. It puts people and their wellbeing as a goal of economic progress rather than seeing them as consumers or workers in an economic system. More importantly it is way of reframing economics to cope with the new local and global challenges.

You can read more about Kate Raworth and the Doughnut Economics concept at https:// doughnuteconomics.org/aboutdoughnut-economics.