Doughnut Economics (Kate Raworth)
The ambitious and brilliantly written Doughnut Economics is an enjoyable attempt to update the premises and assumptions of economic theory, whilst simultaneously expanding the scope of economics beyond resource allocation to include gender equality, climate change and more. Whilst this book explores a broad range of policy solutions from recent corners of economics, it is ultimately fails to convince as a new doctrine - the cover includes a newspaper quote 'The John Maynard Keynes of the 21st century' - this may be a stretch.
Divided into seven chapters each imploring a new way to think about economics, Kate Raworth first tackles the downside of our 'obsession' with GDP growth, and proceeds to demonstrate the flaws in the main assumptions behind classic economic theory. This journey consists of describing newer developments in economics, and applying the new tools to the pressing issues of the day - albeit in a somewhat scattergun manner. The argument that economic growth does not necessarily lead to reduced inequality or a reduction in pollution is a convincing one, and proposed solutions around the digital commons and Universal Basic Income appealed to me personally. The sections on complexity theory, 'Nudge' economics and the countervailing theories of Gerd Gigerenzer did not appear to further Raworth's arguments or contribute to solid proposals, and this in some ways summed up the book for me. These simple summations of newer developments in economic theory were enjoyable to read but vague in their prescriptions.
Tying together the author's many priorities for the world economy is The Doughnut. This diagram describes the way we should plan the future world economy, with the inside hole representing the shortfall the must be met for those currently with insufficient income (and energy, housing, water, food, healthcare, education, peace, justice, gender equality, political voice, networks, social equity), and the outside of the ring representing 'overshoot' with environmental degradation the result. We must come to live says Raworth, within that ring.
The final chapter 'Be Agnostic About Growth', is where the concept of The Doughnut as a prescription for policymakers falls apart. Raworth is careful not to say (as some have) that we should end economic growth in order to save the environment - she instead says we should be 'agnostic'. And for good reason. Beyond the rather difficult task of persuading all developed economies to cease attempting to increase their wealth, if the developing world were to get to the $12,500 per capital annual income she prescribes as a minimum threshold, this would entail tripling of world GDP. The dramatic fall in this year's GDP as a result of Covid is currently estimated to reduce CO2 emissions by 5% - and environmentalists say that if we were to continue a 5% reduction every year for the next 12 years, it still wouldn't be enough to stop serious global warming. So a tripling of GDP (involving the impossible task of ending growth in rich countries) is clearly problematic.
Raworth inadvertently points out this contradiction, and a possible solution in the chapter 'Create To Regenerate'. Whilst laying out statistical holes in the idea that environmental damage is reduced or even fixed at a certain level of wealth within in a country, she points to one study where resource consumption in the UK may have plateaued or declined, stating that if true:
"there would still be a problem: the UK's consumption would have peaked at an unfeasibly high level. If other countries were to follow suit - trusting that growth would eventually lead to a similar peak and decline - it would require the resources of at least three planet Earths."
A moment's pause on the above statement leads us to the problem and a possible solution. If it has taken the UK to grow to the current level of wealth to decouple growth from resource use, of course this doesn't extrapolate for poorer nations today. In order for Sudan's 41 million citizens to go from under $1000 per year to the UK's over $41,000 annual income per capita they obviously wouldn't have to follow the same path. The Sudanese won't build steam engines and shovel coal into the back, then replace them with cars; nor would they set up huge printing presses when a national newspaper industry emerges, only to replace it with digital after some decades. Existing technology means poor countries can skip steps. Likely Sudan's first comprehensive internet network will be space-based and technically more advanced than the current internet provision in the UK.
Economic growth is new ideas. New technology, new systems and conventions, what Paul Romer calls new recipes, for creating and problem-solving with ever greater efficiency. The true economic miracle of the past half-century has been China's ability to bring 700 million citizens out of extreme poverty, and a major part of this is skipping steps of invention to achieve unprecedented growth. But this growth was environmentally 'dirty'.
The call to be agnostic about growth is wrong firstly because we have no right to deny the poor in any country the chance to escape poverty, and secondly because there is no stopping human beings from incrementally problem solving in their day to day lives. The book More From Less by Andrew Mcafee brilliantly shows how the United States, Germany and the United Kingdom have, since around 1970 used less metal, fertiliser, water, paper and timber, and critically, energy year after year, even as output grows. Meanwhile, air and water pollution have also decreased greatly, and many threatened species have seen their numbers rebound. Even greenhouse gas emissions have declined substantially in recent years.
An illustration from that book points to an alternative path to Doughnut Economics. In 1959 aluminium beer cans weighed 85 grams (empty). By 1972 the weight of a two-piece can dropped to just below 21grams, by 1988 it was less than 16 grams , a decade later it average 13.6 grams, and by 2012 it was reduced to 9.5 grams. Driven simply by a striving for efficiency from profit-motivated beer companies, who changed and refined the design in order to save material costs, over 580,000 tons of aluminium was saved from 1980 to 2011 from a 'recipe'.
Rather than discourage growth, the most advanced economies should be striving to create the technology that will decouple growth and resource use as quickly as possible. If for example, the U.S. and E.U. mandated that all vehicles legally allowed on the road had to be electric by 2025, or that all coal-fired power stations had to close by 2030, we'd see an explosion of innovation in those alternatives. This investment would eventually make these technologies cheap enough that poor countries can afford to skip the steps in their development, avoiding altogether the 'industrial revolution' period that was so damaging to the planet.
Despite the fundamental issues with Doughnut Economics cited above, I would still recommend this book. There are sensible and progressive ideas on ways to tackle inequality and environmental damage, and to curb the harmful effects of finance on the broader economy. It is a valid critique of mainstream economics, and it's simplifications and assumptions (often for mathematical purposes) that can be harmful to public policy. Most of all the book is an enjoyable and entertaining read, filled with anecdotes and good intentions. Readers who care about inequality, poverty and the environment, should read Doughnut Economics, but ensure that it isn't the only book they read on this topic.