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The Eco-Worrier Reviews - "DOUGHNUT ECONOMICS - 7 Ways to Think Like a 21st Century Economist"



 

DOUGHNUT ECONOMICS - 7 Ways to Think Like a 21st Century Economist. Kate Raworth. Chelsea Green Publishing, Vermont, USA. 2017.

 

Just last month, six years after this book’s publication, a new Oxfam report has added a fresh twist to its essential argument. The report has found that the world’s richest 1% are responsible for more damage to the climate than the poorest 66%. Unsurprisingly, this is the logical result of conventional economics which would have us believe that these 1%, whose activities most threaten the world’s future, should be seen as the ultimate model of aspiration and ‘success’.

 

Raworth’s very rational explanation of the narrow assumptions and disastrous implications of classical economics has resulted in the back cover of her book almost apologetically describing her as a ‘renegade economist’. It reveals how embedded the mainstream dogma has become.

 

The book draws on the very simple metaphor of two concentric circles, with all of human activity taking place in the intervening doughnut-shaped space. Its inner rim, termed the ‘Social Foundation’ defines the minimum acceptable standards in terms of education, access to housing, food, energy and a political voice required for a fulfilled life. This ‘micro’ ring forms the secure threshold below which no civilised society should permit an individual to fall. 

 

In contrast, the doughnut’s much larger outer ‘macro’ rim forms the planetary  ‘Ecological Ceiling’ which, if crossed, endangers the living world’s life-support systems. The threat to those limits mainly results from various forms of pollution; greenhouse gases, air quality, nitrogen and phosphorus loading and ozone destruction. It also highlights global limits like the excessive use of fresh water and the permanent despoliation of ecosystems by buildings and infrastructure.


 

This is a long way removed from that semi-magical 18th century totem which still dominates mainstream economic thought. Adam Smith’s ‘invisible hand’ supposedly regulates a market economy to provide the ideal outcome for both sides in every human interaction. Smith (1723-1790) and David Ricardo (1772-1823) developed their classical economic theory during a pivotal age of discovery, in which many parts of the world were still unexplored. Its population was around 800 million, so the scope for the unlimited expansion of wealth to the benefit of everyone must have seemed boundless. 

 

As my earlier review of the 1972 milestone The Limits to Growthdiscussed, the expectations of the vast majority of people in Smith’s rigidly-structured 18th century society were very limited. Just as in Roman times, it was still a solar-powered ‘organic’ economy driven by sails, windmills, water-wheels and, via photosynthesis, human or animal muscle-power. Horse-drawn and sail-powered travel was costly, slow and dangerous, so most lives were lived within a walkable radius. Consumption of anything beyond locally-grown food, textiles and timber was rare. Even making expensive iron and steel objects such as weapons and tools required huge quantities of wood to produce the costly charcoal necessary for smelting and forging. Only the wealthy elite could afford small quantities of imported spices and precious materials. 

 

Status was either inherited or attained through marriage.  It was measured by an individual’s control over land, rent and labour, not by their productivity. Conspicuous consumption was limited to building vast, draughty houses, supported by a lot of servants and horses. It was only in such a society with very limited access to energy and, as a result, travel and access to resources, that Smith could  make the striking claim that “….they (the rich) consume little more than the poor”; unlike today, there simply wasn’t a great variety of goods available to consume.  It is hardly surprising that Smith and his contemporaries never gave a thought to any environmental limits.

 

Smith’s 20th and 21st century disciples grandly attribute the economic growth which suddenly took off in the 18th century to his gospel of free markets and global trade. Almost without fail they overlook the more hands-on work of Smith’s fellow-Scot, James Watt (1739 - 1819) with was touched on in the review of "Limits to Growth".  It was Watt’s steam pumping engine, rather than grandiose economic theories which revolutionised the world economy. It provided access to the previously unimaginable quantities of concentrated fossil-energy held in deep coal seams. Without that invention Smith and Ricardo’s theories could never have led to today’s industrialised world of 8 billion people.  That is the result of human invention and access to hydrocarbons, not economic theory. Raworth reminds us that the energy held in a single gallon of petrol can do as much physical work as 47 days of labour.

 

It is only in the last few decades that we have become aware of the Faustian pact involved in releasing those vast amounts of concentrated ‘zombie’ energy.  It was only its secure burial for 200 million years which provided the stable, benign climate in which civilisation could evolve.

 

In listing the ‘7 ways to think like a 21st century economist’, with an appropriately religious turn of phrase, Raworth questions ‘the four articles of faith’ on which the creed of classical economic theory is based;  ‘The Market’, which is considered to be 100% efficient, ‘Business’, which is claimed to be innovative and to provide leadership, ‘Finance’ which is assumed to be infallible and trustworthy and ‘Trade’ which is optimistically claimed to provide a ‘win-win’ for all parties.

 

In contrast she raises the vital factors of human existence which are ignored. First is ‘The State’, still condemned by most classical economists as an interfering hindrance to the correct functioning of the economy. No consideration is given to the state’s contribution, through education, roads, policing, the judicial system and international law which provide the framework in which the ‘free’ market can function.

 

Despite the word ‘economics’ being derived from the wise management of a home, the classical economists completely ignored the social significance of ‘the household’; in that bold 18th century man’s world it was considered to be a non-economic activity assigned to women. 

 

Also overlooked are ‘the commons’, whether in the form of access to land, forests, fishing rights or natural resources.  They were valued only as something to be sold off to the highest bidder, whom the naively dispossessed community must then pay to use. This blinkered world-view is no doubt behind the infamous statement that ‘there is no such thing as society. ‘The Earth’ is  considered to be inexhaustible both in its capacity to provide raw materials and absorb pollution. ’Political power’ should defer to economic power, as we see today with a handful of billionaires financing political parties and owning every form of media.

 

Raworth calls for a more realistic inclusion of these ignored factors in all economic thinking. Is it any wonder that the world is being led by today’s warped set of values towards ecological, social and economic collapse?  As the Oxfam report makes clear, the excessive fossil-fuelled waste of the world and its resources cannot be blamed entirely on the richest 1%. In practical terms it is the aspiration of the world’s middle-classes who, in idealising the ‘exciting’ hyper-mobile, consumerist lifestyle of the ultra-rich, are even more destructive because of their sheer numbers.

 

This book argues that economic thinking needs to be brought forward a couple of centuries and based on a more modern scientific understanding of the world.  One image it draws is of Sir Isaac Newton (1642-1727), the falling apple and his resulting theory of gravity.  Raworth uses it to show how science has advanced from those ‘dead’ mechanics on which classical economics is based. 

 

The post-Darwinian living world is still turning out to be infinitely more complex and fragile than Newton- and indeed Darwin - could ever have dreamed. An  enquiring Newtonian genius today would surely be more excited by the life-cycle of the living apple tree itself and its relationship with the soil’s mycorrhiza and fungi. It is these which feed and sustain not only the tree, but the entire planet’s thin, fragile layer of life. Without it none of us, not even economists, could exist.

 

One major, largely overlooked weakness of ‘Doughnut Economics’ is that, despite its use of two circles as its defining feature, it uses them only as boundaries to the radial ‘inward’ and ‘outward’ movements which threaten these limits. For that purpose they could just as easily be squares.  It misses the chance to highlight the wider concepts which orbit within a ‘doughnut’-shaped space. 

 

First must surely come the constant recycling of living nature through the constant birth, growth and death of everything from bacteria to Bactrian camels, including our own species.


A further ‘ring’ is the thin biosphere of air, water and soil clinging to the  surface of this uniquely habitable planet within which any human economy can exist. It is two centuries of ever-rising quantities of non-living substances, whether mined minerals, burned fossil-fuels or manufactured chemicals, then their disposal into the fragile living ‘doughnut’ which is the cause of our crisis.

 

Finally there is is the missed opportunity of using the constraints of the doughnut to illustrate a ‘ring’ which would solve the crisis; the circular economy.  This is based on the thoughtful use of resources and an intelligent grasp of the human values needed to live a fulfilled life within our planet’s shelter of ‘living’ space. Compared with the nurturing values of the word’s original meaning of ‘household’ and the grown-up personal restraint idealised by philosophers throughout history, today’s economic creed and advertising are deliberately designed to boost toddler-like short-term selfishness and the hedonistic purchase of emotional ‘crutches’.       

 

It has primarily been the post-war generation which has responded to the ready availability of cheap oil and gas and the discovery of plastics with the mass-consumption responsible for today’s ecological crisis. 90% of the fossil-carbon released in the whole of human history has been emitted since 1990 as countries such as China have joined the global consumer economy.  

 

The post-war ‘boomers’ assumed that their own children would continue or even exceed their own lifestyles of debt-free access to university and healthcare, good pensions and affordable housing and cars; all achieved through the fantasy of limitless economic growth.  In reality, their  ‘enjoyment’ of a brief glut of cheap oil, is in fact undermining their children’s future.

 

Today, amidst a scrabble for the ‘fracked’ dregs of oil and gas, nuclear, intermittent wind and solar power and costly batteries, access to the cheap energy necessary to maintain such ‘growth’ is dwindling. Angry political ramifications result as hundreds of millions find their expectations thwarted. Politicians compete with promises of rekindling earlier levels of growth while callously passing blame onto ‘the other’.  Together with economists, they cannot admit that the post-war era of rising crop yields and cheap transport - the result of short-lived oil and gas-fields - provided the cheap food, energy and the growth of wider public and private expenditure which were mistakenly assumed to be the natural, logical result of adopting classical economics.

 

In today’s new world, constrained by the planet’s ability to provide resources and absorb their resulting pollution, classical economics have led us into a ‘zero-sum game’.  As the Oxfam report reveals, this is producing a few $billionaire ‘winners' and a large number of often angry ‘losers’. 

 

This book is very well written and provides excellent, logical arguments. Its unanswered challenge, however, is how to put its only-too-rational ambition for a viable human future into practice.  Its broad-brush, mildly academic approach fails to suggest how the necessary revolution in social and political values can or will be achieved.  It might be too big a question, but the average reader will surely want to be given some idea of what standard of living will be both reasonable and possible and what population level a ‘doughnut’ economy could support. 

 

Raworth the renegade economist  essentially demands the complete upending of the suicidal aspirations of post-war consumer society which we now know are destroying humanity’s future. What the book is surely calling for is a new definition of ‘progress’, but it never defines it.  Having very clearly explained the problem, I hope that Raworth is now working on a book which will show us in more detail how to move to the sustainable, doughnut economy we so urgently need.


- The Eco-Worrier

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