March 7, 2018 / 3:16 PM / in 9 months

Breakingviews - Hadas: Doughnut economics needs a new flavour

LONDON (Reuters Breakingviews) - The idea behind “Doughnut Economics” is a good one. But it will have to become much better if it is to do more than pander to a limited group’s ideological sweet-tooth.

Residents of Mabella slum gather at the area?s only water pipe in Sierra Leone's capital Freetown February 23, 2008. Visiting squalid urban slums and giving vaccinations at a crowded rural clinic, Britain's aid minister called on Saturday for World Bank reform and a sharper international focus to fight poverty in Africa. REUTERS/Katrina Manson

The image was created by Kate Raworth, a senior visiting research associate at Oxford University’s Environmental Change Institute. Her book explaining the concept, “Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist”, has just come out in paperback in the United Kingdom.

The doughnut works like this: the economy is supposed to provide everyone on the planet with dignified lives and not too much inequality. The hole at the centre is the space where those goods are lacking – the goal is to keep it empty. Earth-destroying environmental exploitation is on the doughnut’s outside, which should also be empty space. A health economy stays inside the ring.

Why a ring? Basically, because everything is connected. This can prove confusing, though. Consider the aboriginal Australians. They were desperately poor but slash-and-burn agriculture still wrecked their environment. In other words, they were both inside and outside the doughnut. A Venn diagram would be more realistic. Still, the visual confusion does not invalidate the book’s basic approach.

Raworth starts with a robust attack on conventional economic assumptions. GDP growth should not be the goal of all economic policy now and forever. Individualistic happiness-seeking does not promote the common good. Free markets are not a good standard economic arrangement. And so on, through the conventional misconceptions on finance, trade, the environment and incompetent governments.

The slap-down is persuasive, but the target is an easy one. More impressive are Raworth’s fairly concrete suggestions for improvement. Those are the “seven ways” to think about the economy mentioned in the subtitle: remember that the economy has many goals; ensure that society, the environment, finance, and the rest all work together; think of the economy as a complex dynamic system; actively support greater economic equality; respect the limits of the environment; and, finally, neither crave nor shun GDP growth.

Those ways of thinking are all pretty much outside the current economic mainstream. They are also all sensible. Raworth presents them clearly, showing how they reinforce each other. The list is a good starting point for a much needed debate about economic policy priorities. Or perhaps for many debates, as priorities probably vary with wealth and culture.

This excellence makes the serious shortcomings of “Doughnut Economics” more frustrating. Readers from the ecological left wing of the political spectrum may not notice, but everyone else will find that this doughnut tastes a bit off. The problem is another sort of closed loop.

Raworth is stuck inside her intellectual clan. Like too many groups in the fragmented public square, these anti-capitalists rarely talk to outsiders. “Doughnut Economics” is sadly typical, presenting many doubtful tropes as obvious truths. The poor are in serious trouble, small co-operative ventures are generally wonderful, big business is almost always wicked, the evil neoliberal order is in control, inequality is rising fast, the environment is being trashed beyond repair, and so forth.

True believers may be happy enough to draw on sources such as the 1972 study, “Limits to Growth”. This neo-Malthusian computer simulation predicted an imminent environmental crisis. The book still has its fans, but impartial observers have mostly been sceptical of its technique and conclusion. To present it without caveats is to encourage them to stop reading.

Raworth would have done well to take a stroll across Oxford and chat with the team running the Our World in Data website. There is much to learn from its newly published series of charts on the United Nations’ Sustainable Development Goals. They confirm that there is much good news. Globally, health is improving and lives are longer. Education, communication and basic services are spreading. In rich countries, pollution is way down.

There are still numerous severe problems, both of poverty and environmental degradation, but Raworth’s case would have been more persuasive to non-believers with an appreciation of how much the economic outlook has sweetened.

An acceptance of improvements does not make the conventional economic approach right. On the contrary, a good case can be made that, in practice, elements of Raworth’s doughnut-thinking have already contributed more to development than free market competition, and that more such thinking would accelerate the gains.

The real world is too messy and interwoven to be going in single direction. Both the eco-left bad-news model and the neoliberal good-news one are too simple to be believable. The doughnut can help reshape the world, but only if it does not go stale.


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