Credit: Fahim Mohammed on Unsplash
Not actually that kind of doughnut, [sorry].
TLDR: Economic growth until recently has relied on being able to use ‘natural capital’ from the Earth at any cost, without taking in the negative externalities created. The economist Dr Kate Raworth has had enough, and come up with a ‘21st Century Compass’ which still enables GDP growth but within ecological limits.
🌎 What problem is the Doughnut Economic model solving for?
The world is made up of ‘natural capital’ such as plants, animals, soils, air, water and minerals, which humans use to enable our lives. These are usually kept in balance through stocks and flows, but humans have now pushed them to their limits.
As Raworth notes, between 1950 and 2010, the global population almost trebled in size, and real World GDP increased sevenfold. This made us consume earth’s resources at a startling rate: freshwater use more than trebled, energy use increased fourfold, and fertiliser use rose over tenfold. We have over-harvested resources we have, from depleting fish stocks and releasing more carbon dioxide than the atmospheric and ocean carbon sinks can absorb.
We now know this pattern cannot last in the long-run, so Raworth’s model is to help us consciously live within these parameters, and switch from extracting maximum financial value to an outcome that generates maximum benefits.
🍩 So what is the Doughnut Economic Model?
It is a model shaped, unsurprisingly, like a doughnut.
The inner layer highlights the minimum elements that humans need to live and thrive, and where a lack of these reduces the ability to have ‘social foundations’.
Energy
Water
Food
Health
Education
Income & work
Peace & justice
Political voice
Social equity
Gender equality
Housing
Networks
On the other side of the doughnut is the ‘ecological ceiling’ of natural resources, and within which we must stay to enable the Earth’s ability to regulate its systems. Outside of these boundaries we face calamitous problems including:
Climate change
Ocean acidification
Chemical pollution
Nitrogen & phosphorus loading
Freshwater withdrawals
Land conversion
Biodiversity loss
Air pollution
Ozone layer depletion
The outcome is a clear green zone where we can live on the planet for the long-run.
Source: Kate Raworth
And how are we doing in practice?
Not well. Raworth’s argument is that today our economy is ‘divisive and degenerative by default’, resulting in humans pushing almost every ecological boundary.
In simplest terms, wealth division is unequal globally. Economic models today have resulted in wildly unequal distributions of wealth: in their annual Global Wealth Report assessing 5.2 billion people, Credit Suisse notes that in 2021 the bottom 50% of adults accounted for less than 1% of total global wealth. In contrast, the richest decile (top 10% of adults) own 82% of global wealth.
Economic models are also degenerative: most effectively summed up in the concept of the Tragedy of the Commons, where when many people have access to a public good, each will act in their own interest and ultimately deplete it. This can be used when thinking about most natural resources from the atmosphere, to freshwater flows, to fish stocks, and even coffee. The negative impact of these depletions has not been factored into the overall measure of success.
Until now.
So how do we create new economic models to live within this floor and ceiling?
Raworth highlights the need for a fresh approach to economic models for cities and nations: designing ones which promote distribution and regeneration.
There are five primary areas which can immediately be worked on to address these:
🌿 Who controls land: redistributing land ownership is historically one of the most direct ways to reduce national inequalities, and land security helps enable longer-term planning for livelihoods e.g. farmers able to take out loans against their land value
🏦 Monetary redesign (how money is created): switching from the status quo where commercial banks create money through loans which fuel credit bubbles, to a central-bank managed model which separates credit and money, and encourages responsible spending. This could also provide new funding streams for long-term transformational projects like ‘green’ and social infrastructure.
👥 Enterprise: Employee-owner companies and co-operatives help distribute benefits, in contrast to organisations with a dominant owner.
🦾 Technology: Digital progress is creating a revolution in capital ownership, as anyone can create their own company, or even energy system. Regulation will be needed to break up technological monopolies, and to tax industries that move to using machines so as to redistribute wealth to create new jobs in industries which cannot be replaced by technology.
🧠 Knowledge: Encouraging more innovation and putting more funding into projects which can become open source, to have wider social benefits.
Who is doing this successfully?
🇳🇱 The City of Amsterdam, who have ambitions to bring all 872,000 residents inside the doughnut. Since 2019, they have introduced multiple initiatives including:
‘Materials passports’ to encourage sustainability and circular use of materials for contractors in all city-owned buildings
During the pandemic, the city collected 3,500 old and broken laptops from residents, hired a firm to refurbish them and distributed them to those in need, saving on e-waste and raw materials.
They are developing a future neighborhood called Beach Island, which has been built by materials carried via low-emission fuel boats, laid foundations using processes that don’t hurt local wildlife or expose future residents to sea-level rise, and produces zero emissions and prioritizes social housing.
Running a supermarket called True Price which adds small costs to their produce to represent the impact they have, for example €0.06 extra per kilo for their carbon footprint, €0.05 for the toll the farming takes on the land, and €0.04 to fairly pay workers.
Collecting old denim and jeans and creating stores to fix them, rather than buying new ones
You can read an extensive case study about the plans for Amsterdam here.
Other cities including Melbourne (Australia), Copenhagen (Denmark), Dunedin (New Zealand), Nanaimo (Canada) and Portland (USA) are all investigating using this framework to plan for their future needs. And citizen-led groups focused on bottom-up doughnut policies now exist in São Paulo, Berlin, Kuala Lumpur and California.
Despite only being around as a framework for the past five years, the growing momentum shows this may indeed become the ‘21st Century Compass’ as nations and corporates work to meet their ambitious climate goals.
For more ideas visit the Doughnut Economics Action Lab.