INTERVIEW WITH Kate Raworth
(Author of ‘Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist’)
“IS THE ‘DOUGHNUT’ OUR COMPASS IN THE 21st CENTURY?"
When one first meets the expression Doughnut Economics, he may think of a joke, or perhaps an economic model for managing the supply or the purchase of food. It is not the case! The Doughnut Economic Model proposed by Kate Raworth is a very deep, at the same time philosophic and pragmatic, approach towards the matter of sustainable economy. Thinking that there are 2 lines, 2 limits, 2 boundaries, that, when overpassed, could trigger a serious of nefarious things for human development is very valuable and of practical use for citizens, academics, firms and institutions. Kate Raworth, in her book Doughnut Economics, Seven Ways to Think Like a 21st Century Economis, explains clearly the basics for sustainable development.
In this interview (source: the magazine ‘Renewable Matter’) Kate Raworth answered to some key questions on her book.
Kate Raworth: Visiting Research Associate at Oxford University’s Environmental Change Institute (where she teaches on the Masters in Environmental Change and Management), Kate Raworth is a no-nonsense thinker. Author of one of the most important book of this century, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Kate Raworth has been working on a way to deconstruct neo-classical economy for over two decades, working with the NGO Oxfam, researching on inequality, and authoring the Human Development Report for UNDP. And the doughnut has become the icon of a new economical paradigm.
INTERVIEW - (August 2017)
This document report part of the interview made by Emanuele Bompan for the magazine ‘Renewable Matter’ in August 2017
Thanks go to Marco Moro - Editor-in-chief ‘Edizioni Ambiente’ for sharing with us the interview.
Subject: Doughnut Economy
- We must live within the planet boundaries: economists in the century before us didn’t recognize the planetary life system on which we depend. To achieve this simply, we need a new economy that fits.
- We need businesses with living purpose: pursuing life, restoring the environment. The ownership needs to be rooted, perhaps among the employers or among shareholders who have a long term commitment to the purpose of the company.
- The goal for the government is to create an economy that is regenerative by design, works in time with the living world, and it’s distributive, so it shares the value created. First, absolute, priority is to transform the energy system from fossil fuels to renewable energies.
- The 21st century is going to be governed by natural and social metrics.
- 20th century’s industry was based on a linear degenerative design… A take-make-use-lose system. We need to bend this linear economy around, so instead of using new resources we have to use them again and again.
- There is a lot of interest around the world. In Stockholm the public administration is creating a brand new neighbourhood that will be called the Doughnut District.
Question 1: How did you decide to use the doughnut to represent a new model of equilibrium at global scale?
I know it sounds crazy, but I sat down to try to draw a picture of human wellbeing and the 21st century and it came out looking like a doughnut. I suggest readers take a look at the graphic. In the hole you can represent the shortfall of social foundation, from food and health care, water, education, housing. Whoever is out of the hole can live a life of dignity, rights and opportunity. At the same time we can’t go out of the doughnut, because there we are putting so much pressure on the planet that we begin to cross the planetary boundary. We cause climate change, ocean acidification, and then we threaten the very living system that sustains us.
So, the 21st century’s goal has to get everybody into this doughnut itself. But today we are far outside of it on both sides (social and ecological). We must live within the planet boundaries: economists in the century before us didn’t recognize the planetary life system on which we depend. To achieve this simply, we need a new economy that fits
Question 2: It is time to deconstruct the neoclassical and neoliberal economic models?
There’s a huge responsibility that resides in the economists that tell us ‘who we are.’ This shapes who we become. Not only do we have to rethink the story of what the economy is. In mainstream neoclassical economics if I say to a professor ‘show me the biggest picture you have of the economy’ probably the biggest picture they can show is the Circular Flux diagram, drawn 70 years ago, by Paul Samuelson (his book Economics: An Introductory Analysis, first published in 1948, has influenced most of the macro-economics students in the world, author’s note). But it only shows what is monetized, it only shows the flows, it makes absolutely no reference to the living world. There are no references to materials and waste, it makes no reference to the ordinary people, the place where the people live.
We have been running our economy by a story that is full of blank spaces and silences, on some of today most important issues. We need to redo the diagram and we need to write new stories to tell ourselves an image of the world we actually want to create and a model of ourselves that is true to the full possibility of the human nature.
Question 3: Enterprises have always followed the bottom-line rule. How will the 21st century’s enterprises look like?
Enterprises according to the old model…
There are three core criteria that shape an enterprise: a) its purpose, b) its ownership and 3) its financing. And they are often tightly connected. In the 20th century the purpose of enterprises was to maximize shareholders’ return and maximise profit. ‘The business of business is business,’ was the mantra. The ownership was offered by shareholders, who never even step inside the businesses’ doors and the finance was managed through distant markets and always pursuing the highest rate of return. People only saw flow charts, never met the employees, maybe not even saw the product. This has helped lead us to where we are, pushing the environment and communities to the side, calling them ‘externalities.’ When you call something or someone an externality, you have already told how unimportant they are.
…vs enterprises according to doughnut economy
We need businesses with living purpose: pursuing life, restoring the environment. The ownership needs to be rooted, perhaps among the employers or among shareholders who have a long term commitment to the purpose of the company. Finance needs to be committed not just to ‘return on investments,’ but also to the social and environmental value that this enterprise aims to create. So the question at the heart of 21th century’s business is how many benefits can I lure into it, so that we can give some away. It’s a question of generosity: How can I help to tackle a social or environmental problem using my enterprise?
Question 4: Neoclassical models have been used by States to shape their political economy. How can the State transform its development model and measurements?
Let’s keep it simple: the goal for the government is to create an economy that is regenerative by design, works in time with the living world, and it’s distributive, so it shares the value created.
First, absolute, priority is to transform the energy system from fossil fuels to renewable energies. It would reduce energy costs, it would create jobs, and it would create innovation and a distributive energy system. Than it should change the full basis of taxation, stop taxing labour employers, don’t penalize companies for hiring people, tax the use of resources, and tax the use of virgin materials. This would transform the incentive for business, they would employ people and they would be efficient around the use of resources. Encourage the creation of employers’ enterprise, cooperatives, encourage householders to put their own solar panel in their roofs, encourage the use of the creative commons. We need metric to measure regenerative potential, cutting carbon emissions; we need metrics to show that the value is being redistribute among people. I believe it fundamentally needs to transform the finance, which has led us into a degenerative process.
Question 5: What types of economic metrics is needed for the doughnut economy?
The measures we need are both in terms of the state of play where we are today, which is showed in the doughnut. The 21st century is going to be governed by natural and social metrics. Now we all understand water footprints, we can talk about carbon footprints. 20 years ago nobody would have understood what we are talking about, but today we are pushing forward natural and social metrics. It’s an exciting task for those who are creating the metrics to come up with new KPIs and national big data systems. We need to measure whether an economy is regenerative by design, so we need metrics that reflects the extent to which a business is truly part of the circular economy and whether it is distributive. I think the more we put attention here, the more we see the true sources of wellbeing. We will then realize that GDP, which is mainly the value of goods and services sold in a year, may go up, may sometimes go down in response to the shifts within regenerative and distributive economy, but will no longer be the main and only metrics.
Question 6: GPD doesn’t measure inequality, which has increased everywhere since the beginning of the century. Do you think wealth distribution has to become a central political issue?
The interaction between how we distribute wealth and how we create a regenerative economy has a lot of trade-offs and tensions but also co-benefits that need to be explored. I believe it’s essential to redistribute incomes so that people who can’t afford housing, food, health care, have the access to all of these things; we need to assure that business models create circular supply chains. The question you ask is a complex one, with no easy answer. This is precisely where 21th century’s economists should focus their attention, to look for the synergies that potentially exist between redistributing wealth and creating a regenerative economy.
Question 7: In your opinion what should a real circular economy be?
20th century’s industry was based on a linear degenerative design. Where we took earth’s materials, we made them into stuff we want, we use them for a while and then we throw them away. A take-make-use-lose system. We need to bend this linear economy around, so instead of using new resources we have to use them again and again. In two separate strains, the biological materials, that naturally regenerative themselves – this is what earth does – and a similar one for technical materials, like plastics, metals, and materials. We need to restore them, repair them, reuse them and lastly ultimately recycle them. So this is the essence of a circular economy and to have it functioning truly as an ecosystem within an economy it needs to be open-sources and open-materials based. In this way it doesn’t try to stay just within the limits of one company but it becomes an industry-wide system so that many companies are engaged together.
Question 8: Who will adopt the Doughnut model?
There is a lot of interest around the world. In Stockholm the public administration is creating a brand new neighbourhood that will be called the Doughnut District. Companies have spontaneously endorsed the model. They are flattered by the power of the image.
Question 9: But to subvert strong eradicated beliefs you probably need to shape a new economy school, like the Chicago Boys did in the Seventies.
The Doughnut is being taught in development studies, development economics, geography, architecture, and political science. The only ones that are resisting are the economists.
If the Faculty of Economics continues to use models that every other disciplines already knows are outdated – because we saw what happened in the financial crash – either they make themselves irrelevant with their models or they jump into a new vision. We need to bridge the new economists with the mainstream ones. I am trying to do that at the Cambridge Institute for Sustainability Leadership aimed at executives of world leading companies. But it is a long winding road to change the economists’ world.
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