Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist  by Kate Raworth

Chelsea Green Publishing, 320 pp.

By James O’Shea

I covered the economics beat at the Chicago Tribune for years and always wondered whether the economy was designed to employ economists or to employ people.  

I was a kid from a lower middle-class union family and figured the job of the economy was to spread the wealth and spread it fairly. But most of the economists I talked to didn’t see things that way.

Whenever I raised a question about the real purpose of an economy, my schooled sources usually changed the subject to more comfortable terrain: Mumbo jumbo about macro or microeconomic theory, fiscal or monetary policy, productivity or the Laffer Curve, the theory that suggests higher taxes can lead to reduced government revenues, a favorite of those who champion tax cuts.

That’s why really enjoyed reading Kay Raworth’s Doughnut Economics: 7 Ways to Think Like a 21st Century Economist. She not only deals with the core questions I once raised about the economy, but she also slams the equivocating thinking of her economist colleagues and the way they teach others to think.

“The future leaders of 2050, she writes, “are being taught an economic mindset that is rooted in the textbooks of 1950, which in turn are rooted in the theories of 1850. Given the fast-changing nature of the twenty-first century, this is shaping up to be a disaster.”

I am not an economist. I took economics and finance courses in graduate school but learned most of what I know on the job writing about economics and financial skullduggery, talking to economists, asking basic questions and plowing through papers filled with arcane, turgid prose about the trade deficit and balance of payments. Perhaps that’s why I found Raworth’s renegade views and willingness to challenge the economic thinking of her colleagues so refreshing and insightful. 

For starters, Raworth, who teaches economics at Oxford University’s Environmental Change Institute, writes well. “Doughnut Economics” is a fun read full of iconoclastic insights that would make Milton Friedman, the patron saint of the free market, wince

It helps that she also has a good story. Raworth is not one of those tweedy professors who spent her professional life sequestered in the cocoon of academic tenure.

She’s seen the economy from the ground up, logging long hours with barefoot entrepreneurs in Zanzibar; working at the United Nation’s, where she helped draft Human Development reports; and toiling at Oxfam, where she spent a decade helping the global confederation work to end poverty.

She has first-hand experience with the precarious jobs of women in third-world countries who live and work on the razor’s edge of the global supply chain, and she learned to appreciate the challenge of juggling job and family rearing twins.

Indeed, at one point, Raworth says the real-world problems soured her so much on her profession that she was too embarrassed to even call herself an economist. But she gradually realized “I couldn’t simply walk away from economics because it shapes the world we inhabit and its mindset had certainly shaped me.”

So, she decided to launch a campaign to flip economics on its head: “What if we started economics not with its long-established theories but with humanity’s long-term goals and sought out the economic thinking that would enable us to achieve them? I tried to draw a picture of those goals and, ridiculous though it sounds, it came out looking like a doughnut, yes, the American kind with a hole in the middle.”

To flip the dismal science on its head, Raworth started with an insightful and vigorous attack on the North Star of her theoretical colleagues – the Gross Domestic Product, otherwise known as the GDP.

Defined as the market value of all the goods and services produced within a nation’s borders in a year, the GDP has been considered the broadest measure of a nation’s economic progress for more than 70 years. It’s a nation’s economic report card delivered periodically by governments, usually every three months in the U.S.

The Commerce Department’s Bureau of Economic Analysis calculates the figure in the United States and adjusts it up or down every quarter as economists, financiers, politicians, journalists Wall Street and government officials react, usually with gloom or glee. You’ve all probably heard news reports saying the economy improved because the government said GDP rose by 2 percent this year or vice versa. Sometimes it stays the same but it’s always a number that commands widespread attention.

If GDP declines for two consecutive quarters of the year, that’s a no-no, for the economy is considered in a recession, which is formally designated by another group of private economists. Private companies employ legions of economists to watch, analyze and parse the GDP number. It’s considered good when GDP is always growing, not declining. Regardless, though, journalists call even more economists who get their names in the paper or their faces on TV by commenting on it. Are you getting an idea why economists like the GDP?

Raworth says her colleagues’ fixation on this number and other artificial economic measures is used to justify a philosophy that demands continuous growth, generating unprecedented threats to the globe’s environment and extreme inequalities of income and wealth in a world where one percent of the population now owns more wealth than the other 99 percent combined.

“Today,” she writes, “we have economies that need to grow, whether or not they make us thrive; what we need are economies that make us thrive, whether or not they grow.”

And that’s where her doughnut comes in. Raworth created the idea of a “Doughnut Economy” while working for Oxfam in 2011. It is a visual representation designed to guide our thinking about how the economy can be managed to serve humanity in this century.

In the center or the doughnut, or in its hole, are the foundational needs that everyone faces – water, food, health, education, political voice, peace and justice, income and work, energy and so on. On the outer rim of the doughnut are the things that threaten the earth – climate change, ocean acidification, chemical pollution air pollution, biodiversity loss and other ecological threats.  

Between the hole in the doughnut and its outer ring lies the sweet spot, the part of the doughnut that you sink your teeth into or dip on your coffee -- the safe and just space for humanity, the place we all want to be.

Raworth then lists seven ways of thinking about the economy that will help us manage common needs such as water, food, income – the things in the hole of the doughnut – so that humanity lands in the sweet spot rather than drifting past the outer ring – the ecological ceiling -- where phenomena like ozone layer depletion thrives.

One of the seven ways of thinking is to disregard to fixation on continuous GDP growth. “For the 21st Century, a (more sweeping) goal (than statistical growth) is needed: Meeting the human rights of every person within the means of our life-giving planet.”

Raworth has a chapter on alternatives to the slavish attention paid to GDP and on each of the other six ways of thinking that will help us get into the sweet spot. I won’t go into the details here. If you want to know more, buy the book. You won’t be disappointed.

Doughnut Economics is also chock full of interesting observations such as her debunking of Adam Smith’s reputation as the philosophical king of the free market. Smith’s goal for the economy, Raworth writes, wasn’t just to enable people to get enough revenue to support themselves but also to supply the state with resources needed to provide adequate public services, a factor that economist’s acolytes rarely address.  

I don’t buy everything in Raworth’s book by the way. For example, her seven ways of thinking don’t spell out any specific policy prescriptions or institutional fixes. She readily admits the seven strains of thought contain no immediate answers for what to do next and they are not the whole answer. I think she could have at least taken a swing at a few.

But the value of her book lies in the freshness of her broader thinking about the economy, not in any narrow policies or programs.

We live in a data-obsessed world and economy where something like the Gross Domestic Product attains status and value simply because it can be quantified with the data we crave. We also live in a world where climate change is real and will likely inhibit our ability to relentlessly grow our economy without regard to the ecological damage we are doing.

We need renegade thinkers who can jar us from our complacency much more than we need people who can massage policy ideas.

Kate Raworth is not the only outlier among economic thinkers. Economists such as Joseph Stiglitz, a Nobel laureate at Columbia University, wrote a fantastic book that challenged the conventional wisdom when writing about income equality. But Raworth is one of the few who challenges the way the entire profession thinks about itself. And it’s about time someone like her came along.

She makes we want to toss out my old economics books and go out for a doughnut.

James O’Shea is an author and journalist in Chicago.  Prior to returning to Chicago in 2014, he was the Howard R. Marsh Visiting Professor of Journalism at the University of Michigan. A former executive editor of the Los Angeles Times and managing editor of the Chicago Tribune, he is the author of three books, including The Deal From Hell, a non-fiction narrative about the tragedy that sent the Tribune Company, owner of the Los Angeles Times and the Chicago Tribune, into the hands of real estate mogul Sam Zell and bankruptcy court. O’Shea is also a co-founder and former editor of the Chicago News Cooperative, a journalistic start-up that produced Chicago news for its own website and the Midwest edition of The New York Times. Prior to his news management career, O’Shea was a reporter, editor and Washington correspondent for the Chicago Tribune and the Des Moines Register.