Why it's time for Doughnut Economics | Kate Raworth | TEDxAthens

This talk was given at a local TEDx event, produced independently of the TED Conferences.
Economic theory is centuries out of date and that's a disaster for tackling the 21st century's challenges of climate change, poverty, and extreme inequality. Kate Raworth flips economic thinking on its head to give a crash course in alternative economics, explaining in three minutes what they'll never teach you in three years of a degree. Find out why it's time to get into the doughnut...

Kate Raworth is an economist focused on the rewriting of economics to make it fit for addressing this century’s realities and challenges.
Kate blogs about Doughnut Economics at www.kateraworth.com and tweets @KateRaworth.

If you wanted to change the world,

what language would you learn to speak?

That's the question I asked myself
as a teenager, in the 1980s,

when the TV news showed
pot-bellied children

born into Ethiopia's famine

and a hole opening up in the ozone layer.

And I wanted to be
part of changing that world,

and I thought I knew the language
I needed to speak.

I needed the mother tongue
of public policy.

And so I went to University
to study Economics.

But the economic theories on offer
didn't give me the words I was looking for

because they sidelined or brushed aside

or ignored most of the issues
that I actually cared about.

And if you've never studied economics,
now's your chance.

Because I'm going to give you
a crash course with a twist.

I'm going to show you in three minutes

what they never tell you
in three years of a degree.

So if you would please
open your text books to page 23,

and study with me
the circular flow of goods and money.

And as you can see in this diagram,

households provide their labour
and their capital to firms

and in return they get
wages and dividends.

And with that income,
they spend it on goods and services,

and so, the resources go round and round
and so does the money.

It's simple and it's important

because this diagram is at the heart
of macro-economic analysis

and is the basis for measuring
economic growth.

It's so simple that it goes right into
the back of the head of every economist,

so quietly, that you don't even
realise that it's there.

But it's there, and that's a problem

because this diagram
is fundamentally flawed.

Now I can add in a financial sector,

bringing with it wild speculation

and the magical creation of money.

And we could watch it wreak havoc
in the real economy.

We could add in a government sector,

and talk about taxes and austerity

and the damage that you can do.

But even without adding these two sectors,

there are four fundamental flaws
with this diagram.

First, the economy is not floating
on a white background.

It's deeply embedded in the environment,

drawing in matter and energy

and spewing out waste
and pollution at every juncture.

And the fundamental flow
is not money going round and round,

it's energy coming in from the Sun,

hitting Earth, fuelling life,

and some of it bouncing back out
into the universe.

And it's up to our ingenuity
to capture that energy and put it to use.

Second, anybody who gets
kids up in the morning and off to school,

knows that not all work is paid.

The unpaid caring
work of parents raising kids,

the next generation of workers,

is at the heart of family life,

but it's almost completely ignored
by mainstream economics.

And this woman has a bucket on her head,

because across Sub Saharan Africa
and South Asia

women carry their body weight
in water, in fuel, in firewood,

with a child on their backs,
all for no pay.

And if you ignore that,

you're ignoring the work
of millions of the world's women

which keeps their families alive everyday.

Third,

there's a lot of value that we create
that doesn't get monetized.

We love to cooperate and collaborate
with no money changing hands.

If you baby-sit for me tonight,
I'll feed your cat at the weekend.

Does that sound trivial? OK.

How about, we go online

and create the world's biggest
Encyclopaedia, ever for free?

How about, we deliver world-class
education to any student, in any country,

for free, online?

If you ignore the power
of the collaborative commons,

you're ignoring one of the most dynamic
and disruptive parts of modern economy.

And fourthly,

those happy households
getting wages and dividends,

hasn't really turned out like that.

As we know,

in most high-income countries
for some decades now,

ordinary households
have seen their wages stagnate,

while just the tiny few have got
high wages and high dividends and rents.

In fact, these households are worlds apart

and so too are the firms

with a gulf between local business
and global corporations.

And hidden behind this flow of income
is the accumulation of wealth,

and that wealth rapidly turns
into power over the economy

and who it's run for.

So if you take these four critiques
to your typical Economics professor,

what will they say?

"Hmm, environmental externalities...

Well spotted!

You can study those in an optional paper
in the second year... if you like.

Unpaid care economy?

That sounds a bit feminist.

And as for wealth and power,

I think you actually want
the politics department?"

I mean, all these critiques,
they're interesting, yes,

but they're distracting us
from the real concepts we have to master

which are utility
and efficiency and growth.

And the complexities,
they get in the way of the modeling

and the maths that economists love to do,

because it turns
economists into scientists.

So, can we just use this diagram anyway?"

Well that's why I threw away
my Economics text books

and I walked away from Economics

and I immersed myself
in real-world challenges.

I spent three years working
in the villages of Zanzibar

with entrepreneurs
who had to earn their living

with nothing but their wits,
the forest and their community.

I spent four years
at the United Nations in New York

and I witnessed the bare-faced power
that would stall global negotiations.

And then I became a mother of twins,

and I spent a year knee-deep in nappies,

immersed in the bare bumm
economy of raising infants.

And I got gender like never before.

And then I worked for Oxfam for a decade,

campaigning to tackle climate change

and I met farmers in Southern Africa

whose harvest had just turned to bare soil
because the rains had never come.

And from all of this
I realised the obvious,

that you can't walk away from economics.

Because it's all around us,

it's the mentality
that our societies are run by.

So I decided to start walking back
towards economics,

but to flip it on its head.

What if economics didn't start with money,

but started with human well-being?

And there are two sides to that story.

On the one hand, our well-being
depends on each one of us

having the resources we need
to meet our human rights

to food, water, health,
education, housing, energy.

And on the other hand,

our well-being also depends
on this lady, our planetary home.

For the last twelve thousand years,

the conditions on this planet
have been incredibly benevolent

to human well-being.

We've had a stable climate,
plentiful water, clean air,

bountiful biodiversity
and a protective ozone layer.

And we'd be crazy to put so much pressure

on these life-support systems
that the planet gives us

that we actually kick ourselves
out of the very sweet spot

that we know as home.

I wanted to bring these two ideas together

and draw a new picture for economics,

the kind of picture I did want to have
in the back of my head.

And I apologise,
but it looks like junk food,

and I apologize
but it just looks like a doughnut.

What we see at the centre
of that picture is the space

where humanity is putting
no pressure on the planet.

But with seven billion of us alive today

that would be a place of death
and destitution for millions.

We can't meet our human rights
without using the planet's resources.

We need to get everybody alive

over that inner ring of human well-being,
the social foundation,

so that we each have the resources
to meet our human rights.

But we must stay below the outer ring,

the environmental sealing
of human well-being,

and that's defined
by the nine planetary boundaries

that have been put forward
by leading Earth system scientists,

including Johan Rockström
and Will Steffen.

So we must protect
the life-support systems of this planet,

making sure we don't put
so many greenhouse gases in the atmosphere

that we cause climate change
or massive deforestation

or chemical pollution.

So this doughnut,

you can think of it as a compass
for humanity in the 21st Century.

How do we ensure
that we all have the resources

to meet our human rights,

but within the means of the planet?

And that's the challenge we face,

getting everybody out of poverty

and coming back within what
this one planet can provide us.

And it changes our idea of progress.

For sixty years now, economics has told us

that we can measure progress
with economic growth.

And that what it looks like is a line,

ever rising as the global economy grows.

But the doughnut
tells us something different.

It tells us that progress
looks like balance

between using resources to meet our rights

and protecting the planet's
life-support systems.

And if it's that balance that matters

then the fundamental question is where
are we now in relation to that balance.

Well, the answer is not
for the faint-hearted.

Because as you may well guess,

we're outside of those
boundaries on both sides.

Millions of people live
below that social foundation.

One person in eight
doesn't have enough food to eat,

one person in five
has no access to electricity,

and more than one in five
lives off less than $1.25 a day.

So we've got a long way to go

to getting everybody out
of that space of deprivation.

And yet we've already pushed ourselves
over planetary boundaries.

According to the Earth system scientists

we've gone over on climate change,

we've gone massively over
on the amount of nitrogen

that we're using in fertilizers

and over on biodiversity loss.

And if you look at those
two pictures together,

it's a pretty strong indictment
of the economic development path

we've followed to date.

And we have to figure out how,

for the first time in human history,

to get all people out of poverty

at the same time as bringing ourselves
back within those planetary boundaries.

But imagine if we could be
the turnaround generation

that actually started putting humanity
back on track into that space.

That would be
the achievement of the century.

Imagine if each of us put
our own lives on this doughnut table

and asked ourselves,

how does the way that I shop,
eat, travel, earn a living, vote,

volunteer, bank, affect humanity's
ability to come into the doughnut?

What if every company,

when it sat down to do
its business strategy,

sat down around this doughnut table,

and said, "Is our brand a doughnut brand?

Is our core business model
helping to bring humanity

into that safe and just space
between planetary and social boundaries

or at the very least, not profiting
by pushing people out of it?"

And what if the finance ministers
of the most powerful countries

met and negotiated around
a doughnut negotiating table?

I know this looks crazy
but it's actually completely sane.

Those finance ministers
should be asking themselves,

how can we create
a global financial system

that doesn't profit by undermining
and destabilizing human well-being,

but actually serves society
and the economy and our common interest?

And there's a lot of common interest

that we need to work on
between now and 2050.

We've got a growing global population,

we've got three billion more people

expected to join
the global middle class by 2030,

we know we're facing impacts
of climate change, of water stress.

We need a generation
of policy makers coming through

who are really equipped
to take on this challenge.

Αnd that's why I'm really worried
about the economics students.

Because they're still having this diagram
put in the back of their heads.

So if you want to help
the next generation of policy makers

have a smarter language
and a better mindset,

I invite you to join a guerrilla campaign
to re-write economics.

And all you need is a pencil.

So here's what you do.

You sneak into the room
of every economics student that you know,

and into the study
of every economics professor

and you go over to the bookshelf

and you take down that textbook

and you open it on the page
of the circular flow of goods and money.

And with your pencil,
you draw a circle around the economy

and you label it 'the biosphere'.

And you draw in the unpaid care economy,

you draw in the collaborative commons

and you divide those households
and those firms

into the one percent
and the ninety-nine percent.

And with those few strokes of your pen,

you will have transformed the mindset
of the coming generation of policy makers.

You want to go a step further?

Stick a doughnut picture
in their textbook.

And now we can really start over.

You want to be an economist?

Fantastic!

Leave money aside for a moment,

let's talk about human well-being
and what it takes to achieve that,

that each of us has human rights,
and that takes resources

and let's talk about the planet

and the life-support systems
that keep us alive.

And once you've got
those fundamental values in place,

now your task as an economist
is a crucial one.

We need you to design the markets,
the regulations, the financial system,

the public services
that will help bring humanity

into the safe and just space
between planetary and social boundaries.

Imagine what a transformation
that would be.

Now, you might be thinking,

this planetary scale,
isn't this too big for economics?

Not at all.

This is a scale whose time is come.

Back in Ancient Greece,

Xenophon coined the term 'economics'
to mean household management.

And he was literally talking about
a household, a single household.

But later in his life, he raised his sight
to the next level up, the City-State,

and he recommended policies
for the economy of Athens, his home town.

Two thousand years later, in Scotland,

Adam Smith raised our sights
a level again to the Nation-State,

and he asked what makes
the economy of one country thrive

while another is stagnating?

Today's economy is 300 times bigger

than the one that Adam Smith knew

and it's banging into the biosphere
with impacts ricocheting back on us.

If Xenophon and Adam Smith were here,

I think they'd be laughing at us.

They'd say 'Get with the times, folks!

We moved from the household,
to the City-State, to the Nation-State.

You've got to take the next step!

Yours is the era
of the planetary household,

and you need the economic thinking
to go with that!'

And I think that's the most exciting task
for this generation of economists.

What is the economic thinking
for our planetary household?

So I invite you,

if you want to help transform
the next generation of economics

get busy with your pencils.

And if you want to help
every future economist,

offer them a doughnut.

Thank you.

(Applause)