Jason Ortego

19 November, 2017 By Mike Dowson

Living in the Doughnut

Column Economy

A few years ago, British economist Kate Raworth came up with a compelling metaphor for a sustainable global economy. She called her model 'doughnut economics'.

Picture a doughnut. It’s round, like a planet, but it has a hole in the middle. The outer boundary is the limit of the planet’s ability to sustain us and absorb our waste. If we exceed that boundary, we eat into the planet’s reserves. We consume our children’s future.

But there is another peril. The inner boundary, surrounding the hole, defines what we need for a happy, healthy life. History, and even parts of the contemporary world, show that when people fall into the hole, especially in large numbers, societies descend into conflict, turmoil and eventual collapse.

Our goal, therefore, is to live within these boundaries––inside the doughnut.

Whatever your politics, if you consider the model for long enough, it will become apparent that these are factors, like gravity and mortality, which we can’t simply wish away.

What would it mean, then, to live inside the doughnut? Would I still have possessions, mobility, technology? Would I still be able to get rich? Or would it be like communism? Or going back to the stone age?

The model doesn’t lay out exactly what happens inside the doughnut. The goal is to look after the earth and its peoples by respecting the boundaries. How we do that is open to consideration. There are, however, certain changes which are unavoidable.

To pick one urgent example, we must reverse net greenhouse gas emissions, and we must do it soon. An unstable and rapidly warming world will make everything else so much more difficult. Climate deniers don’t need to be proven wrong. They need a quick course in risk management. In any case, the age of cheap fossil fuels is ending. Inevitably, we will transition to other energy sources.

That will be easier if we start now, while we still have time for a smooth transition. In the West, we can help further by reducing our per capita energy needs.

Happily, it’s possible to keep people out of the hole without huge amounts of carbon pollution. Most of the world’s people survive on very little energy, and could improve their living standards today with renewables.

The same is true of other imposts on the capacity of the earth. We must stop deforestation, soil depletion and plastic pollution while we can still mitigate their worst effects. And we can’t keep indiscriminately producing more people, unless we don’t mind many of them dying prematurely. We need to be sensible enough to change before we run out of life support.

There’s no need to feel glum about the end of reckless consumption. Researchers Daniel Kahneman and Angus Deaton showed it doesn’t make us happy anyway. Or healthy. The transition to better ways of fuelling our economies would bring other benefits. It would create new jobs in the short term. And that means more people with money to spend. Factoring in the full life cycle impact of our products and services to the prices we pay for them would encourage that spending towards less destructive ends.

But if there’s a long-term loser, it’s capitalism. There may still be room for it, but as the basis of a whole economy, capitalism isn’t compatible with doughnut economics. And the reason is growth.

I once stood on the deck of a boat, admiring the pristine, ancient forest that hugs the Gordon River in Tasmania, while I listened to a conversation between two wealthy women.

“That’s the trouble with Tasmania,” one of them said. “Too many trees.”

Somehow, humans have acquired the idea that the earth and its peoples are ‘resources’. It’s common even in well-regulated countries, where capitalism has a mostly respectable face. The earth and its peoples are like Little Red Riding Hood. Grandma’s big, modern house is impressive. And Grandma herself seems friendly. But she’s really the wolf in disguise.

Capitalism is not purposed to the preservation of the earth, nor to the betterment of humankind. It’s designed to help the rich get richer. If it does more for ordinary people than feudalism, that’s because it depends on markets to create demand for goods and services, and the markets which do that are ordinary people with money.

Elected governments, even in more competitively individualistic countries like the US, have nurtured capitalism by moderating its excesses and spreading its rewards, using regulation, progressive taxation and social services. For centuries, this combination has bred people with a stake in the system and money to spend. But all that has depended on growth.

If we’re going to turn investors into millionaires and millionaires into billionaires, we must continually increase the amount of surplus that can be harvested. This is what fills the tax havens and bloats management salaries, leaving a trickle for wages and government programs to distribute to the ordinary people who produce it.

Now suppose we put a ceiling on extraction from the earth to protect it. Where is the expanding wealth of the rich going to come from? My, what big teeth you have, Grandma.

One night, at a dinner party, I suggested that it isn’t responsible to cut down old growth forest in Tasmania and sell it off as woodchips for a few jobs and barely any tax revenue.

The man opposite me wore a business suit. “What are you,” he asked, “a communist?”

Capitalists have been controlling the messages we receive for a long time, through media influence and ownership, business schools, workplace cultures and politics, and other, less visible means. Many people now believe that if they weren’t building Warren Buffet’s share portfolio, they would be toiling in Joe Stalin’s gulag, or on Mao’s ‘re-education’ farm.

The supposed contest between corporate capitalism and state socialism is a ruse. These systems are really two sides of a coin. Both depend on large, centralised, hierarchical, top-down bureaucracies. And in both, benefits can either be widely distributed, or captured by a few. None of the developed nations is wholly one or the other. They all have both to varying degrees.

But there are other options. Consider the platform cooperative. Most people know it from companies like Uber or Airbnb, but these are the wolf in disguise again. A real platform cooperative doesn’t suck profit out of the community into a tax haven via Silicon Valley. In the case of your true local food, energy, housing or transport co-op, the money stays with local producers and consumers. Cities like London and Barcelona are replacing the foreign predators in just this way. But, like its extractive siblings, the real thing eliminates the costly bureaucracy, by making it easy for people to connect and trade directly.

For acolytes of the genuinely free market, there it is. Like a traditional marketplace, but only a click away. It’s likely we can keep people out of the hole using systems like this. Co-ops are springing up all over the world for housing, energy, food and transportation. In Amsterdam, you can obtain an amazing array of things through co-ops, often using an app on your smartphone to do it.

Then there are businesses run by workers. Virginie Perotin at Leeds University found that labour-managed firms in Western Europe, the United States and Latin America are, on balance, more efficient and productive. Other research has shown them to be more resilient too. When they make a profit, it’s shared among the contributors, who are also the decision-makers. Motivation and commitment come naturally.

Conventional businesses, too, can work well, if they’re part of communities. Capitalists tend to behave better when they live next door, with children in the local school. When businesses grow large, or when the owners are distant, they can easily forget about the rest of us.

Tasmanian forestry towns are not, in my experience, very happy places. How could they be? The whole town lives in service to a giant, extractive industry whose real beneficiaries are yachting or golfing far away. And everyone knows that once the forest is depleted, or the market collapses, or the public mood shifts, their livelihood is gone. Fights break out over rival industries like eco-tourism. Similar patterns occur in remote mining communities and single factory towns.

Large scale enterprise is needed for a nation’s defence, or a rail system or the internet. But we should be careful how much of our everyday lives we surrender to it. And we should be especially wary of privatising public amenities. The wolf’s appetite is never sated. Once he takes over Grandma’s house, he’ll eat his way through the neighbourhood.

Along with profit, the other economic factor driving destructive growth is debt-based money. For every dollar or rouble or yuan that gets created, a bit extra must be returned as interest. And that typically means more work, more consumption, more damage. If we want to live inside the doughnut, we need to remove the interest from new money and loans.

Could we do this? We certainly could. If wealth was taxed, instead of allowed to accumulate, money would get back to work. In the absence of interest, the wealthy would need to lend to preserve it, or invest in something useful. If an enterprise generated a profit, the lender might be entitled to a share of that as well. There’s still room for this old-fashioned kind of capitalism, provided it stays within the doughnut.

And how do we keep it in the doughnut? We must get capital moving into enterprises that help rather than exploit. Government programs can contribute. So can markets, if we price in the social and environmental costs of products and services. But, in many cases, we simply need to stop doing things that explode planetary boundaries, and do more things that protect human well being. Banning plastic bags, for example, like some African countries have, or reducing working hours, so families can spend more time together, as the Scandinavian countries have done.

It won’t be the end of the world. If we accept these constraints, and enforce them in law, capital will complain, but it will quickly find better things to do. The wolf can be domesticated.

Since the 18th century, large scale enterprise, driven by power, prestige and profit, has encroached on more facets of our ordinary lives. It’s in our neighbourhoods, our homes, our thoughts.

Pursuing growth, commercial interests have colonised our minds. Families sit together, in ear-phoned isolation, glued to separate screens. When we need something, even to be listened to, or cared for, increasingly we pay for it. If not to a person, then to a corporation. If not with money, with our attention. We have become a commodity.

What prolonged this insatiable economic model, and blew the doughnut apart, was the continual monetising of human life. As everyday activities were turned into financial transactions, new money had to be created to pay for them. Each transaction had to carry the burden of interest on that money, plus profit for the owner of a business. This required still more work, using up more time, so more everyday activities had to be monetised and outsourced.

The things we simply did for one another, in reciprocity, are now a playground for uncaring investors, or a sinecure for aloof public servants. Our arts, our recreation, even the care of our sick, our elderly and our children. Whenever we monetise something, the wolf picks up the scent.

Mothers don’t nurse infants for profit. Fathers don’t play with their children for a return on investment. Nurses tend to the sick, firefighters rescue people, and communities come together to support one another and to celebrate, not to get rich, but because we’re human. Money still changes hands, but it’s about mutual support rather than personal gain––making sure that the people looking after us are themselves looked after.

If we reclaim human life as a gift to be shared, rather than a race for financial gain, we can return large scale enterprise, both private and public, to where it belongs: supporting human scale communities, instead of extracting from them.

The instinct for cooperation, which made our species so successful, is now enhanced many fold by the capability to connect large numbers of people over any distance.

As we find each other again, we will share stories, ideas, knowledge, expertise and tools. We will discover we don’t each need one of everything, if we have enough between us. By consuming less, we will win back our time, and by spending it on enterprises that protect the earth, take care of each other, and build strength and independence in our communities, we will remember our true nature.

This change will not be directed from above. It needs to be grown from below. As our numbers swell, we will reorient the power of technology and the political system back to the service of human and planetary health. We won’t do this by opposing the existing system, but, as Buckminster Fuller suggested, by building something better that others want to join.

If this sounds like a dream, that means you haven’t connected yet. Because it’s happening. All over the world, millions of people are doing it.

Will you join us?