Doughnut Economics

TIME: 13:00 – 14:00 – Thursday 22nd February 2018
VENUE: The Henry Jackson Society, Millbank Tower
SPEAKER: Kate Raworth
EVENT CHAIR: Nikita Malik


Nikita Malik
Alright let’s begin. I’m delighted to welcome today Kate Raworth, it’s an absolute pleasure to have you here with us today. Kate is an economist whose research focuses on the unique social and ecological challenges of the 21st Century. She’s a senior visiting research associate at Oxford Universities Environmental Change institute and also senior associate of the Cambridge Institute for sustainability and leadership. From 2002-2013 she was a senior researcher at Oxfam before which she worked for the United Nations development programme where she co-authored the UN development report from 1997-2001. Kate has been named by the Guardian as one of the top 10 tweeters on economic transformation and also copies of Kate’s book, Doughnut Economics, are available outside I would recommend everybody buy one I’ve read it it’s fantastic and so I can’t endorse it enough.

So I will begin by asking Kate to please speak with us for about 20 minutes then I’ll open up the floor to questions, I have many questions so please ask your questions first so you get a chance. Please go ahead.

Kate Raworth
Thank you so much it’s a real pleasure to be here with this extraordinary view of London, we can survey the economy or at least one part of it as we have this discussion. So thank you so much to The Henry Jackson Society for inviting me here today, I’m just going to dive in because there is always too much which I want to say so let me jump in and start with this doughnut. Let me begin with a health warning – don’t eat too many doughnuts there not good for us, I want to introduce you to the one doughnut that actually might turn out to be good for us, you’ve got it there on the flyer but here it is. So let me tell you about this doughnut. I drew it first in 2012 and it’s evolved a little bit over time, I find it hard to sit down I might have to jump up.

So there’s a hole in the middle the place where people are falling short on life’s essentials – people don’t have the food, healthcare, education, housing, political voice. Those essentials in life which are agreed internationally that every person has a claim to, to lead a life of dignity and opportunity and community. I have crowdsourced these from the global sustainable development goals so you could say they are the most contemporary statement of what all the world governments have agreed every person has a claim to. So we want nobody left in this hole in the middle of the doughnut we are all getting over that social foundation of wellbeing into this greenspace itself. The stability that’s given us this incredible home sweet home of planet earth.

So in the simplest of terms you could say the 21st Century challenge is to meet the needs of all, no-one left in the hole, within the means of the planet not overshooting the outside. And I would say this offers us a compass for what prosperity means this century, I think it’s a compass we desperately need. But if I’m offering it to you as a compass you will want to know where the needles are pointing. That’s on the back of the flyer and it’s not an easy picture to look at because on every one of these social dimensions globally there are millions or billions of people falling short. Here on food 11% of people do not have enough food to eat every day. So that little red wedge goes 11% towards the centre of the circle, we want to eliminate the red from the middle. On water here, 9% of people don’t have clean water, 1 person in 3 worldwide doesn’t have access to what we call a toilet. But on every one of these dimensions there are people falling short including countries rich and poor and yet we’ve already overshot at least 4 of these planetary boundaries. With climate change excessive nitrogen phosphorus being lost through excessive fertiliser use that leaches out into lakes and rivers and kills off life. Massive biodiversity loss and too much land conversion, we don’t even know where we are globally on air pollution and on chemical pollution.

So this is the state of humanity and our planetary home. And I believe that this is the legacy by which our children’s children will remember us and judge us whether or not we begin to turn this story around and begin to put humanity on track for the first time to meet the needs of all within the needs of the planet. Well many, many things need to happen to make this possible and what delights me is when people contact me and tell me how they’ve picked up this idea and started putting it into practice so I was contacted by some urban designers in Sweden and designing a new suburb of Stockholm there is going to be a new suburb built here, and they contacted me and said well actually we are using the doughnut it is on our table, we are using to think how do we use it to design a new suburb that meets the needs of all the people within the means of that green living space into which were building it.

I discovered that in China when the head of the renewable energy centre looked at China’s renewable energy output talking about how China plans to transition towards a renewable energy future, the second image he shows is the doughnut, alongside a quote from President Xi saying that man must learn to live in harmony with nature. And I’ve worked with some companies or they’ve picked this up themselves and started to have discussions around the strategy table saying how does this vision change who we are as a company and the essence of our operations.

So I’m delighted that people are taking it and using it in all these different fields but for me drawing the doughnut took me back to the roots of my own education which was in economics, 25 years ago I studied economics at university, I wanted to learnt the mother tongue of public policy and was deeply frustrated by what I was taught. I believe we need to change the economic story, the economic conversation we have in this country. We need to change it in parliament and to do that I believe we need to change it in the media and if we’re going to change it in the media I think we need to change what happens in economics departments, what is taught the fundamental concepts because this is where the story of how we all talk about the economy is formed. Whether or not we have studied economics we are bathed in a narrative about what the economy is for.

Paul Samuelson was the father of the economics textbook, in fact his first textbook was written 70 years ago this year, 1948 and he said this fantastic quote – ‘I don’t care who writes a nations laws or crafts or advanced treaties. So long as I can write its economics textbooks.’ The first lick is the privileged one impinging on the beginners [inaudible] at its most impressionable state. Yes, Paul Samuelson thinks your mind is a blank slate and he wants to lick it and the way he actually impresses upon our minds I think is through diagrams, he knew the power of pictures, his textbooks were filled with images.

Let’s think about the images at the heart of economics. The first diagram anyone who has studied economics will remember is supply and demand. To me this is actually a profound moment, first lecture here’s supply and demand as if to say the economy is the market and the market is an equilibrium. I think that’s two misleading statements in one sentence, I don’t think it’s a good place to begin a degree. But that model of equilibrium economics was actually drawn from an analogy with Newtonian physics back in the 1870s economists wanted to show economics was a science as reputable as physics so they based it as an analogy on Newtonian thinking. And we are still living with the consequences of that today, I’m going to come back to it.

What about the biggest picture an economist can show you, I often say show me the biggest picture of the economy you have, it’s Samuelsson’s circular flow diagram. We have the essential market relationship here where households provide labour and capital in return they get wages and profit, they can use that for consumer spending for goods and services. So the goods go round and round and so does the money. And there are some leakages through banks, through government, through trade but it comes back and it is re-injected it’s a closed circular system. This is still the biggest picture that an economics professor can show you of the economy. But the blank spaces in the 21st Century 70 years on, the blank spaces are crushing. It makes absolutely no mention of the living world or the energy and resources, material and matter drawn daily into this economy and spewed out into waste and pollution. It makes no mention of the unpaid care of parents who are cooking, washing, sweeping, cleaning, raising the kids and doing it all again tomorrow. That makes this labour fraction ready for work and it makes no mention of the commons where we get together, not with the market, not with the state but as communities and create things we value whether it’s a neighbourhood garden on the corner or the block or Wikipedia on the world wide web. If the biggest picture, we have of the economy is silent on these things it is missing 3 fundamental sources of our wellbeing this century and that comes back to bite us.

And then the most intimate picture in economics, the picture of us this is the character of a rational economic man, he is never actually drawn so I drew him. He would have to be a man, he’d be standing alone with money in his hand, ego in his heart, calculator in his head and nature at his feet. He hates work he loves luxury and he knows the price of everything. Now we all know that this is an absurdly narrow caricature of ourselves but the really fascinating thing is that the more that economic students learn about this character the more they actually come to mimic and value his traits from year 1 to year 2 to year 3, students over time say they value self-interest, they value competition over collaboration, ultraism, compassion. So the model we create of ourselves shapes who we become which is an extraordinary revelation of the reflectivity of who we draw ourselves as.

Then I think there are 3 crucial economic laws of motion captured in very simple diagrams, this goes back to Newton right. Newton discovered the physical laws of motion and it made him a scientific curer forever. And I believe many economists in their desire to show economics was science like physics tried to discover economic laws of motion and there are two which have massively influenced all our lives for many decades. The first is on inequality it was drawn in 1950s by Simon Kuznets, we know it as the Kuznets curve. Kuznets had a bit of data from the UK, Germany and the US of what happens to inequality as a country gets richer and he drew it and he said I see a pattern, I think I see a pattern that as economies get richer, inequality rises but then it falls. And he couldn’t understand why it didn’t make sense to him. He thought it must be something to do with urban [inaudible] and migration. Thomas Picketty came back many decades later and looked again at the data and he said actually Kuznets was right this was what the data showed. But it was a particular moment in time it was from pre-war to post-war and what destroys the capital of the wealthy – after war governments massively invested into health, education and housing. So it was war and government investment that turned Kuznets curve down, not the inherent workings of the market.

But by the time that curve was drawn the image like all the images it took on a life of its own and it began to whisper out a mantra which is ‘if you care about inequality growth will even things up’ and I believe it underpins trickledown economics and austerity economics and yet we know that that curve does not hold so it’s time to let go of that false law of motion.

A second one on pollution it looks so similar they call it the environmental Kuznets curve drawn in the 1990s a very similar pattern measured on local air and water pollutants it appeared to show that as economies get richer first they are polluted but then they clean up as if like a well-trained child, growth will clean up after itself. But when you take into account global carbon emissions, global material footprint, this curve doesn’t hold. And yet it’s justified in many countries grow now clean up later economics. I believe these two false laws of motion have massively misguided policy making for decades and it’s time to leave them behind but in the middle sits a very deep metaphor of the economy which is a belief that growth is progress and growth can go on endlessly and we hear it all the time in the news talking about GDP, the restoration of growth in GDP as if again this is progress. This is a profound metaphor I think at the heart of actually western thinking about what good and progress looks like, I’m going to come back to that in a minute.

So I believe these diagrams sit at the heart of the 20th Century economic mind-set that I was taught and I believe many of today’s students are taught the essence of this and yet it is no way equipping us for taking on today’s challenges. Because last centuries economists did not see this, they did not know about planetary boundaries.

Throughout my economics education the language I was offered to speak of this extraordinary overshoot of the living world on which we depend, the language of course is externalities and even when you hear that framing if we talk of the breakdown of the living world as an externality, surely we already know there is something wrong with the theory if it poses it in this way. Yes, economists know externalities are important, why would we call them externalities, its shine surely of a model which is too small for taking account everything that matters.

So I believe it’s a time now for re-writing, re-imagining and re-drawing the economics at the heart of what we think and talk about what the economy is and is for and what success looks like. And there’s a quote from John McCain’s whether or not you like his theories he said this very smart thing – ‘economics is the science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world and I worry that in economics departments in universities they’ve got very, very deeply involved in the first part – the science, the thinking, the models become very sophisticated. I believe were in a moment in history where we need to go the art of choosing models that are relevant to the contemporary world because the world has changed so much and the models have not kept up.

So I want to give you a quick overview of what I believe to be at the heart of 21st Century economics. And of course I have replaced the pictures because pictures are so powerful. So I begin not with a lecture on supply and demand I don’t think that’s the right place to begin an education in economics. I begin with a question I was never actually asked to ask myself – what is the economy for – purpose. I never had that conversation in my degree throughout 4 years and I would say one way of describing the purpose of the economy surely is to enable us to meet the needs of all people within the means of the planet. If you go back to Adam Smith’s definition of economics it’s actually pretty close – to ensure everybody has the means of subsistence. He didn’t talk about the planet because he didn’t see those boundaries. I bet if you he was alive today he would come up with a definition of the purpose of economics that was pretty much aligned with this.

So if that’s the purpose where do you start what would be the first diagram of the economy you’d show a student, that first lick of the mind that goes so deep. For me the first picture should be the biggest and I would show them this diagram I call it the embedded economy diagram. So what we have here is the economy imbedded in society and all its social, cultural and political institutions because the economy is just a social constant that we’ve created. And embedded in the living world drawing in materials and matter, spewing out waste and pollution. So from day 1 we can ask the essential question of ecological economics – how big can this [inaudible] flow of energy be through the economy before we begin to disrupt the very living systems on which all of our lives depend. It’s bathed in a river of solar energy and we’d be smart this century to stop looking down for energy below the soil and look up because that is where the daily solar income comes from.

But also within the economy it’s not just the market and the state I believe that became a 20th Century ideological boxing match. You know you’re a laisse-fair free market capitalist or you’re a state loving socialist and in that narrow boxing match, we lost sight of two other fundamental sources of wellbeing and human provisioning. The household where we all begin every day, where we care for ourselves, our partners, our children, our parents, essential unpaid caring work that absolutely underpins everything else and the commons that place where we collaborate not through the market and not through the state but as a community. And the work of Helen Oestrum making clear the value of the commons but also the rise of the digital commons this century means that this is one of the most dynamic spaces of economic activity and we’d be crazy to ignore it and to imagine the economy without it.

I would not want to live in an economy that missed any one of these 4 fundamental forms of provision because there all unique but they work best when they work together and I believe we need a rebalancing of power between them. It’s also amazing opportunities for market commons collaborations, common state, market state, household commons. This is one of the most exciting domains of economics but if students don’t encounter it then they don’t have the chance to take advantage of that opportunity.

And finance well it should be a flow in service to society and it’s an amazing question to ask what would a financial sector look like if it was actually designed to be in service to the functioning of these.

What about who we are, we are so much more interesting than rationale economic man were social able, adaptable humans. Let me just give you one example we imagine we have fixed preferences we merely satisfied through the market but actually we have very fluid values. If I gave a survey to all of you in this room about your values and your preferences, and on this half of the room it said consumer reaction study but to this half of the room it said citizen reaction study. Research shows you feel even differently because I’ve activated the consumer and I’ve activated the citizen and it changes how we respond. So even the words by which were named change our values and preferences. We are fascinating beings and we deserve a far richer portrait and of course that’s coming with behavioural economics with many forms of re-interpreting humanity but we couldn’t bring this portrait fast enough because who we tell ourselves we are shapes who we become.

Crucially I believe it’s time to put aside the desire to be like Newtonian physics, even physicists have moved beyond Newton, economics should do it to. Forget the idea that there are laws of motion within economies it’s the time to become like designers and if we think about complex adaptive systems you can’t control them but you can intervene in them and shape their dynamics and shape their patterns and this is the 21st Century systems thinking and complexity. I believe there are 2 design principles that need to be put at the heart of 21st Century economical design if we are going to meet the needs of all within the needs of the planet and they are to be distributive by design and regenerative by design I will show you what I mean by each of those.

Distributive by design, in the 20th Century when we talked about distribution it was always about re-distributing income and it was a deeply political debate about whether you should do that or not. I think there’s a far richer opportunity to go deeper and think about pre-distributing the sources of wealth creation. Pre-distributing health and education through the NHS, through state education we should invest more I believe because the fundamental wealth of every being lies in the potential of their health and education but also land and housing ownership, enterprise ownership and the power to generate energy and to generate and share ideas and communications. Let me show you a few real examples.

In Chile and Argentina many people cannot afford a house and there is a brilliant architect there called Alejandro Aravena who said well if people can’t afford to buy a house maybe they could afford to buy half a house. So he started building half houses that have all the water, plumbing, electricity, heating that you would need so people can afford that and when they have enough money a few years down the line, they can build the rest and fill it in.

But even here in Leeds and many other places in the UK there is communally lead housing this is low-impact living which is affordable people who live here in these low-impact, low-energy using housing in a community pay 35% of their income whatever that is. And these are examples of very strong communities that are growing up and have low-impact affordable housing in a community setting. So bringing back the commons of what it means to live in a community it’s an employee owned enterprise in Colchester but also in the US when many major enterprises left in a rust-belt went overseas because workers’ wages were lower, the workers left behind and actually came back in and started forming co-operatives so there’s a rise in co-operatives and employee owned companies which redistribute or pre-distribute the value of enterprise to those working within it rather than an ever increasing dividend being fractured by shareholders.

Here in Nepal a woman installing solar panels on the roof of her house she’s at the front of that transition but in parts of Germany just solar panel roofs are standard by design, every household generating electricity rather than buying it from an electricity generator totally redistributing the capacity to generate wealth in terms of energy. And here’s a fab lab in the US where any citizen can go and use the open-sourced software, creative commons, 3-D printers and be part of a global exchange of ideas. Not just in the US here it is also happening in Togo, far faster than any company is going to bring these cutting edge ideas. So the creative commons are incredibly dynamic and making accessible ideas that were never accessible before. Regenerative by design.

Here is the de-generative linear 20th Century economy man take earth materials, make into stuff, use it for a while and then throw it away and that cuts against the cycles of the living world. We need to bend those arrows around and regenerate and restore so that nature has always done this regenerating value by degrading materials back to hydrogen and carbon and oxygen and nitrogen and building something new. We need to mimic natures success so that any materials should never be thrown away but should be recycled and used again and again, refurbished so it needs to be a common within the cycles of the human world and this is known as a circular economy, it runs on sunlight. Waste from one process becomes food for another so there is no such thing as waste it’s just a resource in the wrong place. It’s modular by design so that you can take this apart and you can replace just the broken piece and I believe it’s ultimately going to need to be open-sourced. It’s actually captured in the difference between these two phones. Here’s an IPhone which is actually glued shut so if it’s broken you have to send it back to Apple and only Apple can open it. Absolute opposite here, here is a fair phone which intentionally is open and anyone can take the back off and replace the parts, this is modular and open by design. I believe this is 21st Century manufacturing.

Just a couple of examples in the slums of Kenya in places where there were no toilets there are now because there’s an enterprise called Sanigey that has set up toilets which are run as micro-franchises creating jobs throughout the community. The toilets are clean with water, soap and toilet paper. So that brings dignity it also brings health and the waste is collected and turned into fertiliser so it’s returned to the soil. There closing the nitrogen loop, there also creating jobs, health and wellbeing in the community. This is open motors if you bought one of their cars it would arrive looking like this, like an Ikea shelf in a flat-pack. You can assemble it in an hour if you know what you are doing they say but if you don’t know what you’re doing someone can assemble it for you because the design is open-sourced, anyone can go on the internet and see exactly how it’s made and designed which means anybody anywhere in the world can assemble them, can customise them. This is part of a globally distributive network of manufacturing, distribution and customisation and repair. I believe this is the pattern of 21st Century manufacturing industry that we are going to move to and here’s Houdini a Swedish sports-wear company where all the clothing is made either from wool and tensel which are organic that decompose or from recycled polyester and recycled nylon so they have created a closed-loop of material reuse. Of course their clothing is expensive in the way that it was expensive to put a solar panel on the roof of your house in 1975 but if every company is part of a circular economy this becomes the norm and this needs to become the norm.

Glasgow is actually one of the cities that is at the forefront of putting in place a circular economy it is in the planning stages at the moment. Adam Smith who went to the University of Glasgow will be very amused because you know the quote from Smith ‘it is not from the benevolence of the butcher, the brewer and the baker that we get our dinner but from regard to their own interest.’ He would be delighted to know that the butcher, the brewer and the baker are actually at the heart of creating a circular economy of reuse of materials and energy and anaerobic digestion in Glasgow.

So I believe these are the principles of design which we need at the heart of 21st economy. And these are the questions we should be asking in Parliament and in the media, is the UK and is the world economy becoming regenerative by design – is the way these buildings are being built helping to live within the living world? Are we redistributing assets so that everybody can be part of wealth creation?

But it leaves us, and this is my final point, it leaves us with a really profound challenging shift which I believe we need to make which is we have an economy that has growth designed into its institutions. It’s an economy that needs to grow whether or not that growth is making us thrive. It’s financially addicted to growth because the way that money is created by commercial banks bearing interest because financial markets are pursuing the highest rate of return, because companies say the shareholders want to see us have growing profit, growing market share and growing sales every season. It’s politically addicted to growth because no G20 leader wants to lose their place in this G20 family photo. But if any country stops growing whilst the rest continue, they’ll be booted out. So we’ve got a geopolitical lock in and I believe were socially addicted to growth because after half a century of consumerist propaganda we’ve been convinced that we improve ourselves by buying something more, that the best kind of therapy is retail therapy.

I don’t think any of these are insurmountable but they all deserve far more attention than they currently get because if we stand back and reflect, look at nature whose been thriving for 3.8 billion years so it’s a pretty good example to learn from, nothing in nature grows forever. This natures growth curve, any biologist, any epidemiologist or oncologist will tell you things in nature grow and they grow up and come to thrive. From your children’s feet to an elephant to a tree in the Amazon but we’re creating economies that presume to be the one system that will succeed by bucking that trend and I don’t see it happening.

So I think the most profound shift we need to make even though it sounds extraordinarily radical is to create economies, especially when we live in wealthy economies that thrive whether or not they grow without pursuing endless growth. I believe at the heart of 21st Century economics should be this transition to be redistributive and regenerative by design and with GDP being an ever rising target it actually becomes a response variable in the name and service of that much greater transition. And I look forward to your questions and challenges back on this because I know it’s a profound shift I’m proposing.

So let me wrap up I believe a transformation to a 21st Century economic mind-set and I believe today’s students enrolled in universities here in London, in the UK, around the world have the right to be taught a mind-set which will actually equip them for the 21st Century that they face but they are not yet being taught it. If you into quantification at Leeds university a group of researchers 2 weeks ago did an amazing national donor analysis survey of over 150 countries they’ve broken it down to the national level and found there’s no country in the world that currently meets the needs of all its citizens within its means of the planet, this is a global transition we need to make. If you believe like me in the power of pictures you might like these animations that I’ve had the privilege of working with brilliant animators, they are each 1-minute-long and each tells the story of the 7 ways to think at the heart of my book.

But I will stop there because what I most appreciate about opportunities like this is to discuss and respectfully disagree with people so if you disagree with me I absolutely invite you to the conversation, there’s few privileges greater than listening to those we don’t agree with and respectfully disagreeing so I very much welcome the conversation we will have. Thank you.

Nikita Malik
Thank you very much that was fascinating I’ll open up the floor now to questions if you could please begin your question by introducing yourself and if you have an affiliation.

Question 1
Gavin McNickle, Evening Intelligence, first of all may I say what a spectacularly good presenter you are. Obviously the elephant in the room is that is most perhaps striking have you come across an energy economist called Tony Sewell?

Kate Raworth

Question 1
You have so he is predicting a massive distribution just as you touched on of solar energy that the cost of solar systems are halving every 6 months at the moment and I have just checked the price now and it’s now sort of somewhere below $2000 wholesale price to put a solar system on your home which means it’s almost coming down to the point where your energy for a year for a normal household would be paid for in one year or pretty close. What in your system tells you that growth is going to tail off when energy seems about to become unlimited and free?

Kate Raworth
That’s a really great point so first of all the investment in those home solar panel systems will boost growth first I’m sure we can easily agree on that. So China is currently spending 360 billion dollars installing solar, hydro and wind capacity so that’s a big upswing for GDP. But when the energy becomes near zero marginal cost the generation of energy itself isn’t adding to GDP right it’s coming out because it’s no longer showing up in accounts it was an investment cost that then turns into no recurrent cost. So then the question is won’t people endlessly use energy, they won’t have unbounded energy through their household system they’ll have a daily supply it’s not going to be infinite through the household and actually what a lot of studies show is that once people and there’s really interesting work that has gone on with low income households in the UK which used to suffer a lot of fuel poverty they had solar panels put on the roof, people become a lot more attuned to when it’s sunny I’m going to put the washing machine on now and using it in current time. And actually people begin to work with an energy budget precisely because they don’t want to pay.

So firstly energy may become free but it doesn’t mean it becomes infinite because it’s still within a budget of energy use and we actually massively need to hugely reduce the total energy demand, there was an interesting piece I think in the independent today saying that last year the UK generated, through renewable means, enough energy to power the UK in 1958. But UK energy use has risen four-fold since then so we need to scale up the availability and use of renewable energy, we also need to scale down the use of energy per-say so that it comes back within the means of the living world. It’s not a tool obvious to me that GDP will always or can always be going up at the time so I say and I become agnostic about GDP I’m not saying it must go down or it will go down. It’s not at all obvious to me given the transformations that need to happen in the economy, given how many things like energy may go from the monetised economy to the free economy, many things might shift to the commons as well, it’s not at all obvious if GDP will go up or can always go up so I’m agnostic about it and I believe we need to allow our institutions to be agnostic as well because at the moment they depend upon continual GDP growth which is partly what stops us from making these kinds of transitions.

But maybe you have a response I don’t want it only to be me replying.

Question 1
Well I find myself thinking that this you know very low marginal cost of energy will just end up becoming another huge engine for growth just as the electrical lightbulb was and we can’t even imagine what’s going to happen if we have zero marginal costs or near zero marginal costs of energy, we’re not even there yet. We’ve just discovered Krypto-currency which demands huge amounts of energy but very soon it won’t cost very much to do this. The Krypto economy is set to explode what’s that going to do, we don’t know.

Kate Raworth
We don’t know absolutely. Energy may be becoming free it doesn’t mean it’s unlimited but it becomes free within the budget of what you can capture from the sun but material use right the energy that is going into making these may become zero marginal costs but the materials are not zero marginal cost so we are still bounded by the availability of materials and these materials should always be reused and recycled and energy is required to do that. So it doesn’t mean that everything becomes unlimited and there will be endless growth there are clear constraints and circular economies that we need to work within, but like you I don’t know which way it goes which is why we need to enable our economies not to be dependent on growth always going up.

Nikita Malik
Right, lot’s more questions, gentleman in the front.

Question 2
Hi I’m Luke Stottley, I’m going to be an economics student in September. About the growth bit again I was wondering where do we start in terms of convincing people that we don’t need endless growth to sustain ourselves because I think there is one main political party in the UK, the Green party, who doesn’t have as its goal perpetual growth and I mean it’s not exactly a big one. Where do we start to make people change their goals slightly?

Kate Raworth
Well that’s a great question, if you can do a dissertation on that at the end of your degree that would be fantastic. I don’t know I’m trying to do it through talking about natures growth curve right because I do find that profoundly thought provoking. And biologist will say to economists you have a very incomplete growth curve, economics only wants to look up to here right, it’s like the Peter Pan phase of looking at growth. And maybe it feels deeply intuitive that growth is good and growth is always possible because we say well I want my children to grow and it’s Spring and the plants are growing but that’s only part of the metaphor which we deeply understand about growth.

If I tell you that my friend went to the doctor and he told her she had a growth that feels very, very different and we all understand that that is a threatening sort of growth because that is about something that’s growing unbounded within a thriving, living body and so we deeply understand that when something, a sub-system grows within a system that has a thriving integral hole, it’s a threat to the system. Now I would suggest we deeply consider whether the growth of market activity which is just the value of goods and services what are sold to the market, it’s not everything it’s not prosperity, it’s not wellbeing it’s just the value or the cost of goods and sales sold through the market. Whether we could imagine that that can increase unlimitedly and not be a threat to the thriving hole on which we depend because right now it’s a deep threat to the thriving hole on which we depend. There is no evidence of any country in the world is on track for de-coupling it’s growing GDP from resource use on anything like the scale that’s needed. There are few examples of a little bit of de-coupling nothing like the scale needed. But we push that to the back of our minds because I think we are deeply addicted to growth so I think it would be much easier for me not to have to talk about growth and I’d seem much more credible and much more acceptable but I do think it’s time to have this conversation because nothing in nature tries to grow forever, why would we imagine this economic system that we’ve created could be the one system that bucks that trend and succeeds when there’s no evidence yet at all that it’s on track for succeeding.

So I don’t know how we do it Luke and I’m trying my way but there’s other people doing quantified alternative models of a non-growing society, it’s about tapping into the deep metaphors and it’s about having the confidence to stand up and say it because it so deeply jars with mainstream politics and the conversation that happens in Parliament.

Nikita Malik
I wrote a paper that women don’t asks questions so I’d like to invite any women who want to ask a question… there we go, in the back, lady in the yellow.

Question 3
I’m Trish Evans, I’m not representing any organisation here today. I was deeply influenced in the 70s when I was a student by a book called The Limits to Growth, many people were it started the sustainability movement, it moved many of us into politics and ancillary movements. What happened, why didn’t it work I mean it’s really what we are talking about now 50 years later.

Kate Raworth
Oh great OK thank you and what I’m saying I feel like is, although I’m not saying exactly the same thing as the focus on the limits to grow where saying because times have changed and our models have changed but if you go back and look at the model they drew it was possible scenarios in the future and one of the scenarios was that we would run out of material resources and in many ways that has happened so people were very quick to say oh they got it wrong. And there’s a deep belief that oh they were completely wrong weren’t they and we dismiss and we dismiss.

There’s something else in their model which we call pollution. They didn’t have a specific word for what is was they knew there was this externality, we can now call out climate change and catastrophic biodiversity loss and soil loss and we can name it within the nine planetary boundaries. And on that aspect they were absolutely on track that this is where we are. But it’s deeply challenging to the mainstream thought of growth is good and growth is success so there’s a very strong political desire to dismiss that work. But it’s coming back because when we look at the date we have much more data now, as I said there is no evidence of any country de-coupling it’s GDP growth from resource use and pollution and anything like the scales it’s required to bring us back within planetary boundaries.

So even though I can’t point to you a country that is succeeding without growing I put the challenge back that nobody can point to me and show me a country that is succeeding of living within planetary boundaries whilst still growing so this is why we need to rethink economics and have brave conversations because we need to set up to the challenge of reimagining what the economy is and what its success looks like. Last centuries textbooks they ain’t going to give us the answers because those economist, brilliant though they were, they never saw this challenge.

Question 4
Edward Ben-Nathan no affiliation. I read at least one book review and did not get any sense from the book review of what I’ve heard today. Maybe I misread them and didn’t understand them but I didn’t get a sense of the scale and scope of what you are arguing and I’m wondering have you got your message across to you know people in academia in politics, in the media, have you done that successfully yet, I know you’re trying to do it now but how’s it going?

Kate Raworth
You know when you write a book you sort of think well who is my primary audience I have in mind and what I actually wanted to put in my mind, I wanted to free myself from writing a book that had to be relevant from today’s politics to 2020 concerns because then you always have to argue within the existing frame and make it work within the existing language. So I wanted to talk about 21st Century economics the long-view and I wanted to write a book for the student, I wanted to write the book I wish I could have read when I was a student and things didn’t quite make sense to me and I thought is it that I just don’t get economics and I wanted to read a book that said no, no, no there is something about economics that doesn’t get the world and your intuition of that something is right so believe in your intuitions. So that’s the book I wrote.

What’s really surprised me is and pleased me is the number of people who are working at what I say is the frontline of today’s economy in political parties who have contacted me whether it’s in the UK or internationally and have said we would like to talk to you because it’s so clear that political parties are looking for a new narrative, a new way of explaining, talking about the economy. I know my books been read by people all the way from David Davis to Caroline Lucas which I’m really pleased about because I’m not trying to write a book that belongs to any one party because then you just become party political, I’m not interested in that I believe this is a paradigm change we all need to make.

Business as well I wasn’t expecting businesses to come but I’m surprised by the number of business leaders who say I’m really using this to think about how do we make our company a company you’d be proud to work at 2030 and how do we need to transform the way we produce and who we are in the world. And as I showed at the beginning I was very delighted that when I found out China, the gentleman whose presenting China’s renewable energy strategy I mean the world’s biggest economy making the world’s biggest energy transition, if he finds that diagram useful I feel deeply honoured that it’s in use.

The most traction the books had has been let me say everywhere but economics departments from architects to policy makers to business leaders to students to designers they say yes this just makes sense. It’s economics departments actually that are least open and I’m not surprised in a way because it’s deeply challenging, it’s a new world, it’s deeply challenging to the theory, it’s deeply challenging to what your tenure and status is built upon. I have had debates in economics departments but I think there’s sometimes a lack of openness to realise these diagrams we teach are imbued with the world view and every image is coming from somewhere and its making something visible and leaving something invisible and there’s no such thing as an objective positive economics and that’s a very hard thing to take on board if you haven’t accepted it to date.

So I’m really enjoying this conversation I’m having and here and everywhere and for me the book is just a vehicle and writing a book is a vehicle for having conversations and this is the work.

Nikita Malik
I must say this before you started, I read economics at Oxford 10 years ago and I wish I read your book then so it’s definitely resonating with economics students as well. Any more questions. Wow ok I think we have 10 more minutes, gentleman at the back.

Question 5
Hello my names David Goodhart I work at a think tank called Policy Exchange just up the road. Orthodox economics has taken a huge bashing from all sorts of directions in environmental, the financial crash, there have been very rich and powerful people, George Soros put masses of money into rethinking orthodox economics. As you say it hasn’t had a huge effect on the curriculum in universities or perhaps in schools yet although I sort of guess that will come in time. I mean I wonder why that is apart from enurture. I suspect that orthodox, neo-classical economics does work quite well in certain narrow areas I mean trading people for financial markets and things like that, a lot of the models do work reasonably well. But I wonder where, it seems a lot of what you say I mean it’s very well powerfully presented but it seems quite familiar to me in a way that a lot of this is not particularly new. I wonder where what is the point in which a lot of this critique can sort of find it’s most powerful point and I wonder whether it might be the argument which has never really taken off about GDP, about how you actually measure growth, how you measure an economy and every now and then there’s yet another commission on revising the way we think about GDP and I wonder whether that is the place for this thinking to kind of emerge most effectively?

Kate Raworth
Great thank you David oh too many things to say. I agree with you that’s there an extraordinary and actually indecent in-nurture in economics I went to Davos this January and I sat in meetings where governors of the state of Washington where saying we are going to be the first state to introduce a carbon tax, companies were saying we are going to have a zero carbon supply chain, a real sense of ambition from politics and from government and from companies. I then went to a dinner with 4 noble prized thinkers about the economy and each one of them stuck greatly into the membership of well things are picking up actually the economies recovering, the health is coming back, all this metaphor that 3% growth things are coming back again. And I was given the opportunity to speak and I said I’m just really struck that you have all spoken about an economies healthy because GDPs growing again, you haven’t mentioned climate change, why are you falling into this easy, old narrative. And afterwards I spoke to a couple of them saying well we really need to rewrite the curriculum and one of them said aaaa well no that will take time. And I was just so struck by the gap between the pressure on politics, the pressure on or the desire to show leadership in politics and in business and economics that’s say well you know these things take a long time to write.

There’s also a danger that I think the mainstream economic syllabus has a beautiful internal consistency to it whereas if you want to teach something else where you pulling on ecological economics, feminist commons theory, institutional, behavioural it needs to be put together yet.

Absolutely what I’ve said I’m glad it’s familiar to you and it’s familiar to many people but I would ask if you’ve ever read a book before when it’s all in one book because that’s what I was trying to do rather than have to say to a student oh Luke you need to go and read ecological then this feminist then you have to read all around, why should it not be all on one-page bouncing together and that’s what I think is the synthesis what needs to be done.

Lastly yes we need to re-create GDP but instead of focussing on this one GDP number going up and down actually I think we need to re-imagine prosperity and for me it’s going to be embedded beyond the growth metric and thinking about balance and thinking about regenerative and redistributive design. I would like to look across London and say where is the regenerative design in what’s happening here and is this distributive and then ask ourselves how would we measure an economy that was moving towards that. So for me I’m going slightly different rather than just going in on GDP.

Question 6
Thank you yes my name is John Dobson and I’m just a retired old man but Nikita I don’t know where you get the idea that women don’t ask questions my wife never stops asking questions but Kate I’m fascinated by what you’ve been saying whether we like it or not though the increment of change is politics – which political part in this country do you think is more sympathetic towards your ideas and would be likely to implement them?

Kate Raworth
In this country? So the first political party in this country that contacted me was the Green party and I was not remotely surprised because they say well this just makes sense to us this is home. The next political party was the Labour party and they said you know this is interesting and so we had a discussion, how do we move here. But I’m glad that all political parties are looking at this and it shows there’s an openness and a curiosity. Whether or not a political party adopts it I actually believe that the place were change begins isn’t in political parties I think often parties wait until they believe it is safe to start speaking a different language. I believe it starts in communities and people showing and doing and practicing starts in the inspiration and the passion of an individual who says you know what I’m just going to set up a company that is a circular economy company and dammit if it goes against my immediate profits I believe in this and it’s about individuals making things happen.

Once that new economy starts to become visible and that’s why I show examples from all over the world, this is already happening, it starts to become visible and it starts to make sense it begins to be a constituency of people who are already there and they think it’s possible for politicians to start speaking in that space. I don’t expect political parties to lead I think they follow when they see that the new is appearing and there’s a logic and sense to it.

So for me it begins in Glasgow with the local Glasgow people making this happen, it begins in those little enterprises, it begins in local communities then politics can follow us.

Question 7
Can I just follow up on that because I wonder where human psychology comes into this, for quite a few years I lived in a place called the Soviet Union where there was no incentive, my driver used to say to me we pretend to work, they pretend to pay us so unless you’ve got the right environment to incentivise people to actually carry out these things it won’t happen because people will do the least for the most income, I believe anyway a long stick I know but I say that. So it does depend upon the individual and the psychology of that individual and the incentive for him or her to actually create this new environment and economic growth.

Kate Raworth
Yes absolutely what you said economic growth I’m just going to hold that one back but look market, household, state and commons – we all move through all of these every day, we have all benefitted from these today knowingly or not knowingly and actually the incentives that shape how we behave in those spaces and shape how we contribute are actually different in each one, we’re motivated differently. I think economic theory has focussed too much on the market incentive and assumed that that incentive can then be taken elsewhere. Nurses and teachers are often very offended if you say well we will give you performance related pay, do you think I come here for the pay, I come here for a completely different kind of incentive. So actually it’s about a richer understanding of humanity and what motivates us and where our purpose comes from and having different kinds of incentives which is precisely why I would start with this and say look at all four forms of provisioning wow this is a really rich pallet of human incentive and organisation how do we make all of them work and then were having a really interesting conversation.

Question 8
My name is Mallory Wober I’m a psychologist. I just wonder whether in Oxford where they have a combination of studies called PPE which disciplines have been part of the training of many of our political leaders let alone economic ministers, one of those P’s should be psychology.

Kate Raworth
Oh Mallory I am so with you, your talking to two PPists ok well I was a PPist and so many politicians have studied PPE, you know in my experience of doing PPE first we did Philosophy and Economics term 1. Philosophy day 1 we learnt utilitarianism, John Stewart Mill, Jeremy Bentham and economics day 1 we learnt utility theory and I was like wow these really fit together this is amazing. Philosophy week 2 well of course there are severe limits to utilitarianism economics so in Philosophical theory we will go on and do something else and the rest of my degree diverged from there. Economics week 2 building on what we did last week and we just built on that and from week 2 we just diverged.

I absolutely agree that Philosophy, Psychology and Economics because economics is about household management we humans are the creatures at the heart of the economy we don’t have a richer understanding of the psychology and the question of incentives we are completely mis-imagining ourselves and not at all doing justice to the potential so yes I deeply believe there should be more psychology and real understanding of humanity not just modelling ourselves in a simplistic way that changes who we actually are.

Question 9
Frank [inaudible] is my name also no association. This issue of limited growth which is kind of what you are educating to a certain extent (Kate – growth agnostic) how would you deal with emerging markets I mean we are here in a fairly comfortable environment and you know we can discuss it but many countries they are far, far behind and then you come and say ok we have to on a global basis stop growth but they have a big catch up to do to get to anything near to what we consider normal, I mean how do you deal with that issue.

Kate Raworth
Thank you for bringing that up one of the challenges of trying to say a lot in a small amount of time is you cut corners which can then make it sound misleading, so I’m not at all saying every country in the world should stop trying to grow not at all. I believe every country in the world needs to meet the needs of its citizens within the needs of the planet. So this is not a global growth curve this is much more useful if we think of 200 and however many countries in the world all plotted along this curve then we can ask where is any one country.

Now today two of the most fastest growing countries in the world slightly surprising we don’t expect it, Ethiopia and Cambodia, they are growing around 7-10% a year. You could say they are here they are at this take off phase. That makes sense to me because there are millions of people in those countries whose most essential needs are not met and as they meet them through the state and through the market and the household and the commons, these all should see growth only the market and state transactions get recorded but all of those should be growing with people’s needs and I would expect GDP to rise in those countries.

But there are other countries in the world like this country one of the richest cities in the world, France, Japan where GDP is growing very slowly and GDP is large where somewhere closer to here and maybe part the difference in our views, if we were sort of to play pin the tail on the donkey with this curve, where are we now, I mean some people think we’re here and other people would say no, no, no where here but there’s still plenty of growth to go through. I think even if we were here we have ended up in a place where the economy is deeply degenerative, it’s running down the planet, it’s deeply divisive. Last year saw an unprecedented number of billionaires in Greece we also saw a big increase in the use of foodbanks. This is not the economy we want in the UK. So we don’t want to end up here we want this transformation, zero marginal cost energy I believe we want a transformation to far more distributive wealth ownership. So I don’t know which way world GDP should go I believe it needs to be able to adapt actually. So to be very clear I think the worlds countries somewhere along this line is spread out and we don’t know exactly where we are but if we are looked institutionally, financially, politically and socially into needing GDP to keep rising it will stop us from making the transformation we need.

Audience member
But then it probably means in the developed part of the world there is actually a decrease, at least developed in a traditional sense, because more cars are being bought in the emerging market then it needs to decrease here I mean otherwise on a global basis otherwise it’s going to go up.

Kate Raworth
We definitely need to go from 2 cars for every house to a lot more bus sharing from diesel cars to electric cars, so in there all these different transitions it’s just not at all obvious to me which way GDP goes.

If we can become regenerative and distributive and GDP goes up, I’m fine with that I have nothing against GDP going up to me it’s a response variable, far bigger transformation that’s needed is regenerative design and distributive design.

So just to go back to David’s point early on should we focus on GDP well what I wanted to do actually was focus on the pointing out that are economies are structurally addicted to a growing GDP which is why I think so many initiatives to just replace GDP fail. You can come up with a happiness index or something else but unless you tackle the structural inbuilt requirement for growing GDP you’re never going to replace it because we structurally require it.

Nikita Malik
Alright thank you so much I’m sure if you have any further questions if Kate has time she will be happy to chat with people. Thank you very much.

Kate Raworth
Thank you for such a wonderful discussion.


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