British economist Kate Raworth recognises that a dramatic new mindset is needed if we’re going to address the economic challenges of the 21st century. Her iconic book, Doughnut Economics: seven ways to think like a 21st-century economist, argues that our economic activity should operate in the space between a social foundation and an ecological ceiling.
In practice this means that life’s essentials, such as food, shelter and healthcare, are available to all, but within the means and resources we have available on the planet. The doughnut of her analogy is a playful metaphor for a serious and urgent challenge we currently face. In this interview Kate Raworth tells more about her perspective on modern economics and explains how we can create a system that works within the limits of her theory.
Sharing instead of redistributing
Your economic model is now six years old. Have we made any progress?
We have. I consider the Sustainable Development Goals (SDGs) to be an essential step. They comprise the systems that sustain life on earth and are designed for all countries, not just the South. Yet I think we should be able to break through the ceiling of our imagination. The question is: can we design a system to improve things? That, in my opinion, should be our ambition: to develop activities that are distributive and generative from the start.
What do you mean by ‘distributive by design’?
We usually talk about redistributing the wealth that is initially in the hands of a small group of people. That is the core of the 20th century model: redistribution of income afterwards, through progressive taxes and other means. The distributive concept of the 21st century is about designing our activities in such a way that they share the value from the start, instead of redistributing it afterwards. And it is not just about money, but also about land, companies, and the ability to create money. What about the ownership of technology, who will own our robots? How do we treat our knowledge? Does it not make sense that innovative ideas originating from publicly funded research should be accessible to everyone?
The core of the challenge, then, is in reinventing the way we create value in our economy and share it from the start. You can do this with alternative forms of ownership of companies, like employee-owned companies or co-operations. Another way of integrating the sharing of value in the design is not to freeze them in patents but instead let them circulate freely among the commons. That way they travel through society, research communities can use them and develop them further. Another way still is to work with local currencies that connect and empower new initiatives.
Money with patience
The economy should not just share value. It should also be generative?
Yes. We seem to find it normal that a company focuses on realising but one kind of value – financial profit – and in addition, keeps it for itself and its shareholders. It is very much the mentality of the 20th century: how much money is in it for me? You could describe it as an extractive economy, as over-exploitation taking away valuable resources from the community.
The 21st century, generative model has a different baseline. The question now is: how many kinds of value can I integrate in my company’s design to make sure that I can give value back to society and the environment? As a company, why would you strive to only reducing your negative impact on the environment when you can just as easily generate a positive impact? So instead of reducing emission of greenhouse gases, you start generating renewable energy and you share it with your surroundings. The same goes for the social domain, whereby companies actively contribute to the wellbeing of their neighbourhood or community.
What role do you see for the financial world?
That is the million-dollar question. First, we should investigate how to collect money in a 21st century way. That leads us to ethical banks, money with patience, and at first even philanthropy, to get things going. All of those are important sources for money because their values are in line with those of the companies they are supporting. Within the existing 20th century money industry we could do this through our pension funds. Could we restructure them so that they become value-driven? Can we enable people to change to such ethical pension funds? Besides that, we obviously need clear legislation. But I focus mostly on finding new forms of financing that are suited for 21st century businesses.
And that is where Triodos Bank comes in. The bank pays attention to these new kinds of entrepreneurship that are essential for the future. Triodos consciously uses money to create positive social, ecological and cultural change. It is an excellent example of a company with a lively target, aimed at distributive and generative companies whose values go way beyond the financial profit that stays within the company.
Kate Raworth is a renegade economist focused on exploring the economic mindset needed to address the 21st century’s social and ecological challenges, and is the creator of the Doughnut of social and planetary boundaries. She is a Senior Visiting Research Associate at Oxford University’s Environmental Change Institute, where she teaches on the Masters in Environmental Change and Management. She is also a Senior Associate at the Cambridge Institute for Sustainability Leadership. More: www.kateraworth.com
Adapted from an article written by Dirk Holemans, director of Oikos (Belgium).