148. Summer flashbacks (episodes that people still talk about)
Doughnut Economics, with Kate Raworth
Our next episode from the archives that people still talk to me about is episode 3, with Kate Raworth. She’s the best-selling author of Doughnut Economics: Seven ways to think like a 21st century economist. And the instigator of the Doughnut Economics Action Lab (DEAL), helping put it into practice in communities everywhere.
This is an excerpt of the first 20 minutes or so our conversation just a couple of months after the book came out. And this release comes just a week after the launch in Oxford of Doughnut Economics Live, a free course for all economics students in the city who want to think like 21st century economists.
Kate Raworth (pic: Roman Krznaric).
“Suddenly, people were coming up to me and saying ‘Oh, you’re the doughnut lady!’ And you think ‘What?! What just happened here, overnight?’ This diagram just went viral within the world of sustainability. And I realised, when it comes to mindsets, I realised how powerful pictures are.”
Kate said “It's time for every university's economics curriculum to address the world's extraordinary and extreme realities.” And “We have had to change venues three times to accommodate all the students applying to join the course - now it's in the biggest lecture theatre available in the university and it's oversubscribed. Students demand and deserve change.”
You can hear more on the global student revolt that was kicking into gear in the last decade, and has continued to pick up since, in the rest of our conversation (link below).
Here, we kick off on with the shift in thinking involved, and how to communicate and practice it. Then it’s onto Kate’s journey, and how she came to this concept that took off around the world.
Interestingly, Kate brings up the work of George Lakoff, on the metaphors we live by – which used to be the primary text for the postgraduate students in sustainability that Frank Fisher and I worked with.
We close here with how we might go beyond growth and GDP as proxies for society’s progress, towards tracking what’s actually important to us.
This conversation was recorded in June 2017.
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Please note this transcript isn’t perfect, but hopefully serves to provide greater access to these conversations for those who need or like to read.
SPEAKERS
Anthony James, Kate Raworth
Anthony 00:10
Welcome to the podcast, where you'll hear telling conversations with experts, executives, artists and leaders of all kinds of around the world to inform and inspire the personal and big picture changes we need to become a just sustainable and flourishing society. Hi, I'm Anthony James. Thanks for joining us. Today we're featuring a conversation with Kate Raworth, one of the world's most brilliant and needed economists. Her new book Doughnut Economics: Seven ways to think like a 21st century economist, is already a best seller, and has been described by George Monbiot as brilliant, thrilling and revolutionary. So it was great to have an opportunity to speak with her about how her donut, yes of all things, can help us rethink and recreate our economic system for today's world - to leave no one languishing in the hole while keeping planetary boundaries safely intact. Joining us online from our home in Oxford. He's Kate Raworth.
Anthony 01:06
Hello, Kate, welcome. Thanks very much for joining us.
Kate 01:10
It's absolutely my pleasure.
Anthony 01:12
And congratulations on becoming a best selling author 'overnight'!
Kate 01:15
Oh, thank you. Well, I'm delighted. I mean, what it shows is that there is huge hunger for new ideas amongst people and that, that's brilliant.
Anthony 01:23
Yeah, I'd like to talk a bit more later actually about what it shows. But of course, I exaggerate in a way too - it's years of research and work and conceptualizing and personal journey that that you've synthesized in this book. So let's start at the start. What is Doughnut Economics? And how did you come to it?
Kate 01:42
Okay, Donut economics is economics for the 21st century, which goes back to the root of the word economics, it means household management. And I believe the 21st century question that we need to take on, it's our generational question is, how do we manage this extraordinary planetary household in the interest of all of its inhabitants? How do we meet the needs of all within the means of this planet? And that's what economics is for. So I've written a book that puts purpose back at the heart of economics, because when I went to university 25 years ago, to study economics, I wanted to learn the mother tongue of public policy so that I could work on the issues I wanted to help change in the world like social justice and environmental integrity. But the economic theories I was taught, pushed these issues to the margins, talked about them in terms of externalities. And I was really frustrated with what I was taught, so I walked away from it. And it took me a 25 year journey through the villages of Zanzibar, the headquarters of the United Nations, the frontlines of campaigning at Oxfam, and becoming a twin mother, myself, to realize that you can't walk away from economics because it permeates every aspect of our lives. And so I decided to walk back towards economics and flip it on its head, put purpose, the values that I think matter, like social justice and ecological integrity, meeting the needs of all within the means of the planet, putting those at the heart of the project and asking ourselves, what kind of economic mindset will give us half a chance of achieving this? Because it sure ain't the economics that students today are being taught in university. And it ain't the economics that's been put into practice in our Parliaments or in our businesses.
Anthony 03:22
Yes. So you've you've mentioned the word mindset there. Indeed, it's not just about the mechanics of the system, it sort of starts with reconfiguring our mindset. What is the shift in thinking that this entails?
Kate 03:32
Oh, well, that's the whole book! I do believe that mindset is incredibly important. And I suppose let me focus in on one thing that I discovered in the process of writing this book - I drew a diagram of humanity's goal in the 21st century, and it came out looking like a doughnut - the kind with a hole in the middle. So in that hole is a place where people are falling short on life's essentials, from food, health, education, water, political voice - you want to get everybody out of the hole. But we also can't overshoot the outer crust because beyond that, we over-push our pressure on the planet and start kicking it out of kilter with climate change, biodiversity loss, ozone layer hole, ocean acidification. So we need to be in the doughnut between those two. I drew that picture in 2012. It's a diagram that was published in a discussion paper by Oxfam in a very humble little way, but it just hit a nerve of interest. And suddenly, people were coming up to me saying, Oh, you're the donut lady. And you think, what just happened here overnight? This diagram just went viral within the world of sustainability. And I realized, when it comes to mindsets, I realized how powerful pictures are. That our visual cortex which sits at the back of our brains is a place where images go in and they stay there for a long time. And far more than we give them credit for they shape the way we think. So mindsets aren't formed just by the words on the page, they're formed by the diagrams that wordlessly whisper to us, answers to some of the most important questions that never get discussed. So I, on realizing the power of this diagram, when I wanted to write a book about rethinking economics, I thought, well, let me go into this visual side of the mindset. And I went back scrambling back to my economics textbooks from 25 years ago, flicking through them looking at the diagrams that were so familiar to me still, because they were just sitting there in the back of my head waiting to be drawn upon, and of course, informing the way I thought about the world. And as I looked at these diagrams, I realized in a very simple way, they actually sum up the mindset of 20th century economics that I was taught. And there are so many blank spaces and caveats in them, that I could tell the story of what's wrong with 20th century economics through these diagrams. But of course, the best way to erase - so I think of these diagrams as intellectual graffiti that lingers on our minds. Well, the best way to get rid of graffiti is not to try and spray it off, it's very, very hard to remove graffiti, best thing to do is paint over it. So we need to paint new diagrams in their place, replace the old ones with a new vision of using pictures that actually encapsulate what we do want. So that's at the heart of the way I've tried to change the mindset. I'll give you one example. 20th century economics actually has no goal because the economists wanted to make it look like science and sciences don't seem to be defined around goals, but around forms of study. So economists stripped away the idea of having a goal of what economics was for and into its place snuck a cuckoo goal - you know, the goal that inhabits the nest and pretends to be the mother bird's baby, but actually is a cuckoo - the cuckoo goal of GDP growth. And that's what our politicians have spoken to. That's what the media write when they want to talk about economic success, you know, that the economy is growing, again, it's back in health. That cuckoo goal needs to be ousted, and in its place, I put the donut. The goal of the economy should be to meet the needs of all within the means of the planet. That's one of the seven mind shifts set out in the book, I'm quite happy to discuss any of the others.
Anthony 07:11
So there is - you mentioned the reason it's got no goal is because of an era, where it really tried - economics tried to paint itself or become - sort of get that legitimacy of a science. So it went from being talked about as political economy to economic science. And in that sense, it reflected what was happening in physics at the time. You've got a terrific story about Newton's falling apple, and if only he'd pondered how it grew. I'd love you to speak to that for us, if you would.
Kate 07:42
Sure. So in the 1870s, a small bunch of economists, such as William Stanley Jevons in the UK, they wanted to use maths to turn economics into a science. And the science of the times was the science of Isaac Newton. They looked to Newton's theories of the physical laws of motion, and wanted to come up with similar economic laws of motion. So they were drawing a very direct analogy to Newtonian physics. And in fact, if you look at the early diagrams of William Stanley Jevons, he draws and just like Newton drew his almost to say, look, you know, the diagrams look the same, it must be the same. They use the language of market mechanism and market forces. Well, we use those words today, still without blinking. But if you listen to it, the market mechanism and the market forces, this is mechanical, Newtonian sort of aspirational language, trying to make it look like physics. In the book, I playfully question whether Newton had the wrong insight. Because, I mean, of course, he was an absolute genius. But in 1666, when he was strolling in his mother's garden, the apocryphal story goes, he saw an apple fall from a tree and he asked himself, why do things fall always down? Apples don't fall sideways, they don't fall up, they fall down. And this was how he got his insight into gravity. And that led him into the insights of the physical laws of motion, which the economists copied, and I just playfully say in the book, What if he, before the apple fell, he had pondered how it grew. And instead of focusing on the action of gravity on the Apple had looked at the interplay of bees and pollination, of the sun and the water, the complexity of this tree that produced blossom and that created fruit that then deteriorate and turn back into organic matter. So the cyclical organic living processes of the world. If he'd happened to focus on the Apple as it grew, not the apple as it fell, he could instead because he was a bit of a genius, come up with complexity science back there in the 1660s. Well, it would have taken us down a very, very different scientific history, but maybe today's economists instead of talking about the market mechanism, as if the market was some sort of machine on which you pull levers and it moves into equilibrium back into balance, like gravity pulls prices into place. Instead of talking about the market mechanism, what if economists actually would then instead found themselves talking about the market organism, we'd have jumped centuries into evolutionary economics, complexity economics, which is now prevalent today, because it's a far smarter way of understanding the economy as a complex adaptive system. So with full respect to Newton, I just wanted to slightly reinvent his insight and realize that it would have given us a completely different economics.
Anthony 10:34
Yes, it's a nice way to put it too. And it was summed up in a beautiful line you cited from Chief Oren Lyons, when he said to a group of students at UCB, what you call resources we call our relatives. And it does seem to speak to that shift from the mechanistic reductionist view of the world to a more holistic complexity view of the world. And how that entirely shifts your focus, when you think of the broader world in terms of kin, rather than utility.
Kate 11:06
And he was talking to students at I think it was the College of Natural Resources. Again, what he's calling attention to is framing. So these students are studying at a college, whose title is that, you know, College of Natural Resources, already written into the institution is a framing of the living world, that is a set of resources for us to draw upon. And so he's questioning whether that very framing has already determined the mindset through which these students' education will be conducted. And if you call it the College of Natural Relatives, that would have been a really interesting alternative way of thinking about it. So, so framing happens. And our mindset is shaped through language framing, whether we call the living world natural capital and ecosystem services, or natural resources, or indeed the living world, how we frame it shapes how we think about it, both through words and through pictures. And so that's what I've really enjoyed exploring. And it was actually fascinating trying to write a book about the economy being embedded within the living world, without using the language of natural resources, and natural capital and ecosystem services, it was actually very hard to do it because this these ideas of natural resources are so embedded in the English language way of talking about the living world. But it was a sort of fascinating, can I walk the talk? Can I write about this without using a language that I think frames us in a way an old way of thinking?
Anthony 12:34
And the term and the framing of progress itself is something that you speak about as well. I guess that's one that we can continue to own but redefine perhaps, in the sense of you talked about how Lakoff's work with language, talks about progress is something as always been forward and upward, so inherently good, when it's attached to being forward and upwards. Is that right? Is progress something that we can hold on to - that aspirational value, I suppose - but just redefine or is that too problematic and we sort of need to transcend it?
Kate 13:07
So some people say, you know, they challenge the concept of progress in itself. Fair enough. I am an advocate. And I believe in envisioning a better world and from given where we are right now, I really believe we could make progress, right? We many millions of people live without access to the most essentials, the essentials of life, that it would enable to them to live lives with dignity and opportunity. They don't have water, health care, education, housing, political voice, I mean, we can make progress on that. And we have already gone over so many planetary boundaries, we can make progress on reducing our pressure on the living world and coming into a regenerative way of living so that we actually are in tune with the cycles of life. So I believe the 21st century project for humanity is indeed to make progress. The point about Lakoff and his fascinating book, Lakoff and Johnson, written in 1980, called Metaphors we live by. It's quite a theoretical book, but it's fascinating and very readable. And they pick apart the English language, and point out that almost everything we say is in metaphor. One of the most profound metaphors at the heart of a language they call it an orientational metaphor, where we talk about forwards and upwards. Things that are forwards and upwards are good. So you know, why are you looking so down? You know, there's a problem or, Oh, I'm feeling I'm feeling up today, things are looking up. We're moving forward, onwards and upwards. We took steps forwards or a few steps back. So we describe success and failure in terms of forwards and up and down. Well, no wonder we find it so easy then to believe the GDP story, that GDP which is merely the value of goods and services sold in an economy in, say, a year - if it goes up, we quickly think oh, well, yeah, forwards and up is good, right? So and you imagine that the GDP diagram drawn on the page it's an ever rising line - a kind of curve up, up, up, up, up, up up. That's a classic forwards and up diagram. So it's very easy for us to accept that, because that's the way that Western societies framed around forwards and up is good. However, there's a point at which in our culture where growth isn't always a good thing. If I told you that I'd been to the doctor, and he told me I had a growth, that's not a good thing, you'd be worried for me, because - it helps us to step back from our obsession with growth and economy. Think of the living world - growth is an incredibly healthy phase in the living world. My children are eight years old, eight year old twins, their feet are growing incredibly fast. And it's extremely expensive, because I'm always having to buy some new shoes. But it's healthy, right? They're growing, I want to see them grow. But I hope that one day, their feet will stop growing indeed, they will stop growing, because otherwise, they would not be able to sit at my kitchen table. Of course, they'll grow in their talents and their spirit and their skills, but not in their size of their body, they will grow until they grow up and they belong. So the growth phase is just one phase of life. And actually the things that we care about, and we love, we watch them until they grow up and they belong. Trees grow until they mature, they keep bearing fruit, but the tree is mature, a cat grows until it's a full cat size, a child grows, even the Amazon forest grows up until it's created full size and then it thrives. So it's as if we're obsessed with just one little phase like Peter Pan economics always want to be in the growth phase. But actually think of anything in life that you love. And imagine what would happen to it, if it grew forever. I'm going to bet you whatever it is you're thinking about it will be destroyed, or it would destroy the system on which it depends. So we need to have a longer, a richer understanding of growth. It's a phase until something grows until it's matured, it's grown up and it comes to thrive. Why do we never even think about our economies in those terms? I studied economics at University for four years, we never once asked, would it make sense then the economy grows until it's grown up? What would happen if the economy could no longer grow? Is it possible for an economy to thrive without growing? We didn't ask these questions. But I think these need to be at the heart of 21st century economics.
Anthony 17:07
And there would appear to be an opportunity that would be I don't know, not so difficult to grasp in that respect that we are seeking to cut to the chase in a sense to our goals, the things that as you're describing, the things that are most important to us to actually leave that proxy aside of growth and measured by GDP, leave the proxy that we've assumed and perhaps it has been well correlated to our progress in the ways we are talking about it for some time, but to no longer assume that and to actually look and check when does growth serve as well? And when doesn't it? When do we require something else? So in that sense, it's a pretty logical notion of of tuning into our actual goals. And in this sense, you talk about it being distributive and regenerative by design. Do you see that that's a really, it's a sellable line in a sense? That it is something that we can grasp onto to make this really what would be a significant transition given how dominant that narrative's been in recent times?
Kate 18:11
Okay, so is it a sellable proposition? So first of all, I think sellable narratives have to be positive. And this is a positive narrative, right? We need to create an economy that is regenerative by design, meaning it needs to work with the processes of the living world, it needs to enable the living world to restore itself, it cannot cut against the living world and start running down the sources of our own sustenance. So it makes sense to be regenerative by design. And also, I think we need an economy that's distributive by design, by which I mean, that value created is shared far more equitably with all of those who helped to create it, whether that's through employee owned companies or cooperatives, whether that's through ideas that instead of being put under patent and copyright are put in the Creative Commons under Creative Commons licensing so they can be used again and again, again, whether it's through using complementary currencies, to stimulate local economies, decentralized renewable energy systems that everybody can put on their own household roofs, or put on community buildings. These are all everyday examples already in practice of distributive design. So I believe we need economies that are distributive and regenerative by design and what we need are metrics that help us to look and ask, is our economy on track for becoming more distributive by design? Is inequality falling? Is ownership of the sources of wealth increasing and widening? Is it on track for being regenerative by design? Are we coming back within planetary boundaries? Are we creating a circular economy where we allow the natural world to regenerate itself and we are restoring it? And we also regenerate and restore our own materials that we create? So we need metrics to measure that. And then of course, it takes us to the question, So what what then of GDP? I do believe and I'm, I'm talking about not, you know, I'm not trying to sell a narrative to tomorrow's politician. So here we are, I'm waking up in the UK, we just had an election, I wasn't trying to sell this narrative to today's politicians, although I'm told quite a few of them were interested, I'm trying to take on the long view of the 21st century, because it's going to take us time to adjust our thinking of growth. I believe we need an economy that's growth agnostic in this sense, I'm not for saying GDP needs to rise or it needs to stay flat, or it needs to fall, GDP is just the value of goods and services bought and sold in a period. It utterly depends on what those are. And I'll give you an example. In China, the government is investing $360 billion by 2020, that's two and a half years away, in solar energy capacity investing in that. So that's going to be a huge boost to GDP over those times. And it'll create jobs and it'll invest in paying for the technology, it's going to be a boost to GDP because the GDP goes up as China invests in putting that solar capacity in. But once it's in, the cost, the marginal cost of generating electricity will fall very low, far lower than it will be if you're using coal fired power stations. So it will contribute less to GDP as a result. Now, the process is that China will have moved itself another step towards having a regenerative energy system. In the process, GDP will first have gone up and then by not nearly as much in the next phase. So GDP becomes a response variable that needs to be able to go up when it should go up and needs to be able to go down when it should go down in response to the things we want. We want to be regenerative and distributive by design. It's easy for me to say that - the real challenge is that we have an economy that has been structured through its political, financial and social institutions to be dependent and addicted to growth. So it is now structured to demand, expect and depend upon continual growth, whether it's through the financial system that has that rate of return, the financial rate of return, what's my rate of return? How do I maximize it? That's the question that drives the structure of today's financial system. It can be changed, but that's the heart of the very powerful financial system that demands growth. Think of politicians. I love the photographs that are taken every year when they meet at the G 20. And I think of it as the G 20 family photo, all of those political leaders standing in a little line very pleased that their country's in the G 20. None of them wants to lose their place in the G 20. But to keep it they need to keep growing because the G 20 is about being the biggest, most powerful economies. And if you don't keep growing, and others are growing, you get elbowed out by the next emerging powerhouse. So we have a system of global governance and geopolitics that again, demands continual growth. And we're socially addicted to growth. Because thanks to a century of consumerist propaganda, we've been told that we transform ourselves by buying something new. So I don't think any of these addictions, political, financial or social are insurmountable, but they require a lot more attention than they're currently getting. It's deeply structured in the economies we have. That's why I think, although saying being agnostic about growth, might sound completely unrealistic in the face of countries that have extreme debt, that have an unemployment, that needs to turn themselves around. I'm starting this conversation for the long term, because there's gonna come a time at which the possibilities of growth even will disappear in many countries, and an alternative paradigm is required. We need to be regenerative and distributive by design, the value of GDP needs to become a response variable to enabling to make that happen.
Anthony 23:29
Yeah. And that reality of the transition really requires an ability to be able to deal with what we've framed as contraction or recession, extremely dirty words in the current environment. So I guess that would be where the measures the metrics that you talked about become vital, in the sense that we will need to have something to hang our hats on, I guess for a new photo, the new family photo, the photo that you you become a leader, but in a different frame. And then everyone wants to be part of that frame. The metrics would, I imagine would be vital to that scenario of being able to peg our confidence, in some sense of positive new direction. Would you agree?
Kate 24:06
I would. Let me say two things to that. So you just talked about a new family photo of economies that are actually part of this new vision, there is actually an initiative trying to do this. It's not called G7. It's called the We7. And some people are getting together to say, can we bring together a group of countries like Costa Rica and other countries that actually are aspiring to a vision of social democracy, of equity and environmental integrity? That would form an - exactly as you just said - a new kind of aspiration, not rewarding countries for having the biggest economy but for having the most thriving society and ecosystems in which they live. So it's exactly creating alternative forms of recognition and rewards that start to help do that. But to come back to the other point about yes, we need metrics that reward this. Of course, one of the real challenges of, as you'd said, a contraction in the economy is that it creates unemployment, right. And that's a serious matter. So we can't just turn to different metrics and ignore it. Again, we need to come to the heart of the institutions and look at the connection between the availability of paid work, or indeed the availability of income, and GDP growth. And so that's why lots of people are talking about whether it's having a universal basic income that and that gives people a fundamental security, talking about shortening the working week. In employee owned companies, when there's a turn down, instead of laying off people, you know, the kind of the last in first out, employee owned companies are more likely to sit down all employees together and say, let's all of us work five hours less a week, or whatever it is, a day less a week, so that we reduce the workload across all of us. And we all retain our jobs. It's a really nice example of adaptive management within employee owned companies, where they have the resilience to change with the economy, without laying people off. And again, the reason for that difference is because the employees own it, they take account of all of their interests, as opposed to say, a shareholder owned company where they say, well, to preserve our returns, you're just going to have to lay some people off. So there are very different ways of responding to variability in economic output.
Anthony 26:19
Yes, and a related issue that keeps us locked into this is of course debt, in that, along with living beyond planetary means we're also living beyond financial means, in many respects, with unprecedented levels of debt continuing to increase. So how do we deal with that? And what does that infer for how we think about money generally? Do we need for example, to make more use of demurrage, if we're going to make money and finance more in line with living systems and our current needs?
Kate 26:46
Yeah, so in my book, Donut economics, I do explore the fact that money is designed. And the design that we have of money today is just one of many possible forms of design - there are three critical design features that you can ask yourself about any kind of currency. The first one is who has the power to create it - who is it issued by? The second one is, what is it allowed to be used for? And the third one is what character is it given? I.e. Does it bear a positive interest, or it could even have a negative interest, as you said, like a demurrage. So there are very different kinds of currencies that can be created. The one that we're used to, and that's sort of the dollar currency, whether it's the Australian or the pound, or the US dollar, it's issued - we've always believed well it's issued by the State, isn't it? But actually, what's come to light in the public mind, since the financial crisis, actually, most of that kind of money is issued by commercial banks, and it's issued as debt. So that's part of the design feature, they create money when people go and take out a loan, and they and they put down both, you know, the deposit and the loan at the same time. The character it has is positive interest rates. So it's debt that must be repaid at positive interest. And it can be used for - I've got a meowing cat here.
Anthony 28:08
Is that what it is? I was thinking we've got our own BBC moment haven't we, just with the cat in the background?
Kate 28:14
That's right! Well, luckily, I have a male au pair, I'm very proud - No rushing in wife or nanny in this house that you'd have a young young man rushing it to help me, but I'm going to just hold the cat here myself. So the currencies can be you know, who gets to issue it? What character is it given and what can it be used for? In the UK, the country I know best 97% of money's actually issued by commercial banks, the vast majority of it they issued for people to use for mortgages, very little of it has been issued in recent years for small businesses to expand what they're doing. And it's issued at a positive interest rate. Well, this is a recipe for creating a debt based economy, with money invested in investments that just escalate in price like that, you know, housing is almost fixed stock and you're just creating a housing bubble. You're not investing in the capacity of say, renewable energy, or renewable transport, or low carbon transport, you're not investing in something that's going to generate a return for the economy. So debt, per se, always has to be asked around, why is that debt incurred? Is it incurred in just housing stock, and therefore it's leading to a housing bubble? Or have we created a debt because we're investing in our future, we're investing in renewable energy, we're investing in low carbon transport, we're investing in energy efficient housing, in which case, it's going to transform the capital stock of the country. So it's really important to ask these questions around the design of money. And as I wrote this book, I became more and more interested in this word design, and more interested in thinking about how cities are designed, how buildings are designed, and how economies are designed, because just as we were talking earlier about those economists who wanted to make economics like physics. And they were looking for laws of motion as if there was no design at all, it was sort of the God, God's design of how the planet will work and how gravity works. They were looking for the laws of motion of how the economy moves. That's just to me the wrong mindset. It's all about design. And we can redesign our economy, we can redesign what money is, how it works, who issues it, what characteristics it's given, what it can be used for, we can redesign the financial system, indeed we have to, because what we can't redesign is the way the natural world works. And we can't redesign how the climate system changes, we need to work with the processes of nature, and redesign our economic institutions so that they come into line with life.
Anthony 30:47
And then of course, there's investor expectations of returns. And I was fascinated by - and we featured John Fullerton in our in our first episode talking about this sort of thing, but we didn't cover what you covered in your book here, with his evergreen Direct Investing, that case study of escaping the constant pressure from shareholders to grow, working with mature low or no growth enterprises. I'd love you to talk to that. How does that work?
Kate 31:16
So John Fullerton, at the Capital Institute, is a really interesting thinker who, as I'm sure he told the story on your podcast, came out of working on Wall Street for JP Morgan, so has all the insiders insights into how finance works, but then stepped out - realized that it wasn't contributing to a living world. And has used that insider thinking to now come up with really innovative ideas for how can we create a financial system that actually works in tune with the regenerative capacity of the living world, and therefore we create a regenerative economy? And one of his ideas is this idea of evergreen direct investing. The principle is, as he once said to me, you know, a tree grows, and it matures, but it continues to bear fruit. Why can't we allow companies to grow and mature and to stop growing, but they still bear fruit? So there are ways you could structure investments and and equity in the company so that those who invest and hold a share of the company still receive, as it were, the fruit of the company without putting pressure on that company to keep growing. And I think that kind of thinking is exactly what we need. How can you enable companies to mature and thrive like my children to grow up, but then to be fully grown, and to belong? How can a company be fully grown, belong, and still get investors who have an interest in it? So ideas like that, from John, and from others who are looking at many, many different ways we can redesign this, show that there are new ways of financing, show that we can allow companies to mature and to thrive, and not always put them under pressure to grow and grow and grow, because that ultimately leads to mergers and acquisitions, which also often lead to collapse of those companies. It's not a healthy way, ultimately, for the investor or for the company itself.
Anthony 33:02
I'd like to move now to the engagement of, I guess, your engagement particularly, your observations of taking this message around the world. I noted in your book, there's a fascinating and telling line when you talked about a senior advisor to the UN expressing doubt to you privately, but not publicly about whether growth could keep going. Now, you visited the World Bank, the Vatican, the World Economic Forum, you've got mainstream economists like Kenneth Rogoff, I think it is starting to ask the question as well - are you finding that there is a shift afoot or an opening afoot in mainstream institutions, to to start to consider this and bring in the work looking at how we would make this sort of transition?
Kate 33:51
So I'm finding so far that the place I have found least engagement and enthusiasm, or or indeed just response is mainstream economics departments, in universities, they just haven't shown any particular interest. Where I am funding response is amongst those who actually work with the real economy. So whether it's from the World Bank - yesterday, I was at the Financial Times and the international financial corporations transformational Business Awards, and I was asked to give the keynote speech there which again, I was fascinated by that they are interested and want want these new ideas to come in. I'm constantly in conversation with businesses who are really interested in this. And indeed those who are creating 21st century cities because to go back to where we began, economics means household management, and those whose jobs require them to find ways whether through policy or through business or through urban design, to actually actively manage this extraordinary planetary, local, global, national households in which we live - They are looking for ideas that that makes sense with the world in which we live. And so to them, when I talk about creating an economy that's regenerative in working with the living process of life and distributive sharing value far more widely, it makes sense. Companies know that they're exposed to social action, they're exposed to climate change and the vulnerabilities of a changing environment. So they're fascinated about new ideas that actually could help them think about how they can transform themselves to do business in a way that helps bring humanity into the donut rather than pushes us out. So I've been really enjoying presenting these ideas, and presenting the same presentation actually, everywhere I go, not watering it down, not changing it, not trying to make it more palatable to one organization or another, really presenting it boldly and wanting the critical feedback. I'm just struck by how many people in institutions are looking for a positive new language, because we so clearly know that the economic framing that we have is, is tired, and not providing a language that fits the 21st century. So I'm very encouraged as a sort of first round, my book has been out for what just over two months now, I'm really encouraged by the take up and interest from mainstream institutions, not those in the economics departments who seem to not want to engage with it yet, but let's see what happens there.
Anthony 36:31
It is fascinating that that should be where it lags and ironic in many respects, given the increasing links between universities and industry, that in this regard, there's a divide where arguably we would want them to connect. But I also note in that context that you've talked in your book about a global student revolt in economics. So that's a fascinating response to the dilemma you're finding. Could you talk to us a bit about what's gone on there?
Kate 37:02
Yeah, so 25 years ago, when I walked away from economics, there was no internet. I didn't have anyone to find and turn to I just walked away thinking this doesn't make sense as a way of looking at the world to me. Today, when students do that they - well what happened a few years ago, especially around the financial crisis, many students found themselves frustrated and embarrassed because sitting in the pub with friends turning to them and saying, well, you're studying economics, you tell us what's going on in the world's banks - Why is the financial system crashing? And they said, We had no better explanation than anybody else, our degrees were not equipping us to even understand what was going on at the heart of the economy. So when they felt in this situation, some of them went online and realized they weren't alone. And the beauty of the internet is it allows you to meet and organize with those like minded and so they created an international students movement that is not just for students, that's the great thing about it, they've opened it up, anybody can join, we can in a sense all be students of 21st century economics. It's called Rethinking Economics, which is the Umbrella Movement, bringing together many, many of these different diverse student movements in countries all over the world. And their call is for pluralism. So they say, we feel we are being taught predominantly just a neoclassical economic understanding of what economy is, and we're being taught it as if it's just the only theory. This is the theory. Whereas in almost any other subject, from history, to English to politics, you'd be taught a range of theories and you, you learn to see the world through these different perspectives. They want that they want pluralism, they want to be taught diverse schools of thought, so that they can be given the chance to use their own minds, to make up their own minds as to which theories should be used when. So I think this is incredibly valuable. Those who have in many countries paid 1000s of dollars and given years of their own lives, to study this subject, the very, those very people are turning around saying, but we realize that what we're being taught isn't equipping us for the future that we see coming at us. And we want to be taught something different. So it's a drive for change from within the economics institutions themselves. And I'm working with those students and really inspired by them. In fact, my book opens and closes with one of the founders of this movement, because it's a very important place for change to come.
Anthony 39:17
It sure is. So speaking, I mean, you've just done or I guess, throughout, we've been talking about how people are getting involved and applying this stuff and exploring this stuff. Let's perhaps close with a sense of, is there anything else that that people having listened to this program or read your book, out there in the world, in their own lives and the work that they do, that they can do or that they might be able to explore as part of the message you're giving? What should and could people be doing?
Kate 39:47
Okay, there's a lot that each of us can do. 20th century economics told us that we are consumers. And therefore the power that you have is where you know, you can think about what you buy - yes, you can, you can think very thoughtfully about the way that you eat travel shop, all have an impact on our use of resources, on other people's rights at work. So we can all think about how does the way that I engage as a consumer and buy things in the world shape humanity's ability to move into the doughnut, but we are so much more than this 20th century conception of a consumer. We're all citizens. How does the way that I vote, engage in politics, shape our ability? How can I reshape the economy through these means? Again, there's this wonderful thing in the UK called neon, the new economic organisers network, where people, ordinary citizens are learning to talk about the economy and to become people who then go from place to place giving talks about rethinking economics. So we're really starting to democratize the economic conversation. But we're also savers, we're investors. So how does the way that I invest or divest, how's the way that I volunteer? All of these different ways shape the economy, each one of us may be a student, how can I join the students movement? How can I influence the curriculum taught? Or are you a teacher? How can I change what I teach? Are you an employee? How do I earn my livelihood? And what influence can I have in my own organization? To ask whether the products that we're producing are in line with moving into the donut or reflecting a world in which we meet the needs of all within the means of the planet? How can we change our corporate strategy? And maybe I'm a CEO, an inventor, an entrepreneur, an innovator? In any of these roles, we all actually have a constellation of influences. Even if it's as a parent, how do I talk to my children, about our interdependence on the living world? What can I show them? What can I do with them that increases their appreciation of that. So there's a lot we can do, we should never allow ourselves to be told we're consumers. And then it's just what you buy is what matters. We are a rich constellation, each one of us, of influences. And we can use that to reshape our economy. And I would say lastly, the first thing we should do is each one of us, starting in our own homes, the unpaid care work of parents, and traditionally women, all the cooking, washing, sweeping cleaning, raising the children, do it all again tomorrow, to raise the next generation of those who work in the economy. That's a hidden part of the economy. So I often say at talks when people say what can we do? So right, start in your own home - Who's doing the unpaid caring work in your home? Is it fairly distributed in the home? How could that be redistributed? Where do all the materials coming into your home come from? Could you reduce the amount of materials you're bringing in? Are you recycling the streams of waste that are going out? Are you making your household part of the circular economy? Where does your energy come from? All these things. We can ask a lot of questions and start to transform our own lives. And of course, they're challenging, but that's the first place we should start.
Anthony 42:49
And the citizen part of ourselves that you referred to, of course, has been intensely relevant in Britain of late - well, now, currently.
Kate 42:57
Overnight! Yeah, we've just woken up to a hung parliament here in the UK. And Theresa May, the prime minister called a snap election some weeks ago, because she wanted to strengthen her party's majority in parliament. So she could take a strong Brexit as she says. In fact, she's lost her party's majority. So it really backfired on her. But what's happened is, in the last, I believe, in the last 24 hours, a million young 18 to 34 year old young people registered to vote. So there's been an increase in young people registering to vote, voting, engaging in politics. I believe it's a wonderful beginnings of a return to an engaged political narrative. I know in Australia, you have an obligation to vote, which I actually think is a pretty smart idea. We don't have that. And you can have huge voter apathy with people thinking, Well, you know, it doesn't make any difference anyway, and it does make a difference. And a lot of young people have woken up to that and shown that they can make a difference. So we're waking up to a sunny morning in the UK literally and proverbially.
Anthony 44:04
Yes, and that reframing of hung parliament we were talking a little about earlier in the sense of how it comes with negative connotations by and large, as well, as almost hamstrung rather than hung. But needn't be that way in terms of the dialogue that you are compelled then to engage in.
Kate 44:22
Yeah, so in the UK, we're used to a two party system. That's the history of UK politics. And one party normally gets the majority of seats, and they just go on and rule and the others are, you know, the minority. I think this is the second time now we've had a situation where no party gets a clear majority. And it's the beginnings of some sort of coalition politics and dialogue, because we don't have a proportional representation system, which would really help us move in that direction. But I believe perhaps there's a chance that those dialogues will actually be a listening dialogue and true engagement rather than one party thinking that because we have the majority, we can steamroll the rest of the population from whatever side of the house they sit - much more into compromise and to negotiation into working together. And certainly, given the things that this, the UK has been through in recent years, compromise, working together and realizing we have more in common than we do apart would be a wonderful thing to happen in British politics.
Anthony 45:28
indeed. And I hope that within that context, you'll find an ever growing platform to speak about what you've written about and and this beautifully segues to the music you're going to nominate for us too I believe?
Kate 45:39
So I nominate a wonderful song by George Benson, who I just think is a fantastic jazz guitarist, musician, singer. So I've always loved George Benson, but the donut is a positive diagram. It's a positive picture of the future that we want to create. And so I believe in having a strong positive vision of the world that you're for. You should always speak in the language of what you're for - Regenerative and distributive by design, keep to that language, keep to a positive framing, stick with it. And that's how we create paradigm change. So George Benson has this lovely song, never give up on a good thing. And I that's just - That's my strategy for changing the world. Hold out a positive vision, never give up on it. Keep speaking to it. And one day, you'll find that other peoples are moving towards it with you.
Anthony 46:27
Brilliant Kate, you will probably always be the donut lady from here on. But we're all the richer for it. So thanks a lot, and thanks for joining us.
Kate 46:35
Ok, just don't eat too many of them. It's just a metaphor.
Anthony 46:38
That's right. Thanks for joining us. It's been an absolute pleasure.
Kate 46:42
My pleasure. Thank you.
Anthony 46:49
That was brilliant new economist Kate Raworth online from Oxford. Donut economics: Seven Ways to think like a 21st century economist, is available at all good bookstores, and the series of animations on our website is also well worth a look. My name is Anthony James. See you next time.
Find more:
Hear the rest of our conversation back in episode 3. We go on to talk about the practicalities of change, the student revolt that has only continued to grow since this conversation, and how we can go about the shift in thinking and acting in our own lives.
Music:
43, by Owls of the Swamp.