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Doughnut Economics: A Review

“Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist,” — Kenneth Boulding, 1973 Early on in the pandemic, Marc Andreesen told us it’s time to build. Our embarrassing response rate as a nation was due, in large part, to a shortage of things. We ran out of ventilators, cotton swabs, medical gowns, etc., because we hadn’t bothered to produce more of them. “It’s time for full-throated, unapologetic, uncompromised political support … for aggressive investment in new products, in new industries, in new science, in big leaps forward,” said Andreesen. In other words, more growth. Others said, f**k that, it’s time to whip out the doughnuts. In April, Amsterdam pledged to turn itself into a giant pastry item by becoming the first city to embrace “Doughnut Economics,” an alternative economic theory that rejects continuous GDP growth as its starry-eyed solution.

Instead, it embraces the doughnut, a circular economy model that seeks to feed and clothe everyone without ransacking the planet. You might be thinking, what are they smoking? Or, it’s socialism, reborn as a doughnut. It’s not: socialism is just as unsustainable. But we’ll let Kate Raworth, the inventor of “Doughnut Economics,” explain.

Too Serious for Its Own Good

Raworth was a renegade British economist who was tired of taking her peers so seriously. As a field, economics has a long history of inflating its own importance. In 1968, the Swiss central bank successfully lobbied and paid for a controversial expansion of the Nobel prize in sciences: overnight, economics was upgraded from an art to a science, and was now awarded the same authority as physics, chemistry, and medicine. The categorization implies that human economic behavior “lends itself to modelling, like chemical reactions or the movement of stars.” No wonder the Council of Economic Advisers (CEA) has every presidents’ ear. Frustrated with what she considered outdated dogma, Raworth set out to write Doughnut Economics, a growth agnostic model that seeks to update many traditional assumptions of economic theory. “Today we have economies that need to grow, whether or not they make us thrive,” said Raworth. “What we need are economies that make us thrive, whether or not they grow.” Among the doughnut’s other principles? To design a regenerative economy, one that is active within the larger biosphere rather than floating against the white background of a textbook. Why doughnuts and not something classier, like a beignet? It’s all about the hole. The hole represents misery and deprivation: the space we fall into when our critical needs haven’t been met. The outer ring, on the other hand, represents the ecological ceiling. Cross that line and the planet starts to fall apart. The sweet spot, of course, is the dough. Keep economic activity within the boundaries of the doughnut, and, Raworth tells us, we’ll be safe.

The Charges Against Growth

Raworth is not the first person to bring charges against growth. Thomas Malthus was the original celebrity pessimist, preaching that we would all die of famine thanks to our uncontrollable fondness for marriage. (He didn’t account for the industrial capabilities of Perdue Farms.)

More recently, Donella Meadows, a biophysicist and environmental scientist, provoked outrage with her 1972 report, The Limits to Growth, which used computer simulations to predict the outcome of exponential growth combined with a rising population and unchecked resource use. The conclusion? We’re SOL by 2072. “Growth is one of the stupidest purposes ever invented by any culture,” said Meadows. We need to ask, “Growth of what, and why, and for whom, and who pays the cost, and how long can it last, and what’s the cost to the planet, and how much is enough?” That’s not to say that Raworth dismisses growth entirely. She acknowledges the deep irony that is central to growth. On the one hand, economic growth is responsible for extraordinary strides in global well-being. Without growth, most of us wouldn’t make it past fifty, our daily budget would be less than $1.90 a day, and on top of that, we’d still have no indoor toilets. (And you thought running out of toilet paper was hard.) On the other hand, Raworth believes that growth, particularly in high-income countries, is dependent on the brainless consumer, widening inequality, and trampling offshore environments.

You Give GDP A Bad Name

Then there’s the issue of GDP itself. What’s so bad about GDP? GDP is simply a measuring tool for the value of goods and services within a given time period. It is widely considered the world’s most powerful indicator of national well-being, and the US Department of Commerce considers it one of the “greatest inventions of the twentieth century.” Sadly, it’s not very accurate. As Raworth points out, GDP overlooks huge swaths of people that grossly distorts its meaning. Futurist Alvin Toffler, who described conventional economics as a “one-size-misfits-all” fiasco, saw the limitations of GDP and productivity very clearly. “[Economists’] concept of productivity is extremely narrow. They define productivity in terms of your participation in the formal, paid-for work economy. There are millions of people in this society who are productive and do extremely valuable things for the economy, who never get paid.” A study in 2014 of 15,000 mothers in the United States calculated that if women were paid the going hourly rate for each of their roles, they would earn $120,000 per year. Even mothers who do head out to work each day would earn an extra $70,000 on top of their income for the unpaid care they provide at home. But GDP completely bypasses the cost of social reproduction and fails to value the future labor force. Toffler used to close his presentations by asking business executives, “How productive would your workforce be if it hadn’t been toilet-trained?” Another group left out by GDP is finance. GDP separates the real economy of goods and services from capital gains. This is significant because capital gains aren’t very equally distributed: in the US, the top 1% received 69% of long-term capital gains in 2018. Is GDP really the best indicator of national health if it doesn’t account for a huge chunk of inequality? Plus, most economic analysts completely ignore the banking sector. In 2008, many major financial institutions were using macroeconomic models in which private banks played no role. Economist Steve Keen, one of the few individuals who predicted the crash, was baffled by this exclusion: “Trying to analyze capitalism without banks, debt, and money is like trying to analyze birds while ignoring they have wings. Good luck.”

The Regenerative Economy

All of these shortcomings lead us to the idea of the regenerative economy, where real-world systems — whether living or non-living — are used as a model for economic-system design. Bill Rees, ecologist and co-creator of the “ecological footprint” concept, explains how it works: “A regenerative system is one that does not deplete or pollute its host and, at best, facilitates its host’s thriving. In other words, consumption by the system must not exceed production by its host; waste production by the system must not exceed the assimilative recycling capacity of its host.” What would this look like in the economy? For one, replacing linear supply chains with circular ones. Raworth describes the typical supply chain as an “industrial caterpillar, ingesting food at one end, chewing it through, and excreting the waste out the other end.” It’s a nice short-term design for profit-maximization, but, in the long-run, it runs counter to the living world’s natural recycling process and leaves us with a massive pile of garbage.

Raworth suggests transitioning to a circular supply chain where, “instead of heading for landfill, the leftovers from one production process — be they food scraps or scrap metal — become the source materials for the next.” Cellphones, for example, are filled with gold, silver, cobalt and rare earth metals, yet 85% of them wind up in landfills or your sock drawer within two years. In a circular supply chain, they would be designed for easy disassembly and reuse. (Apple definitely hopes this book winds up on the bonfire.)

And as for finance? Regenerative business will get nowhere without funding. But how to redirect resources? Raworth points to John Fullerton, a former managing director at JP Morgan who worked in finance for twenty years before founding the Capital Institute, a non-partisan think tank that seeks to reimagine economics and finance. “[Most people] do not question that the purpose of banking and finance is to make money by using other people’s money, preferably at the fastest rate possible, which usually means fueling those rabid extractive processes that are shattering the long-term holistic health of people and the planet.” One immediate change Fullerton suggests is developing a systemic rate of return “SRR” rather than an internal rate of return. Currently, finance seeks the highest risk-adjusted rate of return on investment, no matter how it’s generated. A 15 percent IRR is always considered better than a 10 percent IRR to the investor. Any nuance — such as whether an investment is real or speculative — is not reflected in the IRR. Fullerton believes that risk measurements could be tremendously improved if they included broader risks to the economy, society, and planet.

Spare Us The Horoscopes

The persistent branding throughout the book may deter some readers. At times, Raworth’s vision of countries issuing “national doughnut reports” one day or working around “doughnut-shaped conference tables” seemed utterly ridiculous. And sometimes the New Agey, Millennial dialogue was so overwhelming you thought she was going to pull out a horoscope chart next. But, overall, the idea of modeling our economic systems on ecological cycles seems much more sensible than bits of machinery. There is a growing global movement, led by groups such as the Santa Fe Institute, that rejects the idea that you can understand something simply by looking at its individual parts and ignoring the broader, more complex whole. Current economic models isolate man as a “self-contained globule of desire,” intent on growth for the sake of growth, which is the same ideology as a cancer cell. Can it get any worse? And, in our biggest quarterly decline in GDP seen since the Great Depression, any news dismissing GDP is welcome. At the very least, we can check in on our friends in Amsterdam in a few years and see how they’re faring. In the meantime, don’t worry about building more things. Let’s relax and have a doughnut.

About Colbeck: Colbeck is a strategic lender that partners with companies during periods of transition, providing creative capital solutions to meet their evolving needs. You can reach the team at


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