Book Review and Application to the Australian Construction Industry

Raworth's Doughnut Economics:

Seven Ways to Think Like a 21st-Century Economist
by Matt Stevens PhD
Kate Raworth's Donut Economics proposes a new
journey for a centuries-old discipline. She asserts that
Economics' highest purpose should be for human prosperity
and, therefore, not be a source of misery (climate destruction,
social injustice, and economic unfairness). This book is a primer
with familiar guideposts that bring the reader to a contemporary
and basic understanding of challenges and potential solutions to
this century's social, environmental and economic threats.
Doughnut Economics is a needed historical
interpretation and a new path for the construction industry as
we deliver the needs of this century. For outsiders of our sector,
it provides an aspirational direction about a core activity of most
people and their societies. However, it fits neatly into the
construction industry dynamics and structural relationships.
Raworth asserts that unbridled economic growth comes
at a high environmental and societal cost; therefore, more
planning and guidance are recommended and will help minimise those costs. However, the
ideological battle appears to be waged at the institutional and historical levels. Therefore, Raworth
targets many of capitalism's enduring tenets and institutions, offering a different approach.
From Raworth's perspective, capitalism is not a religion, nor should it become one.
Therefore, economic growth is not primary compared to existential threats such as climate change.
But it has lifted more people out of poverty than any other system. Replacing it appears not to be
an option but modifying it is. However, there are clear examples where technological advances are
not advisable nor welcome in a democracy. One is the soon-to-be standardisation of self-driving
cars and trucks. Pursuing this on a national scale would manifest in a loss of employment of 5%
or more of its citizens. Therefore, capitalism, the best system for increasing quality of life, must be
managed more in the 21st century.
Raworth integrates the most notable economic thinkers and their assertions into her well-
articulated thinking. She explores many governing theses, such as those from Paul Samuelson,
Alfred Marshall, and W.W. Rostow.
Her framework resembles a doughnut that proposes borders on economic activity and
directs of future policy. See Figure 1.

Kate Raworth is a self-described “renegade economist” focused on making economics fit for 21st
century realities. She is the creator of the Doughnut of social and planetary boundaries, and co-founder of
Doughnut Economics Action Lab
 Figure 1. Doughnut Economics' Framework (Doughnut Economics 2017)
The Doughnut Economic Framework articulates two limitations (see dark green rings) a)
The ecological ceiling that cannot be exceeded without grave consequences. Adverse inputs such
as chemical pollution, biodiversity loss and ocean acidification that exceed the earth's
compensation capacity will endanger our existence. b) The social foundations must be attentively
governed as we journey to a more heavily managed economy. Fairness in areas such as justice,
education, housing, and healthcare must be paramount to keep society moving forward.

The Seven Ways to Think Like a 21st-Century Economist

Raworth lists seven interrelated points that describe a system of new thinking. None are
radical, and all are plain-spoken. Each is fully explained in a chapter of its own. We have found
alignment with the construction industry.

Raworth’s internationally best-selling book Doughnut Economics: seven ways to think like a 21st century economist
has been translated into over 20 languages and has been widely influential with diverse audiences, from
the UN General Assembly to Pope Francis to Extinction Rebellion
 1. Change the Goal
The old goal was to produce more to prosper. The new plan aims to balance growth with
zero harm to the planet. The new goal is to assess and monitor economic activity's impacts
carefully with a concern for excessive growth; indeed, the Australian construction industry's
inflation-adjusted growth of 1% historically makes our industry lightly speculative and one
where supply/demand for shelter, processing facilities, and infrastructure is predictable.

2. See the Big Picture

The Big Picture is a recasting of the narrative which guides our thinking about how the
economy works. Should it have a circular flow or some other process characteristic? Smartly,
a system view facilitates an examination of causes, effects, policies and unintended
consequences.
In a simple process map, construction industry is linear but highly structured. Its big
picture is easily drawn from it project conception to its facility management phase. Products
and services are generally "pulled" when investment dollars are dedicated to a project. A
majority of structures is not constructed speculatively. Lastly, governments must understand
the industry's contribution to the quality of life, its role in rapid urban transformation and
firewall against the effects of climate change.

3. Nurture Human Nature

There are "nudge" policies of the present and future that should help shape human
thinking about critical areas such as consumption, status, saving, charity, and investment.
Nurturing human nature can be effective in construction. It is an industry hungry for secure
payment and higher procurement ethics. If "nudge" policies ensure the timeliness and
completeness of payment and a better chance of winning the next project, then the main
contractor and their subcontractors should produce consistent outcomes

4. Get Savvy with Systems

Getting savvy with systems is another alignment with the book. The economy's
common understanding needs to be updated from its 19th and 20th-century knowledge to one
of a complex system (many interdependent parts). From this point, modelling and ongoing
monitoring help all citizens toward a fairer and safer economy.
Construction is a chaotic industry, and a process map that is adhered to by all
stakeholders will be welcome.

5. Design to Distribute
There are inequalities in the economy. The value produced is not distributed
proportionally to the person or organisation generating it. In Raworth's vision, a distributive
system would be designed and implemented to create a more equitable outcome. Power
imbalances among stakeholders should be identified, and regulations should be enabled to
create a fairer relationship between stakeholders
The nature of the construction industry is an owner/operator (O/O) model or those
who are managing directors also own the firm. These are more than 90% of the organisations.
They have skin in the game. The largest firm has approximately 2% market share. Very few
construction firms are publicly held, and O/Os have no ambition. There is a low barrier to
entries and thus much competition.

Kate Raworth is a self-described “renegade economist” focused on making economics fit for 21st
century realities. She is the creator of the Doughnut of social and planetary boundaries, and co-founder of
Doughnut Economics Action Lab
 6. Create to Regenerate
More advancements in circular economic thinking produces products and services with
less destruction and poisonous results. The circular economy dynamic is aligned with
construction. Materials are stored in a finished building, processing facility or infrastructure
that can be rehabilitated, refurbished, recycled, repaired, repurposed or reused.
The Construction Industry creates large objects that can be a deposit of energy and
resources with its material to be used again. It is known as Buildings As Material Banks
(BAMB). We may use a material we have too much of to store in a structure with the plan that
we would create technology many years later. Design should move toward an energy-
sufficiency model. Its electrical and related needs should be generated on-site at the building
or processing facility while also evolving materials to be carbon neutral. See Figure 2.

Figure 2. The Butterfly Economy - regenerate by design (Doughnut Economics 2017)

7. Be Agnostic about Growth

Growth is not critical to the economy's health or quality of life. Instead, better use of
energy and resources focusing on social and environmental policy. However, if this is to occur,
populations will need to trust institutions for their economic needs in their retirement years.
As stated, Australian construction does not grow exponentially (an average of 1% per year)
in inflation-adjusted dollars, so it may not be a concern to Raworth about growth being
problematic. However, some industries may need to be considered, such as innovation and
education, which are crucial for the continued improvement of quality of life
We sense that at the end of the near-term debate, governments will create a selection
process of industries that are encouraged and others that will have disincentives placed upon them
by governments.

Data Show Raworth's Model is Manifesting

We offer these additions to the author's salient points showing, in general, here seven
points are truer today than in 2017. First, the following data buttress the book's assertions and
should give pause to critics. The list below contains real-world alignments in 2023 to Raworth's
2017 framework. Second, statistics concerning "The social foundation and indicators of its
shortfall" - Table 1 - includes one year's data – not a trendline or a comparison year. Finally, we
Raworth’s internationally best-selling book Doughnut Economics: seven ways to think like a 21st century economist
has been translated into over 20 languages and has been widely influential with diverse audiences, from
the UN General Assembly to Pope Francis to Extinction Rebellion
add the following reference points. From Ten Global Trends Every Smart Person Should Know: And
Many Others You Will Find Interesting (Bailey and Tupy 2020). These additional data show positive
trends that align with the book's assertion of critical improvements needed.
• Since 1820, the world's economy has grown more than 100-fold, while the world's
population has increased less than eightfold. In 2100, the Intergovernmental Panel
on Climate Change projects growth to USD 600 trillion.
• Absolute poverty was 42% across the globe in 1981. It fell to 8.6% in 2018,
according to the World Bank.
• The UN Human Development Index has trended positively in OECD and
Developing Countries. However, it has developed twice as fast in this latter group.
• In 1800, Autocracies ruled 60% of countries, but in 2017, approximately 10%
governed that way. For the same period, Democracies were in single-digit
percentages but are now evident in about 50% of nations.
• In 1977, Solar Panel Generation cost $76 per watt. In 2017, it dropped to $0.24 –
a 95% reduction.
Discussion: How this Applies to the Australian Construction Industry
Raworth's work is profound and interwoven; its value is high. The ideas and applications
from this book deserve consideration by construction industry leaders and their governmental
counterparts.
The construction industry is a good starting point for implementing the Donut Economics'
model. It has many characteristics that align with Raworth's seven points. First, it does not grow
exponentially but incrementally subject to the flow of funding of projects. Next, the system is
straightforward, easily mapped, and thus understood and managed. Nudge policies are already in
place, with many under consideration to lessen the size of dwelling units. COVID has shown the
value of remote work. Building and other structures are material banks, and the amount of carbon
and other undesirable inputs can be designed out. The Australian construction industry is a low
net profit margin business (5%) but pays an above-average worker wage (Melbourne pays the 7th
highest globally), according to the Daily Mail Australia (2022). This translates into intra-industry
equity. It is interesting to note that COVID has increased wages in Australia.
In general, more government intervention is needed in the Australian Construction
Industry. However, construction history has shown that the top quartile of successful economic
actors, including private developers, will not go silent or inactive but engage the market and
government in advantageous ways. Even if they do agree to slow and implement equitable
economic growth policies, those stakeholders will not stand by after losses while seeing others
"winning" economically; there will be a revolt against the policy. As the author suggests, politics is
always present in government guiding industry.
Lastly, New studies published independently by the Lancet (2020) and the United Nations
(UN) (2022) revealed that the world's population is set to decline within the next few decades for
the first time in centuries. The article's lead author, Vollset declared," The last time that global
population declined was in the mid-14th century, due to the Black Plague." Do the world's decreasing
population forecasts, if true, show that no intervention is needed to limit GDP growth?
Construction contractors will have shrinking demand for housing, processing facilities,
commercial space and infrastructure in Australia. On the other hand, higher wages raise workers'
prosperity.

Kate Raworth is a self-described “renegade economist” focused on making economics fit for 21st
century realities. She is the creator of the Doughnut of social and planetary boundaries, and co-founder of
Doughnut Economics Action Lab
 Furthermore, the UN data files show a declining percentage of increase. Also, within
countries, it is more dramatic. For example, projections for 2100 show China's population will
shrink to 52% of its 2017 size while India is forecasted to be 79%. re
We sense that accommodation will have to be made for underdeveloped but critical
activities, such as innovation. Should there be exemptions to the proposed limited or no growth
policies of GDP? Additionally, economically emerging nations may protest the elimination of their
future economic development. Furthermore, Global patent applications were up 3.6% to a record
3.4 million for 2021, according to the World Intellectual Property Organisation (WIPO). Would it
be wise to stifle this activity? To do so may be to stunt the growth of the innovation ecosystem
and their follow-on improvements to industries worldwide. Patents that focus on clean energy, i.e.,
fusion, solar, wind, and the like, will produce more economic activity, be sustainable oriented and,
at the same time, replace outdated industries and sometimes harmful products. An additional
example is growth in the education sector; if people can become self-sufficient, social safety net
funding will not grow as quickly.

Conclusions and Summary

Raworth's book advances thinking about economic and-related challenges of the future. It
is needed today due to some "peak crisis" narratives familiar in social, economic, and
environmental discussions. Some groups believe this is an effective and noble method to battle
stagnated thought and action. In these days of a well-developed media industry, it is effective.
However, there are solutions with trade-offs that, if discussed consistently worthy of the
transcendent value they possess, then some form of this solution will be implemented to the most
benefit.
Citizens need to understand the general plan to support it, and Doughnut Economics is a
path forward given creditability by trends. The author provides an integrated set of ideas that
includes guideposts to help travellers reach a critical destination.
Raworth's landmark work is worthy of its praise. For our industry, we see it as a viable and
preferred path forward. Encouragingly, we are trending in the same seven ways the author
envisioned. It is critical to point out that true experts are proven by their predictions. Five years
after its publication, Doughnut Economics is emerging as a realistic framework.

References:
Bailey and Tupy (2020) "Ten Global Trends Every Smart Person Should Know: And Many Others You Will
Find Interesting". Cato Institute. Washington D.C.
Goren, S., Yuan, E., Cao, C.W., Smith, J., Hsiao, A., ... & Murray, C. J. (2020). Fertility, mortality,
migration, and population scenarios for 195 countries and territories from 2017 to 2100: a
Global Burden of Disease Study forecasting analysis. The Lancet, 396(10258), 1285-1306.
Raworth, K. (2017). Doughnut Economics (1st ed., p. 372). Random House.
Talintyre, B. (2022) Construction workers in one Australian city are earning $124 AN HOUR making them
among the best-paid tradies in the world. Daily Mail Australia. Sydney
United Nations Population Division Department of Economic and Social Affairs (UN) (2022)
Probabilistic Population Projections based on the World Population Prospects 2022. File
PPP/POPGROWTHRATE: Probabilistic projection of average annual rate of population
change by country or area, 2022-2100 (percentage) Median (50 per cent) prediction
interval, 2022 – 2100
Raworth’s internationally best-selling book Doughnut Economics: seven ways to think like a 21st century economist
has been translated into over 20 languages and has been widely influential with diverse audiences, from
the UN General Assembly to Pope Francis to Extinction Rebellion
Vollset SE, Goren E, Yuan C-W. (2020) Fertility, mortality, migration, and population scenarios
for 195 countries and territories from 2017 to 2100: a forecasting analysis for the Global
Burden of Disease Study. The Lancet
World Intellectual Property Indicators (2022) World Intellectual Property Organization. Accessed
December 31, 2022, https://www.wipo.int/publications/en/details.jsp?id=4632
Matt Stevens PhD focuses on construction contracting in research and teaching at
Western Sydney University.

Kate Raworth is a self-described “renegade economist” focused on making economics fit for 21st
century realities. She is the creator of the Doughnut of social and planetary boundaries, and co-founder of
Doughnut Economics Action Lab