Environment Magazine

The Economy Worse off Since 1978

Posted on the 03 July 2013 by Bradshaw @conservbytes
eat money

Can’t eat money

I was only a little tacker in 1978, and as any little tacker, I was blissfully unaware that I had just lived through a world-changing event. Just like that blissfully ignorant child, most people have no idea how important that year was.

It was around that year that humanity exceeded the planet’s capacity to sustain itself in perpetuity1. As I’ve just discovered today, it was also the same year that the per-capita Genuine Progress Indicator (GPI) peaked.

Now for a little detour and disclaimer before I explain all that. I’m not an economist, but I have a dabbled with the odd economic concept and bolted-on economic sub-routine in a few models I’ve written. Some would argue that conservation (i.e., the quest and methods needed to conserve biowealth) is almost entirely an economic pursuit, for economics is the discipline that attempts to explain (and modify) human behaviour. I tend to agree insofar as we now know enough on the biological side regarding how species become threatened and go extinct, and what kind of things we need to do to avoid losing more of the life-support system provided by biodiversity. Being completely practical about it, one could even argue that the biology part of conservation biology is complete – we should all now re-train as economists. While that notion probably represents a little hyperbole, it does demonstrate that economics is an essential endeavour in the fight to conserve our home.

Almost everyone has heard of ‘GDP’ – the Gross Domestic Product – as an indicator of economic ‘performance’, although most people have little idea what it actually measures (I’m including businesspeople and politicians here). GDP is merely the sum of marketed economic activity, which is only one small facet of the economy. For example, growing a tomato and preparing a salad for your family with it is not included, yet buying a frozen meal in the supermarket is. Even an oil spill increases GDP via increased expenditures associated with clean-up and remediation, when clearly it is not a ‘good’ thing for the economy on the whole because of the lost opportunities it causes in other sectors.

GDP clearly doesn’t measure all the positive aspects of economic activity, nor does it come close to measuring social or economic welfare. In other words, it’s a pretty shit measure of the totality of economic activity.

While there are many other measures out there, a new paper demonstrates that the Genuine Progress Indicator (GPI) is perhaps a more appropriate measure of a society’s economic performance. What is the GPI? It is a consolidated measure of economic, environmental and social elements. It too has its flaws and critiques, but no single indicator can ever hope to be a perfect measure. GPI includes personal consumption expenditures like the GDP, but it penalises them for skewed income distribution, environmental costs, crime and pollution (amongst others). It is therefore a much better index of economic welfare.

In their new paper in Ecological EconomicsKubiszewski and colleagues use this more inclusive and representative economic indicator to show that globally (i.e., for the 17 countries representing > 50% of the world’s population and GDP for which data are available), the per-capita GPI also peaked in 1978. While per-capita GDP has largely continued to increase uninterrupted over the last 60 years, GPI/capita shows instead that we are now losing economic welfare. So while we might be expending more in markets, we are doing more damage than making economic gain.

I must reiterate that this paper is not about biodiversity, extinction or even environmental trends. It’s a fairly involved economic analysis that might be lost on many conservation-minded. However, I think it clearly demonstrates to the so-called economic ‘rationalists’ out there that environmental degradation has real costs. Making more and more money is superfluous if you can’t enjoy the fruits of that expenditure.

As the ‘proverb‘, attributed to Canadian Cree Alanis Obomsawin and made famous by Greenpeace in the 1980s, goes:

“When the last tree is cut, the last fish is caught, and the last river is polluted; when to breathe the air is sickening, you will realise, too late, that wealth is not in bank accounts and that you can’t eat money.”

CJA Bradshaw

1This is estimated based on the global Ecological Footprint/capita exceeding global Biocapacity/capita. While the Ecological Footprint has its problems, it is correlated with other measures of environmental degradation (e.g., Bradshaw et al. 2010).

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