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Home›Environmental dumping›When will “economic growth” represent environmental costs?

When will “economic growth” represent environmental costs?

By Brian Baize
May 12, 2022
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Human health and the natural environment are inseparable. A recent article in the journal The Lancet reminds us that “economic decisions about the environment have major impacts on human health, and that health and well-being depend on a thriving environment”.

Those who live in large cities may find this statement difficult to grasp, and many economists certainly do, as the words “natural environment” must now be replaced with “natural capital” for their understanding.

We live in a world where economic thinking governs our lives, which many believe should be our servant to provide a fair and secure future.

When the leaders of most western nations continue to puff out their chests announcing their latest gross domestic product (GDP) increase, or growth rate, they are exposing their powerlessness to manage a nation’s future by failing to recognize the environmental costs.

Or as written more politely by Stephen Posner and Lydia Olander, in The Hill, “As congressional leaders debate billions of dollars in federal spending, they have a critical blind spot ‘because they are ‘uninformed by a comprehensive accounting of the nation’s assets, leaving out many essential services that nature provides. “.

After nearly 70 years of GDP in economic ideology and practice, the World Bank has doubts about GDP as a measure of “growth” because it does not take into account the natural and human capital used to achieve it .

Indeed, the bank’s report “The Changing Wealth of Nations 2021 Managing Assets for the Future” now seriously challenges the use of GDP in its current form and could finally offer a glimmer of hope for the world to have a sustainable future.

Regarding “natural capital”, the report states that “mismanaging nature and failing to consider the longer-term impacts of our actions can have serious consequences, even if they are not immediately obvious. We therefore need an expanded economic toolkit, including broader measures of economic progress, to ensure our collective prosperity and even sustain our existence as a species.

The report notes that “in countries where current GDP is achieved by consuming or degrading assets over time, for example through overfishing or land degradation, total wealth declines. This may happen even as GDP grows, but it undermines future prosperity.

In Australia, with an election scheduled for May 21, the government has proudly announced a current GDP of 4%, but it could well be minus 4% if the loss of natural capital is taken into account, due to prodigious land clearing, urban expansion and environmental damage caused by mining. This may also be the case in the United States, but there have been few attempts to measure it.

The issue is of urgent importance as the world’s food supply is threatened by war, crop failures due to extreme climate change events and supply problems. It is a threat to one of our vital systems, the living soil, whose surrounding ecology and biodiversity services provide our food. Research by many scientists defining these threats should galvanize action.

The World Bank’s 2021 report may have been influenced by ‘The Economics of Biodiversity’ report by eminent economist, Professor Partha Dasgupta, which was quoted in an earlier The Hill article. Dasgupta pointed out that GDP does not include “asset depreciation” such as biosphere degradation. Economic progress relies on the extraction of resources from nature and the dumping of waste into it. When extraction and dumping exceed nature’s ability to repair itself, natural capital shrinks, as does biodiversity and the essential environmental services it provides.

A basic principle of any policy or practice is that it must be able to measure its effect precisely. It is therefore now vital to establish environmental accounting to value natural capital, as explained in an article by the Harvard Kennedy School.

Indeed, one has to wonder why the United States has been slow to adopt the United Nations System of Environmental-Economic Accounting (SEEA), which began in 2012, when about 90 countries have already done so. The answer may be that the United States favors a free market system that embodies deregulation and is the primary instrument in defiance of the consumption of natural capital. Indeed, even recent articles from prominent business schools fail to mention the environment as it relates to the US economy.

It is also important to reflect that for too long we have failed to recognize and utilize the inherent knowledge of many Indigenous peoples about land management. The free market system has alienated Western civilizations from such an understanding.

Reform must be initiated by a fundamental change in the thinking of economists and politicians of both tendencies. Bipartisan reforms will become all the more necessary as climate-related conflicts emerge, and reforms could provide security, especially to rural constituencies that include food production. Given the unprecedented impact we’ve had on land, the UN’s recent land report is essential reading for all members of Congress as they think about economic policy, not just climate change. climate action.

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A key step in the development of the World Bank’s “extended economic toolkit” should be to educate the public and businesses on GDP reform to value nature in order to incentivize government to protect it. . Currently, “real GDP” refers to GDP adjusted for inflation. Let’s have a “real GDP”, which includes environmental losses.

But we must realize that GDP reform is only one of a thousand pieces needed to complete this puzzle in the coming decades, if the planet is to remain viable for human life. The other elements – including climate change, pollution, toxic chemicals, water security, marine and terrestrial ecology, population growth, consumption, conflict – must all fit together because they are interdependent. Only by putting the puzzle together can we ensure our survival.

David Shearman (AM, Ph.D., FRACP, FRCPE) is Professor of Medicine at the University of Adelaide, South Australia and co-founder of Doctors for the Environment Australia. He is co-author of “The Climate Change Challenge and the Failure of Democracy” (2007) commissioned by the Pell Center for International Relations and Public Policy.

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