Factoring the environment into economic calculations part 3
Wednesday, 01 July 2009
Economic growth is touted as the only way to rid the world of poverty. But London's New Economics Foundation policy director Andrew Simms wrote in New Scientist magazine (October 18, 2008) that to get the world's poorest people on to an income of just US$3 per day would require 15 planets' worth of bio-capacity.
"In other words, we would have made Earth uninhabitable long before poverty is eradicated." He goes on to say: "It would take at least three Earths to sustain us if everyone had the lifestyle of people in the UK, five if we lived like Americans."
However, at the moment, growth is king and the call for economies to continue growing drowns out any concerns about the environment.
But another call is getting louder. The call to change the economic model to include effects on the environment. And the recession is seen by some as an opportunity to do that.
Earlier this year, United Nations Secretary-General Ban Ki-moon told the World Economic Forum in Switzerland that "climate change threatens all our goals for development and social progress . . . On the other hand, it also presents us with a gilt-edged opportunity. By tackling climate change head-on, we can solve many of our current troubles, including the threat of global recession."
The UN is calling for countries to adopt a Green New Deal. New Deal is what American President Franklin D. Roosevelt called the economic package he put together in the 1930s to haul the United States out of the Great Depression.
The Green New Deal aims to do the same thing, but with an emphasis on the environment.
The Chinese government has allocated about US$30.9 billion, out of a US$586 billion economic stimulus package to environmental projects. Time magazine, in its June 1, 2009, edition, says 30 years of "rapid, unchecked economic growth" has turned many of China's rivers into cesspools, lands into wastelands and "much of its air into grimy soup".
Closer to home, the New Zealand Government's initiative in last week's budget to provide $323 million over the next four years to insulate houses is a Green New Deal-type project.
Dr van den Belt says energy efficiency is a big one.
"Better insulated houses would help. There is economic activity associated with that and there are also certain savings when it comes to environmental impact. That's the type of thinking that needs to go on."
Erosion is a big problem and could be included in a New Zealand Green New Deal, she says.
"If you take away the natural vegetation and you build farms very close to the waterways, there is no vegetation that holds the soil in place and good rainfall washes the soil into the waterways."
The Green New Deal is a shift away from economic activity that is geared only towards growth. Instead, it is based around economic development.
Various names have been given to an economy that is not geared towards growth - steady state or zero growth are two of them.
There is a big debate among scientists around whether there has to be zero growth, Dr van den Belt says.
"If you start to value the ecosystems and the services you get from it and make it a legitimate part of your economy, it could actually grow."
Conventional economics says built capital, labour and land are the factors that produce goods and services. This is measured by GDP.
But what is left out of the equation is that economic activity is only possible because society is embedded in ecosystems, she says.
"So we prefer to look at the whole economy, which includes natural capital alongside built capital. If you really want to be serious, you can include social capital and human capital."
Ecosystem services, which at the moment are counted as free, are the natural capital component. It should be valued.
"It's outside the GDP way of looking at the world, but we still get those services. It'll be really terrible if we don't get those services anymore."
Wetlands, for example, take them away and society loses services such as water purifying and flood protection. Forests, especially those on slopes, perform erosion control. Now is a good time to look at new economic indicators, Dr van den Belt says.
"They need to do a major system overhaul and not just look at the speedometer, but look at other indicators as well."
At NZCEE, ecological economists are looking at different indicators. One of them, and there are several, is a genuine progress indicator, which looks at a number of things including social activities and environmental impact.
"It looks at the environment as a capital, as a resource. It looks at what kind of services we actually get for free from the environment."
Everyone is worried that changing the economic model will hamper their way of doing business, she says.
"In a way it will, it might become different. It's setting the container of how you can do business in a different way."THE END
