We have about 50 years and then we’re fcuked…

…unless we start doing something about the environment now! This is the harsh message according to Al Gore’s movie called “An Inconvenient Truth”. A must see for all of us in my opinion!

What is most scary about this movie is that it makes one realize that the world is going to be a very unfriendly place to live in if we don’t stop the current rate of environmental destruction.

But despite inherently knowing this, most of “us” just continue to live our lives without taking any real action – a bit like frogs in a pot of water being brought to the boil without jumping out. And by “us” I include governments, especially those from more industrialised nations.

There are many reasons for our lack of collective action and urgency, but in my opinion one of the major reasons is that success of our economies and businesses is measured by GDP. Using GDP does not give incentives’ to be more environmentally friendly as illustrated by an article I wrote a few years ago. Part of it referring to the problems with GDP I have pasted below:

Businesses seek to maximise profits and therefore there will always be an incentive to externalise costs. As Welford (2002) summarises, “The single-minded emphasis on profit, efficiency, cost reduction and growth dwarfs issues such as employment, protection of the environment, social responsibility and sustainable development.” Cavanagh et al (2002) claim a possible reason for this is because the primary driver and measure of economic activity today is GDP, which fails to give a true indication of how society is actually progressing based on these activities.

Inherent in the GDP measure is the assumption that, as it grows, so society is better off. However this system of measuring economic activity has many flaws because it assumes that all business activities, even destructive ones such as the clear-cutting of forests or construction of toxic dumpsites, are all positive indicators of GDP growth. Ineffective long supply chains are also considered more beneficial to GDP than shorter ones. For example long-distant shipping of goods across oceans is seen as a good thing because it adds many layers of economic activity, from production to port, from shipment to delivery. Local production for local consumers involves less shipment and is therefore seen as less productive because it does not contribute as much to the GPD measure, despite being more efficient and effective.

Other limitations of GDP include: not counting activities where no or minimal money changes (e.g. household labour caring for the sick and elderly or subsistence agriculture within communities); not counting the destruction of non-renewable resources and natural capital (e.g. the depletion of forestry whose diminishment impoverishes the future of any society); and the lack of any distinction between the production of goods and services that help the poor and that of luxury goods or even weapons.

Hence it is possible for the deprivation of the poor to increase in a country during periods of rapid growth. While more ‘productive’ economic approaches such as increased foreign investment or capital-intensive infrastructures add to GDP and the perception of progress, they actually undermine traditional economies and previously self-reliant systems. Encouraging businesses to work towards a higher GDP is therefore often in conflict with many of the objectives and initiatives of a sustainable economy and this needs consideration.

A better measure of economic success is GPI rather than GDP…

A new philosophy and strategy of measuring economic activity is needed; one that encourages sustainable production, consumption and accountability by businesses, but also overcomes the inertia for change and is consistent with the aim of profitability. It needs to accurately reflect the economic activity while encouraging practices that are sustainable and in compliance with initiatives such as the Global Compact.

Several such measures have been developed by organisations like the International Institute for Sustainable Development of Canada, the Redefining Progress group and the United Nations Development Program, which overcome many of the GDP’s shortcomings. One example that could be used as a suitable alternative to GDP is the Genuine Progress Indicator (GPI), which takes from GDP the financial transactions that are relevant to sustainable economic well-being, and adjusts for aspects of the economy that GDP ignores (GPI, 2004; Cobb et al, 2004; Cavanagh et al, 2002). Hence GPI measure the relationship between traditional factors that are economic as well as those factors that are social and environmental. Like GDP, GPI is based around the nation’s personal consumption, but assesses the ‘well-being’ of households, rather than the money they spend.

Some of the economic adjustments and measures for GPI include: Resource Depletion – GDP counts resource deletion as current income, while GPI counts the depletion or degradation of wetlands, farmlands and non-renewable minerals (such as oil) as costs; Pollution – GDP counts pollution as a double gain, firstly when it’s created and again when it is cleaned up, whereas GPI subtracts the costs of air and water pollution, as measured by actual damage to human health and the environment; Long-Term Environmental Damage – GDP does not account for economic environmental impacts such as climate changes and the depletion of the stratosphere whereas GPI treats as a cost the consumption of certain forms of energy and of ozone-depleting chemicals.

I don’t profess to be an expert on environmental issues but I know that the time to act collectively is now. There is an associated website for Al Gore’s movie where you can read more. We cannot tell future generations in 50 years from now, that we didn’t know.

mmm... I am also wondering how different the world may have been today if Al Gore had won that election!

References:

• Welford R, 2002, “Disturbing Development. Conflicts between Corporate Environmentalism, the International Economic Order and Sustainability”, in Utting, 2002, pp. 135-158.
• Cavanagh J, Mander J, Anderson S, Kimbrell A, Barker D, Korten D, Barlow Maude, Norberg-Hodge H, Bello W, Larrain S, Broad R, Retallack S, Clarke T, Shiva V, Goldsmith E, Tauli-Corpuz V, Hayes R, Wallach L, Hines C, 2002, Alternatives to Economic Globalisation – A Report of The International Forum on Globalisation, Berret-Koehler Publishers, Inc, San Fransico.
• Cobb C, Venetoulis, J, 2004, “The Genuine Progress Indicator 1950-2002 (2004 Update), Sustainable Indicators Program”, Redefining Progress [online]. Available from: http://www.RedefiningProgress.org [Accessed: 6th July 2004].
• GPI, 2004, “Contents of the Genuine Progress Indicator” [online]. Available from: http://www.redefiningprogress.org/projects/gpi/gpi_contents.html [4th July 2004].