Wednesday, May 18

Growth and its measurements

In today’s societies we live in a kind of schizophrenia between our way of life and the consequences it produces. On the one hand, we are increasingly aware that the ways of producing and consuming, the use of resources that our rhythm of life imposes and the degree of pollution it generates, have plunged us into an unprecedented ecological crisis that we need to face in a timely manner. expensive and urgently. But, at the same time, when we want to combat specific economic problems such as unemployment, loss of purchasing power or, in general, when we try to improve the living standards of society as a whole, the only recipe we know how to apply is the growth of the economy. economy, regardless of its effects on the environment.

The economics debate versus health that some have wanted to put on the table in the wake of the pandemic, can be transferred on an enlarged scale to the growth dichotomy versus ecosystems. And there is little doubt that we have been prioritizing the former for a long time to the detriment of the latter, in such a way that the systematic commitment to grow at any price ends up having a negative impact on the health of the planet, on which the health of the planet ultimately depends. own humanity.

A part of this complex problem resides in the way in which we measure living standards and economic well-being, using almost exclusively as an indicator; the Gross Domestic Product (GDP) and its growth rates, and implicitly assuming that having more GDP per inhabitant always makes a richer society. But is that really so? As its name suggests, GDP basically measures what an economy produces, but it is not designed to measure the effects that production and its evolution over time have on ecosystems. If growth implies destroying natural resources at a rate greater than their own regeneration, growth may actually be making us poorer, only that the measurement system we use does not allow us to detect the real impoverishment of which we are being victims. For this reason, incorporating indicators that are capable of measuring environmental effects in order to take them into account should be a priority for economic policies.

Recently, the magazine ICE Economic Notebooks (dependent on the Ministry of Industry, Commerce and Tourism) has published a monographic issue on environmental economic indicators which deals with this problem and which includes a whole series of alternative measurement proposals for the Spanish case that are worth disseminating.

A basic way of developing environmental indicators is the quantification of the resources used by an economy in physical terms (tons). Something that, if combined with the right theory and methodology, can offer very interesting information. An example of this is the approach to economic functioning through the so-called “social metabolism”. A theoretical approach that analyzes the economy of a territory (country, region, city …) as if it were a living being that necessarily needs to ingest materials and energy in order to function and that, from there, like any other living being, develops different internal metabolic processes of transformation and, later, expels what is not metabolized in the form of solid, liquid or gaseous waste.

Analyze in an orderly and systematic way the quantities and types of materials and energy that enter an economic system, the internal transformation processes that are taking place in it and how well or badly they work, and the waste that the system generates , makes it possible to detect different metabolic regimes and their evolution over time. And that information can be very helpful in designing policies that bring us closer to an optimal metabolism whose objective is not necessarily to grow and grow without limit. The ecological transition that we are obliged to develop if we want to avoid major environmental disasters is nothing more than a change in the metabolic regime in which the “living economy” should consume less energy and materials, greatly improve its internal transformation by promoting reuse and recycling and, finally, reducing emissions of all kinds as much as possible.

Other indicators try to measure the environmental effects in monetary terms, that is to say, valuing in money the non-renewable resources that are used and also the environmental deterioration that is generated. This accounting is not easy at all, because it is very difficult to have all the information necessary to properly assess the price of exhaustible resources, pollution or the many environmental services that ecosystems offer us. To do so, it is necessary to apply criteria that are largely subjective and that, consequently, can give very different results depending on the assumptions made.

There is little doubt, however, that the valuation of resource depletion and waste generation represents a loss of assets that must therefore be subtracted from the growth accounting. And when this subtraction is carried out, even using very conservative assumptions, it becomes clear that a good part of the growth that GDP usually talks about evaporates, revealing a much less optimistic reality.

Already in 2009, in a report prepared by the Commission for the Measurement of Economic Behavior and Social Progress in which the Nobel Prize winners in Economics Joseph Stiglitz and Amartya Sen participated, among others, it was literally said: “What we measure affects what we we do. And if our measures are deficient, we can make wrong decisions. ” It is very obvious that the economic measurements that are being carried out regularly are deficient in that they do not take into account the environmental effects. Incorporating indicators that do so will not by itself solve the environmental deterioration generated by an economy designed mainly to grow at any price, but it allows at least to detect it, and is, therefore, a necessary but not sufficient condition to begin to act.