Here’s a piece just written for Sublime Magazine about ‘Holistic Economics’
There’s a deeper, darker recession that has been stealthily growing since long before the Lehmans and Madoffs of this world were consumed by their own greed. No doubt the financial crisis will affect many of us over the coming years. Its speed, coupled with the related financial tendrils that creep into many of our lives are surely cause for concern. Yet there is another financial disaster occurring that we’ve largely ignored as we’ve gorged on cheap money. One that’s less easily solved, taking place far from the trading desks and skyscrapers – the environmental crisis.
In a world shamelessly obsessed with economic value, the reasons for protecting the environment still make economic sense. When you factor in the value-added services, such as providing clean water and absorbing carbon-dioxide, it is calculated we lose $2-5 trillion annually through forest loss. That’s just forests. There’s climate change, which could risk reducing global GDP by 20% according to the Stern Review, coupled with marine issues, pollution, water shortages, and desertification – to name but a few. By some reports, the annual (yes, annual) loss in ecosystem services from biodiversity loss could exceed €14 trillion by 2050.
It’s hard to fully comprehend the value of our natural resources. After all, it’s rather difficult to pay off your credit-card bills in stag beetles, or take a redwood down to your local store. Yet we must be mindful of the value in mother nature’s store. Most of us can put a price on a pint of milk or a jar of honey because these natural products have woven their way into our consumptive cycles. But what of the value of poison ivy, jellyfish and slugs? Even if an acre of rainforest is worth more to us intact rather than in flat-pack boxes, how do we make that value apparent and accessible to would-be loggers? Is it possible, or do we need governments to make that determination, regardless of localized pressures? Not only might it take many years for a responsibly-managed forest to release the same value that might be captured in a day’s logging, but the value might be almost impossible to perceive, such as in the case of absorbing carbon-dioxide.
Yet perceptions of value are changing. We’ve begun to try to quantify and value some of the wider externalities of our actions, such as by considering the ‘triple-bottom-line’ impacts, measuring ‘ecosystem services’, or by studying cradle-to-cradle models. Economists such as Lord Stern have tried, with some success, to influence climate change policy at a global level by examining the holistic economics – despite the costs involved, the few immediate or local benefits, and the ownership issues (or lack of them) that might provoke a ‘tragedy of commons’. A more comprehensive valuation process is emerging, which represents a return to wisdom. Lets heed that wisdom.
Wisdom is defined in the dictionary as, ‘the quality of having experience, knowledge, and good judgment’. Wikipedia states it is, ‘an ideal that has been celebrated since antiquity as the knowledge needed to live a good life’. Sadly, we often ignore our wisdom. True wisdom implies understanding nature’s interconnectedness and, most importantly, making decisions based on deep, ancient experience, rather than acting, or reacting, in the short-term. I believe that if we ask individuals, organizations and governments to utilize greater wisdom, we’ll start to maximize true value.
For example, if the marine life in an ecosystem grows by 10% a year and the catch expands by 15% per year, the system will eventually collapse – with that in mind, it’s fairly easy to determine a ‘wise’ course of action. We should accept nothing less. When we do the math and look at the immediate value realized from catching the 15%, versus the the compound growth that would occur with say a 5% yearly catch, it’s even easier to make a decision that incorporates ‘experience, knowledge and good judgment’. Another example might be a forest that supports a community that would otherwise be displaced and attracts sustainable, long-lasting income through tourism or careful resource use. If that value is many times greater and employs and sustains more people than the immediate value gained through logging, once again it’s easy to be wise. Both examples play out daily, yet there are too many smart people who continue to make irrational decisions. There must be greater economic accountability for their foolishness.
It’s not just politicians and civil servants, but organizations that we need to ask to tap into their inherent, but under-utilized wisdom. Trends indicate that organizations with the strongest CSR agendas and deep, sustainable principles outperform those that lack these values. Look at the economic benefits of GM’s ecomagination campaign, or how well Patagonia, The Body Shop or Innocent Drinks, Timberland are doing. Google, ever-keen to remain at the forefront, offers subsidies to employees buying hybrids, serve organic sustainable foods in their cafes and have been making inroads through Google.org. These companies understand the economic benefit this brings in terms of the quality of employees they can attract. Those with far-reaching sustainability agendas are not only tapping into a zeitgeist, but are getting better value from their people, their products and often their customers.
We should also look more closely at what constitutes economic ‘development’ and ‘progress’. By way of example, the book ‘Ancient Futures’, by Helena Norberg-Hodge details changes in the Ladakhi culture, who until recently lived in almost perfect symbiosis with their surroundings. Westernization, under the cloak of development, has resulted in a higher GDP, but it has also led to rapid social and environmental deterioration in Ladakh. If a holistic economic study was conducted, assessing the true social and environmental costs of development, I wonder whether the deterioration in ancient wisdom has caused a reduction in overall value in the region. For example, a diesel powered mill in Ladakh brings with it economic value that displaces subsistence farming (which has no apparent value), but when we realize that diesel must be bought, parts replaced, pollution is caused, and people are put out of work – then the overall value contributed might be negative, even if more money is traded. It seems that in our relentless drive to develop our world according to the latest fad, we continually overlook ecosystems that are far more developed than anything we can create, and often destroy things of far more value.
It’s time for each and every one of us – from presidents to farmers, executives to village elders – to follow our internal compasses and exercise our wisdom. If you face a tough decision, go walk amongst nature as the seasons change, as they have for millions of years, and bring yourself back to act on the real crisis at hand.