According to a recent article in the Guardian, the World Bank is now calling on countries to report their natural resources as capital. Soon the estimated value of a nation’s natural assets may be included in its GDP, as a kind of resource-revised “GDP plus”.
Environmental economists have long argued that GDP is an imperfect measure, revealing nothing about sustainability or long-term losses and gains. A book published in 1994 entitled, Assigning Economic Value to Natural Resources, explores the apparent flaws in GDP as a true measure of wealth. An excerpt reads:
The nation could severely degrade or vastly improve the environmental quality of its land, air, and water; nearly exhaust or greatly add to its mineral reserves, forests, fisheries, and soil fertility; and suffer—or not experience—permanent losses of biodiversity through the extinction of flora and fauna with little or no discernable effect on aggregate measures of national income or wealth.¹
A look at the economy of Brazil in recent years illustrates this indiscernible effect. From 1990 to 2008, Brazil’s GDP showed an increase of 34%, though during the very same time period its natural capital declined by a frightful 46%. Without a measure which factors in these critical losses, a nation’s economic growth can appear steady and robust artificially.
The push for “GDP plus” comes at a time when the economic impacts of climate change are being increasingly felt worldwide. Just last weekend on May 5th, a “Climate Impacts Day” was declared, and 350.org sponsored a campaign called “Connect the Dots“, asking people the world over to hold up dots in areas where weird weather has had a local effect on their communities and livelihoods. Droughts, flooding, tornadoes, unseasonably warm temperatures, super-cyclones, and ocean acidification were among the highlighted disturbances. Participants held up signs that read, “Three 100 year floods in 20 years” and “Your Carbon kills our Coral”. In Aspen, Colorado, activists pretended to ski on a snowless mountain. Monks in Thailand gathered in front of a temple to hold a banner reading, “Climate costs lives,” depicting the notion that some have paid the ultimate price for such changes. The idea behind the campaign is that you must simply connect the dots to get the full picture: the degradation of our environment comes at a cost.
Indeed, Thailand’s experience with flooding cost them 18% of their GDP last year. In light of their experiences, they are now moving to estimate the dollar value of their native mangrove swamps which provide a natural buffer against such devastating floods. The World Bank article points out that the mangrove wood itself can be sold for a profit less than $1,000/hectare while converting the swamp into a shrimp farm could potentially bring in around $10,000/hectare. However, simply leaving the natives in place provides an ecosystem service worth more than $16,000/hectare. The math is simple; it’s the long-term thinking that is the problem.
Unfortunately, our short-sightedness sees “countries allowing their environment to be degraded in the pursuit of short term economic growth” as business as usual, but moving away from this model feels urgent. The World Bank mentioned that increasing pressure may be placed on developing countries to find ways to protect their ecosystems, and hinted at restricted aid should they not comply. “Donor countries may be increasingly reluctant to give funds to countries that have ignored such advice and suffered exacerbated disasters as a consequence,” the Guardian article reads.
Exacerbated disasters have been a hallmark of recent years in developed and developing nations alike. A World Bank blog reported that between 1970 and 2010, disasters caused $2.3 trillion in damages and more than 3.3 million deaths globally. Last year was record-breaking, with the United States experiencing 14 different climate and weather related events totaling $53 billion in damages in 2011 alone.
Whether or not “GDP plus” will be effectively implemented remains to be seen, but this much is clear- the consequences of not valuing our environment is a cost we will all have to pay.
WAVES (Wealth Accounting and Valuation of Ecosystem Services) is a World Bank partnership to aid countries in incorporating the value of natural capital into their assets. To learn more, visit their website here.
1. National Research Council. “The Feasibility of Incorporating Environmental and Natural Resource Availablility Into the National Accounts.” Assigning Economic Value to Natural Resources. Washington, DC: The National Academies Press, 1994. 47. Print.