Measures and incentives as well as policy frameworks are needed toward this end.
Yet, doing all of this without challenging the output indicator of the decoupling
agenda, GDP, keeps the thinking linearly, geared at maximum possible exploitation: which means, for example, that species extinction rates ten times the average
rate over time are acceptable simply because they would not destroy human
welfare.
3.2.4 How Does Exchange Value Governance Impact
Living Systems?
Just as introducing the logic of cost–benefit thinking in more and more areas of life
numbs people to realizing what is really at stake, the logic of capital substitutability
turns the perceptions of the webs of life of which nature is composed into one of a
demand-satisfying raw material storage whose overexploitation will spur human
ingenuity into finding substitute input factors. Ironically, the concept was developed
to recognize nature’s importance in economic processes but in the end made nature
invisible.
It was John Hartwick who translated the concept of capital substitutability into
policy guidelines in the 1980s, and after the Rio Summit in 1992 these became the
measurement standards promoted by powerful international institutions. According
to the Hartwick–Solow rule, sustainable development is reached as long as the rent
or benefit made from degrading natural resources is invested in the augmentation of
man-made, i.e., social and human capital (Hartwick 1978: 347–354). As a consequence, the world started changing its accounting systems, incorporating nature into
the most influential measure of economic performance and progress, GDP.
GDP expresses the sum of the market value of all final goods and services
produced by firms, individuals and the government in any given time within one
country’s borders. It is usually calculated annually and, with some minimal
exceptions, nothing is counted that is not purchased within that year. It also provides the base line for the most common indicator of poverty and standard of living,
GDP per capita. The total of GDP is divided by the number of people living in a
country.
The criticism of GDP as a measure has many nuances but three points are always
made:
• GDP violates accounting rules because it lumps together costs and benefits:
Cleaning up after natural disasters or having to install thick absorption walls
along highways for noise protection create payments for services and products
but are actually defensive expenditures. They only restore or maintain a similar
level of ‘wealth’ but do not increase it.
• GDP ignores all value created or depleted that has not been captured by market
prices. This includes household and volunteer work, education and caring for
children and the aged. Meanwhile, once someone starts being paid for this type
94
3 Why the Mainstream Economic Paradigm Cannot Inform …
Yet, doing all of this without challenging the output indicator of the decoupling
agenda, GDP, keeps the thinking linearly, geared at maximum possible exploitation: which means, for example, that species extinction rates ten times the average
rate over time are acceptable simply because they would not destroy human
welfare.
3.2.4 How Does Exchange Value Governance Impact
Living Systems?
Just as introducing the logic of cost–benefit thinking in more and more areas of life
numbs people to realizing what is really at stake, the logic of capital substitutability
turns the perceptions of the webs of life of which nature is composed into one of a
demand-satisfying raw material storage whose overexploitation will spur human
ingenuity into finding substitute input factors. Ironically, the concept was developed
to recognize nature’s importance in economic processes but in the end made nature
invisible.
It was John Hartwick who translated the concept of capital substitutability into
policy guidelines in the 1980s, and after the Rio Summit in 1992 these became the
measurement standards promoted by powerful international institutions. According
to the Hartwick–Solow rule, sustainable development is reached as long as the rent
or benefit made from degrading natural resources is invested in the augmentation of
man-made, i.e., social and human capital (Hartwick 1978: 347–354). As a consequence, the world started changing its accounting systems, incorporating nature into
the most influential measure of economic performance and progress, GDP.
GDP expresses the sum of the market value of all final goods and services
produced by firms, individuals and the government in any given time within one
country’s borders. It is usually calculated annually and, with some minimal
exceptions, nothing is counted that is not purchased within that year. It also provides the base line for the most common indicator of poverty and standard of living,
GDP per capita. The total of GDP is divided by the number of people living in a
country.
The criticism of GDP as a measure has many nuances but three points are always
made:
• GDP violates accounting rules because it lumps together costs and benefits:
Cleaning up after natural disasters or having to install thick absorption walls
along highways for noise protection create payments for services and products
but are actually defensive expenditures. They only restore or maintain a similar
level of ‘wealth’ but do not increase it.
• GDP ignores all value created or depleted that has not been captured by market
prices. This includes household and volunteer work, education and caring for
children and the aged. Meanwhile, once someone starts being paid for this type
94
3 Why the Mainstream Economic Paradigm Cannot Inform …