of work, it automatically registers as ‘growth’ even though nothing new has
been created. Destruction of natural resources like healthy oceans, forests or
landscapes is growth, once someone pays for their raw materials, but the same
destruction is invisible if they do not.
• GDP is blind to the effects of distribution. The overall sum does not show who
has been receiving which amount of income from exchanging the products and
services whose market prices are aggregated. The per capita GDP of a country
may therefore rise while its poverty levels stay the same.
After a first wave of debate about the blind spots of GDP as a benchmark for
development in the 1970s, the ever more tangible, negative effects of the economic
growth development agenda have revived criticism in recent years. Since 2007,
many initiatives have formed around the world, which the OECD-led online platform www.wikiprogress.org seeks to keep track of.
Before this revival, however, the capital substitutability logic had elegantly
settled the challenge of environmental limits to progress: in Standard National
Accounting, as used by the UN, only the formation of fixed, produced capital was
counted as an investment in the future, since it is viewed as increasing the value of
the assets available to society. Likewise, depreciation of the value of this type of
capital was calculated as a decrease. The World Bank engaged with the critique of
an undifferentiated understanding of capital and added human and environmental or
natural capital because, according to the World Bank’s Manual for Calculating
Adjusted Net Savings, they are equally important “assets upon which the productivity and therefore well-being of a nation rest” (World Bank 2002: 4). A depletion
in the stock of an asset like minerals or water means that options for future use
decrease and therefore should be calculated as a disinvestment.
However—and here we find the Hartwick-Solow rule—the net opportunity costs
for future citizens are not necessarily negative if the profits made from depletion are
invested elsewhere. The new indicator of Genuine Savings Accounting or Adjusted
Net Savings expresses this substitutability view by subtracting a country’s natural
capital depletion and pollution from its Gross National Income (GNI), which is
similar to GDP but counts the production of all citizens independently of where
they live.
Within the discipline of the economics of sustainability this approach has been
labeled “weak sustainability” because it does not make any reference to the biophysical limits that a country might well run into even if the entire population becomes
utterly smart and creative. This is different from the safe operating space mind-set and
became the source of peer benchmarking activities comparing the sustainability
performances of different countries. As the World Bank manual explains:
Weak sustainability assumes that any type of capital is perfectly substitutable for
natural capital as an input to production. From the adjusted net savings standpoint,
for example, a nation which reinvested all of its profits from the exploitation of
non-renewable resources in the formation of human capital through its educational
system would have imposed no net opportunity cost on the country’s future
3.2 How Mainstream Economics Views Nature and Its Governance
95
been created. Destruction of natural resources like healthy oceans, forests or
landscapes is growth, once someone pays for their raw materials, but the same
destruction is invisible if they do not.
• GDP is blind to the effects of distribution. The overall sum does not show who
has been receiving which amount of income from exchanging the products and
services whose market prices are aggregated. The per capita GDP of a country
may therefore rise while its poverty levels stay the same.
After a first wave of debate about the blind spots of GDP as a benchmark for
development in the 1970s, the ever more tangible, negative effects of the economic
growth development agenda have revived criticism in recent years. Since 2007,
many initiatives have formed around the world, which the OECD-led online platform www.wikiprogress.org seeks to keep track of.
Before this revival, however, the capital substitutability logic had elegantly
settled the challenge of environmental limits to progress: in Standard National
Accounting, as used by the UN, only the formation of fixed, produced capital was
counted as an investment in the future, since it is viewed as increasing the value of
the assets available to society. Likewise, depreciation of the value of this type of
capital was calculated as a decrease. The World Bank engaged with the critique of
an undifferentiated understanding of capital and added human and environmental or
natural capital because, according to the World Bank’s Manual for Calculating
Adjusted Net Savings, they are equally important “assets upon which the productivity and therefore well-being of a nation rest” (World Bank 2002: 4). A depletion
in the stock of an asset like minerals or water means that options for future use
decrease and therefore should be calculated as a disinvestment.
However—and here we find the Hartwick-Solow rule—the net opportunity costs
for future citizens are not necessarily negative if the profits made from depletion are
invested elsewhere. The new indicator of Genuine Savings Accounting or Adjusted
Net Savings expresses this substitutability view by subtracting a country’s natural
capital depletion and pollution from its Gross National Income (GNI), which is
similar to GDP but counts the production of all citizens independently of where
they live.
Within the discipline of the economics of sustainability this approach has been
labeled “weak sustainability” because it does not make any reference to the biophysical limits that a country might well run into even if the entire population becomes
utterly smart and creative. This is different from the safe operating space mind-set and
became the source of peer benchmarking activities comparing the sustainability
performances of different countries. As the World Bank manual explains:
Weak sustainability assumes that any type of capital is perfectly substitutable for
natural capital as an input to production. From the adjusted net savings standpoint,
for example, a nation which reinvested all of its profits from the exploitation of
non-renewable resources in the formation of human capital through its educational
system would have imposed no net opportunity cost on the country’s future
3.2 How Mainstream Economics Views Nature and Its Governance
95