Every nation in the world obsessively continues to measure success by the state of its Gross Domestic Product (GDP). It is the equivalent of the famous “bottom line” in a company’s accounts. Yet this measurement can be hugely misleading just as the “bottom line” can also mislead if not calculated properly.
Any qualified accountant will tell you that real profit can only be assessed if, in calculating net income, capital is kept intact through investments that will compensate for wear and tear and so sustain future income. Any other calculation is grossly misleading and succeeds only in gulling shareholders and the public into fundamentally misconceiving the true state of affairs in the business.
In recent times around the world too many business leaders have tried to get away with just such false calculations – and have often succeeded.
The same mistake is made, even more blatantly, when calculating GDP without taking into account environmental capital when picturing success or failure in a nation. For the proper calculation of plus or minus in GDP allowance must be made to keep intact a nation’s capital, including its environmental capital.
To the extent that the environment is being degraded a deduction should be made from income in showing whether GDP is growing or declining.
The fact, of course, is that nations do not make such calculations and therefore as a matter of course inflate GDP measurements and give a wholly misleading picture on how well or how badly countries are doing.
When you next read or hear that a nation’s GDP has increased by this or that percentage smile a cynical smile, make your own mental adjustment, and accept the grim fact that political leaders in every country, aided and abetted by their pet economists, do not find it convenient to tell the truth.
The whole world is doing worse than any of us might think from the upwards and onwards economic indicators trotted out by leaders in the large industrialized or rapidly industrializing nations and in the reports issued by the various international institutions.
Starting with the famous Earth Summit in Rio nearly twenty years ago, environmental conferences have seen regularly summoned.
But the degradation simply goes on. Every month 4,000 species of plants and animals disappear forever, 2 billion tonnes of agricultural topsoil are lost, more than 2 million acres of tropical rain forest are destroyed, and countless millions of kilograms of toxic pollutants are added to the earth’s air, water and soil.
In the same time of one month – despite all the slaughter and famine you read about – more than 6 million human beings are added to the world’s population, joining the queue demanding their place in the sun and a fair share of the world’s resources.
Who can doubt that an ecological disaster awaits our children and, certainly, our grand-children?
Yet this immense, gathering crisis continues to be pushed aside for another day by the short-sighted priorities of politicians, economists and international financiers in the privileged countries (now including China, India and Brazil.) It is enough for them to indulge their scientists’ priorities by holding environmental Summits every so often but then it is back to business as usual for the sake of a little more time of power and privilege.
Shareholders are supposed to be protected from erosion of resources in the company they jointly own by their directors in the first place and if the directors try to fool them then they are supposed to be alerted to the fact by public auditors.
These are safeguards we need. In world terms who can doubt that our directors are failing in their primary duty of preserving the planet’s assets. But of course they get away with it.
No public audit qualifies their willfully spurious accounts. And certainly we shareholders in the earth have no means of booting them out of office and into jail for fraud on the grandest scale.
