History remembers the beginning of the 20th Century as a momentous epoch. Two world wars, the liberation of colonies, and the subsequent alignment of the world on two different ideologies, among other events wove a brilliant political narrative. However, the enormous significance of these political events sometimes blind sight the economic epoch the beginning of the 20th century was. The world faced the greatest economic downturn it had ever experienced. Conventional economic theories of the time proved inadequate in countering the problems. It was in this background that Lord John Maynard Keynes turned conventional economic theory on its head and in the process explained our problems. More importantly, he found solutions to them. So significant was his work that this economic epoch came to be known as the Keynesian revolution in economics.
A lot of scholarly work pursued the Keynesian line of thought, and built on Lord Keynes’ intellectual legacy. Among the most influential was the concept of GDP accounting. GDP accounting was the brainchild of Simon Kuznets. In 1941 Prof Kuznets published “National Income and its Components”. This revolutionized how an economy (country) measures its output (or income). Quite simply, it measured a country’s economy. This accounting methodology was adopted by the world at the Bretton Wood’s conference (which was called to establish global institutions that represented the political economy of those times; namely IMF and World Bank)
Prof Kuznets was aware of the capabilities of GDP measurement and its limitations. He had warned against using it as a measure of a country’s welfare. However, towards the end of the 20th century the world had changed again. First, Regan and Thatcher came by and set on course a neo-liberal agenda broadly defined as the simultaneous globalization, privatization and liberalization of economies. While our economics was being set to a different course, a wall in Berlin came down and a few chapters in History’s textbook later, Capitalism thought he had won his victory against Communism. And more devastatingly, neo-liberalism was pitch forked as the new world order.
Pursuant to this agenda we set in the 80’s and followed in the 90’s, we let the health of our economy masquerade as the measure of welfare of our people. We marked GDP growth as an end in itself, and didn’t treat it as a means towards development.
Among the many problems of measuring GDP (and there exists many problems, not only in accounting, but conceptual problems as well) the ecological impact of high industrial growth isn’t captured. The ecological capital our environment provided us formed the base of the industrial mode of production. And by fuelling this industrial idea of growth, captured by an increasing GDP, we didn’t consider the finite nature of the ecological capital from which we extracted. We had a ball – working jobs we don’t like, to buy things we don’t need, to satiate cravings we don’t respect!
In the process, the environment around us bore the worst consequences for our actions. But, simultaneous to this rape, loot and plunder of the environment to feed our consumption desires, science pulled us up. Issues of environmental degradation came to the fore. Political leaders were forced to take cognizance of global trends in climate change, and how lifestyles stemming from industrial growth contributed to this injustice to nature and injustice to future generations. Some suggested a new accounting system to make for a more equitable distribution of resources and a more detailed accounting of our ecology. This was theorized as the Gross Natural Product. This accounting system in fact has more problems than the GDP measure of accounting. I won’t get into these problems right now for reasons of brevity. But more encouragingly, the discourse on accounting national wealth has recognized the need to relook at measuring the ecological capital from which we produce. Whether our future measures of an economy will capture the ecological costs of our mode of production is a debate being played out now. Considering that we’re the majority stakeholders in defining the world we inherit, it is our responsibility to actively participate in this debate and define its outcome.
This outcome will hopefully lead towards a societal churn that accords environmental and intergenerational justice its rightful place!