ABC business reporter, Gareth Hutchens, has penned an article questioning whether economics can ‘save the environment’. This follows the establishment of “the world’s first national accounting system that tracks the health of a country’s natural environment, according to former Treasury secretary Ken Henry”:
“I think this is a game changer, I really do,” [Dr Henry] told the ABC.
“What we’ve done for the first time anywhere in the world at regional scale is to make an assessment, an audit if you like, of the environmental condition of the landscape.
“We’ve now demonstrated that it can be done … and there is intense interest from financial markets people in seeing whether it’s possible to commercialise this data, in the form of a biodiversity credit for example, and it looks like there is the possibility to do so.”
Dr Henry said it will hopefully lead to future business profit-making also regenerating the planet…
Dr Henry said the environmental account in the BMRG was important for one key reason.
He said it created a baseline dataset of the environment in that region, and that will allow scientists to track changes in the health of the environment over time — to see if it’s degrading or improving.
He said that will lay the foundation for the creation of new markets that will attach a financial value to the improvement in environmental conditions.
And that means businesses will be incentivised to start pouring vast sums of money into projects that improve the environment because it will be the profitable thing to do.
I very much doubt this accounting system will do much to stem Australia’s environmental decline. Because our economic system is still centred around growing aggregate GDP (not even per capita GDP), and as long as this is the case, the environment will continue to degrade.
Take the issue of mass immigration, which almost every economist in Australia supports. Few of these economists ever mention any downsides from extreme immigration. You know, basic things like the impact on the natural environment, where the hundreds of thousands of migrants will live amid the record rental shortage, nor how Australia will meet its emissions reduction targets with hordes of new energy users and consumers arriving every single year.
These economists only ever focus on ‘labour shortages’ impacting businesses, while totally ignoring the shortage of homes, schools, hospitals, infrastructure, energy, green space, etc – all of which adversely impact Australians and the natural environment, and are made much worse by extreme population growth.
The fact of the matter is that many economists in Australia are either employed by the business lobby directly, are funded by the business lobby (e.g. ‘independent’ think tanks), or serve the business lobby in one shape or form (e.g. consultancy firms).
Similar criticism extends to the upper echelons of Australia’s economics establishment, from the RBA to the Treasury and throughout academia. Their infatuation with GDP – a rubbish measure of economic well-being – prevents them from analysing issues holistically. Anything that boosts headline growth is viewed as good, even if it makes Australians worse-off on an individual basis and wrecks the natural environment.
Even the Productivity Commission agrees that GDP is a useless measure of wellbeing, noting the following in its Migrant Intake Australia report:
While the economywide modelling suggests that the Australian economy will benefit from immigration in terms of higher output per person, GDP per person is a weak measure of the overall wellbeing of the Australian community and does not capture how gains would be distributed among the community. Whether a particular rate of immigration will deliver an overall benefit to the existing Australian community will crucially depend on the distribution of the gains and the interrelated social and environmental impacts.
Economists’, the media’s, and the Government’s infatuation with GDP as the lead economic indicator is one of the biggest shortcomings in macroeconomics.
It is also why economics won’t ‘save the environment’.
