Contrary to common sense, we could experience booming GDP and stock market valuations all the way to society’s imminent collapse.
As we reel from one natural disaster after another—hurricanes Harvey, Irma, Maria, wildfires in California—climate scientists explain how they’re not really “natural” at all. They’re the anticipated consequence of a breakdown in the world’s climate, one that will become far more extreme as global temperatures rise from the current 1° Celsius above historic norms to 1.5° (perhaps within ten years) and then 2° potentially as early as twenty years from now.
With headlines proclaiming the dire effects of these disasters on local economies, it might seem reasonable to believe that the power-brokers of our economic system—investors, CEOs, Federal Reserve policymakers—will eventually recognize the danger and wield their financial might to shift our civilization’s trajectory away from climate catastrophe.
That may turn out, however, to be wishful thinking. In the short term, these disasters do indeed cause harm to the economy, but after the initial shock they’re more likely to have a net positive impact on the country’s Gross Domestic Product (GDP). In the words of U.S. Treasury Secretary Steve Mnuchin, “There clearly is going to be an impact on GDP in the short run. We will make it up as we rebuild. That will help GDP.”
Welcome to the cruel, topsy-turvy economic logic of a civilization facing the risk of collapse. As millions of people increasingly suffer the devastation of climate breakdown, we can expect the economy—as measured by conventional benchmarks—to maintain and even strengthen itself right up to its breaking point.
The reason for this apparent disconnect between economics and society’s well-being arises from the use of GDP as the benchmark of economic success. GDP merely measures the rate at which our society is transforming nature and human activities into the monetary economy, regardless of the ensuing quality of life. Anything that causes economic activity of any kind, whether good or bad, adds to GDP.
That’s why hurricanes and firestorms, catastrophic as they may be to the people experiencing them, can be positive for the conventional economy. Devastated communities mean big profits for the companies supplying materials, technology, services, and finished goods for the rebuilding. The thousands of people in California at risk of long-term bronchial problems from smoke inhalation represent a boon for GDP, as their increased healthcare requirements only serve to boost economic activity.
This disconnect between GDP and the health of our society means that, even when things become more desperate for people as climate breakdown worsens, investors may keep enjoying high returns on their investments while neoliberal economists point to stock market valuations as proof that things are not as bad as they might otherwise seem.
This scenario has been predicted by Jorgen Randers, a member of the team that wrote the seminal Limits to Growth report back in 1972, and author of the more recent 2052: A Global Forecast for the Next Forty Years. Randers, who has spent a lifetime working through the nonlinear feedback effects of our global system, expects that we’ll be spending as much as 36% of global GDP in replacing infrastructure by mid-century. “These are huge hikes,” he writes, “and difficult to grasp, until one starts considering the cost of moving megacities and transporting infrastructure to safer grounds.”
However, this increase in GDP will only occur in countries that still have the infrastructure to rebuild what gets destroyed. For more vulnerable societies, one huge swath of destruction—from a hurricane, flood, or drought—could leave them so devastated that they find themselves permanently removed from the 21st century global technological economic matrix. That may be a real risk right now for Puerto Rico: with its electrical grid, water supply, and finances in ruins, its only hope for a return to normalcy will be through massive investment from the US mainland—something the Trump regime seems unlikely to support.
Is this what civilizational collapse may look like in the 21st century? Not one dramatic event that brings down the whole house of cards in a moment, but a gradual disintegration of regions that lack the wherewithal to recover from climatic disasters, while the more developed and affluent nations enjoy economic booms and soaring stock market valuations?
It’s not too late to turn around this terrifying trajectory, but as long as we measure a country’s success by its GDP, that’s going to mask the true destruction taking place in the quality of people’s lives. Recognizing this, forward-thinking economists have come up with more accurate measures of a country’s welfare. One of these, the Genuine Progress Indicator (GPI), incorporates negative factors such as income inequality, environmental pollution, and crime, as well as positives such as volunteer work and household work. It shows that, in contrast to GDP, which has been soaring for the past 70 years, GPI peaked worldwide in 1978 and has been falling ever since.
At this point, our society can still choose to invest in a future that builds genuine welfare rather than shoring up collapsing infrastructure. In an urgent but still hopeful report, 2020: The Climate Turning Point, members of the highly-respected Potsdam Institute show there is still time to turn things around. Just. And the profound irony is that we can do this by investing in the very things that create welfare for society. “This moment of history,” they declare, “is not a burden; it is a tremendous opportunity.” They estimate that worldwide investment in a sustainable future—one with cleaner air and water, fulfilling livelihoods, more livable cities, and regenerating ecosystems—could make the world $19 trillion wealthier by 2050.
An important step to move toward this more hopeful trajectory would be to substitute a true measure of society’s health such as GPI for the currently ubiquitously GDP. As long as our political and financial leaders are evaluated by the distorted measure of GDP, our civilization may well disintegrate from climate breakdown even while they get credit for a cruel, topsy-turvy economic boom.
19 thoughts on “The Cruel, Topsy-Turvy Economics of Collapse”
This is the same mindset (simple math) that welcomes the disaster of war, and hence the Military-Industrial-Complex (MIC).
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I was thinking the very same thing.
Jeremy, have you thought of submitting this piece to the Huffington Post? They may very well publish it.
Thanks, Lance. It’s on Huffiington Post: https://www.huffingtonpost.com/entry/the-cruel-topsy-turvy-economics-of-collapse_us_59f8db9be4b0412aab840bd9
We are alrady in the new era of the ‘Anthropocene’, and climatechange is only one issue among those that all habitants of the planet feels. Our evolved intelligence certainly “helped” make it happen, and we can draw a number of parallels in history to our current social issues. Our basic wireing in psychology remains, the tools are changeing. I see a future with ever faster changes, balancing at the edge of chaos, but it might take longer than just a generation, changes in eath’s history are on larger timescales. Sometimes I think -why am I so obsessed on trying to understand everything? I think has lot to do with fundamental anxiety/survival. Buddhists have a lot of wisdom or common sense: Everything just is! Mindfullness. 🙂
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Nature sets limits for every living thing.
We need to learn what those limits are for us
and abide by them.
Studying ecology is a good choice for learning
Our focus shouldn’t be on the GDP it should be
“A thing is right when it tends to preserve the integrity, stability and beauty of the biotic community. It is wrong when it tends otherwise.”
― Aldo Leopold, A Sand County Almanac and Sketches Here and There
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Today, business news hangs on every jiggle in GDP as if it were the great oracle of modern commerce. We would be better off to ditch GDP, but that will not happen quickly. The modern GDP was only invented in the 1930s by Simon Kuznets, but it blossomed into a household word in about 40 years.
Why? It nicely quantified a cultural bias for unending expansion that existed long before. The most basic tools of finance are biased to promote growth and short-term thinking. Compound interest is an example. It’s a growth formula.
Kuznets himself cautioned against making GDP too strong a guide for policy. His warning was disregarded as it was being spoken. Aesop’s fable of the Goose That Laid the Golden Eggs was a similar warning issued about 2500 years earlier, but similarly disregarded ever since. However, only in the last century has mankind’s technology grown to the point where we can cook our own goose though unbridled expansion.
Doing away with GDP is a great idea if we can persuade people to do it. However, I fear that the core issues run much deeper. How do we turn our cultural values from limitless growth to simply sustaining a viable environment? What constitutes a meaningful existence for you?
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As Peter Joseph pointed out back in 2007 through his original Zeitgeist movie, then made more poignant in Zeitgeist: Addendum, the dominant economic system we’ve ALL grown up with, Capitalism, is at its roots untenable. I would hazard that Academia has been well aware of this and chuckling for at least 200 years, or about the time that Adam Smith grandly proclaimed that the “hand of god” is directing “us” (as in humanity in toto) to ‘capitalize’ on all of the amazing good fortune we find ourselves among on this planet.
Since that time, awareness has grown (albeit in limited fashion) in various circles that even simplistically this mentality is not maintainable. Yet what we’ve collectively received from those handed the reins of power is the consistent litany of why this is the best model and that new technology is our ‘new’ saviour (along with mention of the old one(s) watching over it to ensure it is “right, just and godly”). So why hasn’t anything really come of all of this seemingly long-standing awareness?
Neil Postman, way back in 1985 postulated that we humans are animals prone to making ourselves feel better–in whatever way that evolves for each apparent one of us. He didn’t necessarily put it in so many words, the title of his work (pre-Internet, pre-smart phone, pre-Netflix and streaming…) was Amusing Ourselves to Death: Public Discourse in the Age of Show Business. Since his original writing, all of those parenthesized elements, along with many, many more have conspired to keep the bulk of humanity as preoccupied as possible. In much of the world, mere survival is still the core focus of daily life. And while it would be easy to try to foist onto those that profit the most by maintaining the status quo some sort of collusion and to try to implicate some sort of scandalous conspiracy theory, the sad fact is that each and every one of us is responsible for the current state of affairs.
So while pointing out the obvious to those too busy in their multiplicitous distractions may capture the attention of a few on the periphery, the sad fact is that the majority of our fellow humans are all too eager to watch the sights go speeding by as we cartwheel toward oblivion. After all, it is highly possible that what in fact feeds the underlying pursuit of all of the infinity of distractions for many are coupling their personal stressors with the stresses of actually attempting to sort through the best available options to save spaceship earth and its inhabitants–humans and otherwise.
At this point, I recognize that convention points to an obligation on my part to try to bridge that chasm in one way or another. Rather than try to generate yet another “grand” contribution to the cause, I would simply suggest a moment of reflection on what elements within this overall scenario can be used to more broadly shift focus from short-term “pains” and responsibly nudged to providing some sort of pleasurable return in order to incrementally shift behaviours of our more reticent (and numerous!) fellow humans. Perhaps much like the slowly snowballing recycling movement, inroads can be made, transitioning from awareness to action.
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RE: “… providing some sort of pleasurable return in order to incrementally shift behaviors of our more reticent (and numerous!) fellow humans.”
The Fractal Frontier
Sustainable Development Trilogy
The GDP is an index used in the money game. We need to step away from that game as best we can.
“What constitutes a meaningful existence for you?”
Good question! We all need to think about that.
The answers may not be easy or comfortable.
At least, not at first.
But the answers must fall within the boundaries
set by nature. And, as I said earlier, those boundaries
can be learned by studying ecology, in particular, human ecology.
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Good/bad? Its all subjective, at the end of the day we are just another evolutionary cul-de sac, and it’s ok. People are often obsessed about the meaning of life or anything -there is not any! Things can have “purposes” but it’s like a hammer was made to hit nails in. It’s nothing sophisticated- otherwise can be called religion. If we wanted to save the planet we would have stopped reproducing long ago, less than a billion well scatteted nomads, that would be ok from habitat perspective.
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From the standpoint of Advaita; absolutely! If one’s perspective is simply from that source, all of “this” human drama is just that; either entertaining or not, but certainly there is no one that can alter whatever is to be…hand wringing and genuflecting could simply be wastes of energy (but there is no one that can prevent themselves from participating in those activities!) if any number of infinite possibilities unfold instead of the growing projections for the demise of the planet through climate change. The Yellowstone caldera could blow first, etc…
In the end, I agree, we simply don’t know, can’t know, because we aren’t…
I love the cartoon. As someone who has gone full sustainable (no tv, no car, no flying, small house/large lot, garden, no kids or pets) over the past 20 years, I can’t understand why anyone would want anything else.
Reblogged this on Greek Canadian Literature.