General · 16th October 2014
“The good ol' days”, is seems, were 40 years ago. A recent study of global wealth by the Australian National University — it analyzed the quality of life in 17 countries representing over half the world's population — revealed that prosperity peaked in 1978 and has been declining ever since (NewScientist, July 13/13).
Gross Domestic Product (GDP), the sum of all the monetary transactions in an economy, has continued to rise. But this traditional measure of wealth fails to account for social and environmental conditions that compromise the quality of our lives. An oil spill, measured in terms of GDP, is counted as a net benefit to society because the cleanup costs constitute economic activity. Money spent on the prosecution of crime and the incarceration of criminals is similarly counted as a positive. Forest fires are expensive to fight so they are registered as beneficial. Water supplies contaminated by mining wastes and toxic legacies left by industrial activities incur restoration costs to society that are counted as pluses on the GDP ledger, as are health problems caused by pollutants. Damaged or destroyed property and infrastructure, wrought by extreme weather events such as storms and floods, must be repaired or replaced, so these disasters too are registered by GDP as initiators of useful spending. The so-called carbon economy, a system of wealth production based the extraction and burning of fossil fuels, now causes an estimated $1.2 trillion per year in costs from environmental damage and climate change (CCPA Monitor, July/Aug. 2014). Pain, suffering and grief are not counted in this calculation.
The Genuine Progress Indicator (GPI), used by the Australian National University study, is a much more comprehensive and realistic assessment of prosperity. It employed 26 variables to measure the quality of human life. In addition to monetary expenditures, it considered security, contentment, healthy living conditions, income equality, crime levels, community support, health care, clean natural environments, and even such non-monetary activities as housework and volunteering. The study's conclusion was that “social and environmental woes have outpaced the growth of monetary wealth”. In other words, “We're not making social profit,” summarizes Robert Constanza, one of the authors of the sobering Australia study.
One of the most obvious “social woes” identified by the study was Income inequality. This growing disparity in the distribution of wealth creates many unsettling social conditions: poverty, civic unrest, homelessness, crime, and a collective psychology of negativity, victimization, disengagement and cynicism. The many people without money cannot buy the goods and services that keep economies robust and diverse. But the few people with more money than they can spend are unable to correct this impairment — their superfluous cash just gets invested to generate more capital, most of which does not translate into social prosperity.
A similar conclusion was reached independently by Thomas Piketty in his watershed book, Capital in the 21st Century. In a remarkably indicative statistic that concurs with the findings of the study by the Australian National University, Piketty discovered that in the US, “in terms of purchasing power, the minimum wage reached its maximum level nearly half a century ago, in 1969, at $1.60 an hour.”
Critics of the Australian study have noted that developing countries are wealthier than they were in the 1970s, that half a billion people have risen from poverty since that decade, and that global poverty rates have fallen from 42% in 1990 to an expected 15% in 2015, while life expectancy during the past four decades has increased by 12 years for women and 11 for men. This may be so. And the accomplishments are remarkable. But they don't refute the conclusions of the study. The world's population since 1978 has increased by over 3 billion, meaning that the efforts to improve humanity's quality of life — remarkable as they may be — can only succeed if they outpace the burden of providing subsistence service to the rising number of people. The challenge of improving the prospects of a peak population of at least 10 billion is even more formidable.
The university study's general conclusion that global prosperity has been falling since 1978 suggests that we may have exceeded the carrying capacity of our planet given the present system used to define, generate and distribute wealth. The study also suggests that the diminishing prosperity on the planet is being distributed differently. Since 1978, the extremely poor are now marginally less poor, the extremely rich are now significantly richer, while everyone else in the middle is sacrificing prosperity. Whether this constitutes an improvement in humanity's condition is debatable. For a sense of perspective, Ronald Wright, in his book, A Short History of Progress, reminds us that the number of people presently living in abject poverty on the planet is equal to the total population of the world in 1900.
The second major cause of declining prosperity, according to the university's study, is environmental degradation. For several decades now, the study concludes, the ecological costs of economic growth have been outweighing the benefits. These cost are hidden by the illusory assurances of GDP. But our individual and collective prosperity is being increasingly compromised by weather extremes, rising oceans, ubiquitous pollutants, species loss and invasive species, higher food and fuel costs, riskier resource extraction, food insecurity, climate refugees and the resulting political instability
This Australian National University study gives academic credibility to the growing feeling among many that, for all our efforts, the quality of our lives is not improving, that the next generation will not be as prosperous and secure as the present one, and that — somehow — we have to change the way we do things.