Thursday, October 9, 2008

A Larger Economic Worry than the Banking Crisis

As Richard Feynman's father supposedly put it, "What makes it go? Everything goes because the sun is shining." The sun provides the energy for plants to grow. Without that, there's no energy for us to move. Without that, there's no energy to turn the key of a wind-up toy, let alone any of the other complex machinery we've built over the millennia.

In this vein, my only real answer to musings and questions about where on earth "money" comes from is that on some level it's all built on the cultivation of natural resources. There's plenty of leeway built in, once you add the idea of trading services instead of just goods, but that's the bit that seems to have become so unstable in recent times. In the end, it all comes down to our use of nature – the beginning, and the end, of our economic and physical life.

Well, this article is entitled Nature Loss 'Dwarfs Bank Crisis'. It puts some scary numbers on how the whole process is going right now: "whereas Wall Street by various calculations has to date lost, within the financial sector, $1-$1.5 trillion, the reality is that at today's rate we are losing natural capital at least between $2-$5 trillion every year." (emphasis mine) Which is to say, around 7% of the entire world's GDP.

Obviously, it's impossible for work like this to get truly accurate results, since the calculations required to analyze every economic and environmental system in the world would be infinite even if we had a good idea of all the variables (which we don't). But a limitation like that isn't reason not to at least estimate the hard cost of increasing environmental degradation, and economists have started to come up with ways to do it:

Key to understanding [Deutsche Bank economist and study leader Pavan Sukhdev's] conclusions is that as forests decline, nature stops providing services which it used to provide essentially for free.

So the human economy either has to provide them instead, perhaps through building reservoirs, building facilities to sequester carbon dioxide, or farming foods that were once naturally available.

Or we have to do without them; either way, there is a financial cost.

The Teeb calculations show that the cost falls disproportionately on the poor, because a greater part of their livelihood depends directly on the forest, especially in tropical regions.

The greatest cost to western nations would initially come through losing a natural absorber of the most important greenhouse gas.

To put on a Analogy-Hat that fit me better in more radical days: the way things are headed, capitalism is the atom bomb that will set off the hydrogen bomb of civilization itself. If we don't want the whole human race to get lost in the blast, we've got to figure out more efficient ways to live.

No comments:

Post a Comment