Speech as delivered during a Changing Planet Seminar at Imperial College London
Very delighted to be speaking with you all today.
Thanks to Mr. Ben Chapple, for moderating this session;
Deepest thanks to Professor Martin Siegert, Director of the Grantham Institute for Climate Change and the Environment for the invitation;
I’m delighted to be here today to speak about a topic that’s so close to my heart. Early on in my career, I was an advisor to Lord Nicholas Stern when he was Chief Economist at the World Bank and ever since then economics has been a subject that has shaped how I see the world.
But what I’m really speaking about today goes deeper than economics. It cuts to the heart of one of the greatest challenges of our time. It’s a challenge that can be summed up by a question:
“How can humankind flourish for generations to come without laying waste to the living world that sustains all of us?”
Answering this requires us to look at the story that mainstream economics has told us about who we are as human beings.
Economists like to paint people as rational, solitary actors who are motivated primarily by competition. We’re told we’re calculating, greedy, and dominant over nature. As far back as Adam Smith, economists have encouraged us to pursue our own self-interest because this, they say, is what best serves individual and collective well-being.
This view of humanity is central to modern economics and indeed the modern world. But how true is it?
Well, we now know that it’s only half the picture. The Nobel prize-winning economist Daniel Kahneman was famous for showing that humans have an amazing ability to act completely irrationally. Nor are we entirely selfish and competitive. Our capacity for love, altruism and co-operation is etched into our DNA.
So the economic system we’ve built is based on a very limited – and limiting – definition of what it means to be human. Because our economies encourage consumption and novelty-seeking behaviour, we have created societies that value profit, material wealth and economic expansion above all else.
What has this led to? Well, in rich, high-income nations – and when I talk about the problems of economic growth I’m talking specifically about high-income countries in the West – there are serious signs of social and cultural decay.
Even before the pandemic, the OECD was warning of an epidemic of loneliness in the West.[1] Trust in government continues to decrease while the gap between rich and poor grows, it says[2]. The West has built economies where most people’s living standards are no longer rising and where the fruits of economic expansion are increasingly grabbed by those who already have the most[3]. This is trickle up economics, not trickle down.
And then we have the climate crisis and the destruction of the living world. Our studies are clear: a linear, fossil-fuel based model of economic growth that relies on unsustainable levels of consumption and production is destroying the ecological building blocks on which our well-being depends.[4]
We face a triple planetary crisis of climate, nature and pollution. Our air, water and soil are contaminated.
And we’ve also seen what the consumption and production of more and more stuff has caused:
- Plastic pollution in our oceans has increased tenfold since 1980.
- Up to 400 million tons of heavy metals, solvents, toxic sludge and other industrial wastes enter the world’s waters every year.
The devastating irony is that despite these horrific side-effects, economies have to keep expanding to prevent the system from collapsing. In doing so, we end up consuming more resources and causing even greater ecological harm. This is the dilemma of growth.
So, what can we do about all this?
Before I answer, I want to point out that when I say “we”, I’m really talking about high-income countries. It’s the world’s richest that are responsible for most of the harm we see today. The wealthiest 1% produce double the combined carbon emissions of the poorest 50%, one of our recent reports found. And the G20 account for 78% of all global emissions[5].
These countries have a responsibility to question the thinking and systems that led us to this point so that they can begin to transform their economies in a way that gets us out.
But how?
First, they will need to stop using economic growth as a measure of human well-being.
As Partha Dasgupta, one of the world’s leading economists, says: GDP is “based on a faulty application of economics” that fails to account for the damage done to the biosphere. Even its architects knew that GDP was a poor measure of human progress and yet GDP growth has been the primary indicator of our success as a species for decades.
Dr Akinwumi Adesina, President of the African Development Bank Group, puts it more bluntly: “Nobody breathes or eats GDP. When we measure wealth properly, taking nature into account, we will be better custodians of the planet,” he says.
I’ll come on to how we can measure wealth properly in a moment, but I want to make something clear. When we talk about discarding GDP as a measure of progress, we’re not talking about degrowing our economies.
The debate about whether we need to grow or shrink economies in the West is a false one.
Instead, rich nations must aim to move beyond growth. This means sectors that fail to enhance prosperity will need to shrink. Those that increase well-being will need to grow.
One obvious sector to degrow is the fossil fuel industry. Despite what orthodox economists want us to think, markets are not efficient. The invisible hand is not so invisible. The massive government subsidies to the fossil fuel sector are a case in point. They allow polluters to continue to artificially claim value and growth – at the expense of the environment and social well-being.
And then there are countries that will need to continue to grow their economies – those whose incomes are so low that they fail to meet basic needs and suffer from under-consumption.
So how can rich nations begin to measure wealth properly?
First, they must put nature at the heart of their economics. This means recognising that the living world is “our most precious asset”, a concept that lies at the centre of what we mean by “natural capital” and “inclusive wealth”. Unless economists begin to value our air, our soil, our waters, a stable climate, the richness of the living world – the very things that make life possible –, then the destruction of the living world will continue.
Second, we need to redefine what we mean by wealth. In the economies of tomorrow wealth must become synonymous with human well-being. Do our lives have more or less meaning? Do people have access to things they care most about: family, friends, health, the natural environment, meaningful work? And are these being achieved within planetary boundaries?
Alternative ways of measuring this progress exist:
- The Genuine Progress Indicator or the Inclusive Wealth Index take into account the health of the living world.
- New Zealand’s Living Framework uses 38 indicators to measure progress in 12 areas of well-being, like housing, health, the environment and culture.
- And countries are adopting the UN system of universal accounting, which accounts for national stocks of forests, clean water, arable land and other natural capital.
Scotland, Iceland, and New Zealand are just a few examples of high-income countries that are making this shift to a well-being economy. We’re also seeing cities in countries like Canada and the Netherlands shift to more circular, regenerative economies.
Among non-OECD nations, Costa Rica is a superb example of what middle-income countries can achieve. It has high levels of wellbeing despite a relatively low GDP and it has achieved this without damaging the natural world. It now outscores the United States on life expectancy, democracy and how its people evaluate their lives. And it’s the only tropical country in the world to have reversed deforestation.
If we’re going to respond to the climate and ecological crisis in a way that stops the worst harm, then more of the world’s wealthy nations will have to follow suit.
This is where the interface between science and policy is so vital. Science informs policy. It can tell us where scarcity lies – atmospheric carbon, nutrient overloading, the contamination of oceans – in a way that markets and flawed pricing mechanisms can never do. Equipped with this knowledge, governments can leapfrog the lags that are built into markets by enacting forward-thinking policies. Science, in other words, lets us get ahead of the problem rather than waiting for the markets to respond.
So this is the task we have before us. If we’re going to transform our relationship with the living world in a way that allows humans to flourish within planetary boundaries, then we will need to re-examine how our economies function, what we value and how we measure progress.
We will need to restructure our economies so that they are circular and regenerative instead of linear and extractive. And we will need to harness the full power of science to trigger this transformation by presenting policymakers with ways to get out in front of the problem.
As the intellectual architects of our future, you have the power to illuminate our uncertain future and, in doing so, shape our future in a way that allows our descendants to flourish. There really is no greater task.
Deputy Executive Director
[1] https://www.oecd-forum.org/posts/49051-oecd-forum-2019-session-debate-over-lunch-the-pressure-of-modern-life
[2] P.17 https://read.oecd-ilibrary.org/economics/beyond-growth_33a25ba3-en#page19
[3] ibid
[4] Adapt to Survive + GEO 6. Exceprt from Adapt to Survive:
[5] https://www.unep.org/interactive/emissions-gap-report/2019/#:~:text=The%20G20%20(a%20group%20of,into%20a%20thriving%2C%20renewable%20future.&text=Two%20G20%20members%20(United%20Kingdom%2C%20France)%20have%20passed%20legislation.
