One of the strangest characteristics of the contemporary economic system is its propensity to cannibalize itself in pursuit of short-term increases in profits. According to a literature review by eftec, “an estimated 40% of the global economy is based on biological products and processes, and yet these resources are being lost or severely damaged at an unprecedented rate…”

The loss and damage of these resources can be traced to the common indicators of economic progress: mineral and fossil fuel extraction, clearing open space and draining wetlands for development, building roads, and manufacturing. In essence, the global economy is cannibalizing itself.

To understand how such a paradoxical phenomenon could be possible, I turn to the analysis of Lester Brown, who argues that the global market’s inability to measure the true value of goods and services has the unintended consequence of decimating the world’s natural resource base.

Chapter 11 of Brown’s Earth Policy Institute Publication Plan B summarizes the economic concept of externalization:

As the global economy has expanded and as technology has evolved, the indirect costs of some products have become far larger than the price fixed by the market. The price of a gallon of gasoline, for instance, includes the cost of production but not the expense of treating respiratory illnesses from breathing polluted air or the repair bill from acid rain damage. Nor does it cover the cost of rising global temperature, ice melting, more destructive storms, or the relocation of millions of refugees forced from their homes by sea level rise. As the market is now organized, the motorist burning the gasoline does not bear these costs.

Indirectly, of course, we all bear these costs in the form of government subsidies, heavier tax burdens, and escalating insurance costs.

The report continues:

A summary of eight… studies by John Holtzclaw of the Sierra Club indicates that if the price were raised enough to make drivers pay some of the indirect costs of automobile use, a gallon of gas would cost anywhere from $3.03 to $8.64, with the variations largely due to how many indirect costs were covered. For example, some studies included the military costs of protecting petroleum supply lines and ensuring access to Middle Eastern oil, while others did not.

Everywhere we turn, we are faced with the results of private interests subverting public institutions in order to externalize costs. The corporation, as it is currently structured, is only pursuing its stated mandate: to provide the best return on investment to its shareholders. It is a classic case of good people tangled in the complex structure of a system that is inherently unjust and self-destructive.

Finding solutions will not be simple. According to Brown, the first step will be to redesign our business metrics so that they take into account the true social and ecological costs of doing business. In Brown’s words, we must “get the market to tell the ecological truth”.

One such attempt has been made by the organization Redefining Progress. Disenchanted with the use of GDP as a metric of progress, Redefining Progress has created the Genuine Progress Indicator, or the GPI. The GPI takes many factors into account that go unnoticed by the myopic GDP statistic, such as the quality and distribution of wealth. According to Redefining Progress, the GPI indicates that in the year 2004 our nation’s economy grew at a rate of less than 1%, over six percentage points less than economic growth as measured by GDP.

If we continue to allow false metrics to dominate public debate, then the global economy will continue to cannibalize itself, destroying the natural resource base that is, and will always be, the foundation of civilization.