The way we live our lives has us speeding towards a cliff that, and if we are honest with ourselves, we all know is coming. But no one wants to slow down. In the world we live and invest in, there are no incentives to do so.
According to a 2021 report, The Economics of Biodiversity, we are currently using the earth’s resources as though we have 1.6 earth’s to use. Picking the right ESG fund will do next to nothing for saving our societies from the cliff’s edge. Pulling that 1.6 number down to 1.0 will. But this will be hard.
Nine planetary systems exist on earth and planetary boundaries help us track the resilience and health of our environment. Crossing a boundary risks significant and, in some cases, irreversible environmental changes. We have already crossed five boundaries: climate change, biodiversity loss, biogeochemical (nitrogen and phosphorus cycles), land use (deforestation), and chemical pollution. The boundaries for ocean acidification, freshwater, ozone depletion and atmospheric aerosols have not yet been breached.
Some argue capitalism has lifted billions out of poverty and built a world of technology that was unimaginable 50 years ago. But it’s also blown us out beyond our planetary boundaries. Think for a moment about the natural systems you depend on just to eat: insects to pollinate crops, healthy and well-stocked fisheries, dependable rain and snow patterns, dependable flooding patterns, dependable temperatures patterns in order to grow crops, and many more.
All of these are headed in the wrong direction at an accelerating rate, and will lead to increased famine, drought, property destruction, refugee crises, extreme weather events, and a host of other disasters.
Hooked on growth
Capitalism in its current form focuses on growth for growth’s sake as a measure of success – more precisely GDP growth. Why? GDP simply aggregates all activities that can be sold in an economy. If a company sells $1bn of cigarettes, that is $1bn counted to the plus column for GDP. This number considers none of the negatives of that activity, which of course are extensive.
To grow GDP, we must continue to extract natural resources, and therefore push farther past planetary boundaries. We are seeing the effects of our devotion to GDP growth, as increasing environmental degradation threatens our ecosystems. Eventually, in our lifetimes, we will see societies begin to collapse.
See also: – Should investors consider happiness rather than GDP?
GDP growth has diminishing returns. Growth needs limits to level off, otherwise capitalism is a cancer. We must start including ecological breakdowns in our growth models. A metric like a Genuine Progress Indicator (GPI), which considers some negative externalities that GDP leaves out, is a good start. A dashboard approach that measures the health of a society with metrics such as life expectancy, education and quality of life would be better still. A number of countries, such as Canada and Finland, already do this.
Cap on resources
A simple solution (in theory, not in practice) is to put a cap on the use of resources that push us beyond planetary boundaries until we get them back in balance. To de-emphasise growth for growth’s sake, we should be scaling back industries that are destructive to our survival and ramping up ones that are not.
But won’t this lead to mass unemployment, a crashing of the market? Not necessarily.
GDP growth does not make you happy. Although GDP and income growth do tend to correlate with quality of life up to a certain point, societies always reach a point of diminishing returns. Education, access to healthcare, and a sense of community are all better predictors of societal health. As a global society, we are squarely in the diminishing returns part of the GDP curve.
More leisure can save humanity. Iceland experimented with a four-day work week – while keeping pay the same. They found people are no less productive, that they are happier and also have a smaller ecological footprint. Seventy companies in the UK have now launched their own trial. If GDP growth past a certain point doesn’t make us any happier and is environmentally destructive, why do we do it? We need to focus on what will make our future a better one. Hyper-consumerism and growth for growth’s sake are not the answer.
Capitalism will meet its end soon. Either because it has pushed us all over a cliff, or because we change capitalism into something else. Neither option is easy, but with one of them, we survive.
