Capitulating on today’s Capitalism — kind of.

During the last 2–3 decades, governments, NGOs, corporations, and tech start-ups have applied colossal efforts to address the environmental-based externalities of the economy by creating “markets”. While making incremental gains, all have failed to achieve the goal of creating “real” markets.

While this is intellectually obvious, society has not accepted this emotionally, meaning that we have not accepted that our institutions, and most importantly, the norms and indicators we have relied on to resolve our problems are now inadequate.

What is GDP?

Gross Domestic Product is an economic indicator used as a comprehensive measure of U.S. economic activity.

GDP measures the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used up to produce them). Changes in GDP are the most popular indicator of the nation’s overall economic health.

So GDP assumes all growth is good as it “measures the value of the final goods and services produced in the United States”.

And it states that it does not “double count the intermediate goods and services used up to produce them”.

What is doesn’t state that is “does not count all the intermediate and final externalities that are used to produce them”.

So G[ross]DP is a big number that does not involve subtraction. I get that. Do economists?

Growth of Economic Tumors

The use of GDP as the most popular indicator is aligned with the idea of all economic growth is good. But what about economic tumor growth?

GDP growth occurred when the oil tanker Exxon Valdez ran aground in Prince William Sound, Alaska, spilling 11 million gallons of oil in March 1989. That type of GDP growth is economic tumor growth.

Under just GPD metrics, economic tumors are good. It is like if we only account for the income gained by the medical industry for removing your tumor and none of the costs and hardships to the patient. (I think we might do this for medical care, too)

We count economic tumors as growth because don’t have an accounting system that is able “to count all the intermediate and final externalities that are used to produce them”.

This is not just economists’ “free lunch”, but the largest “free buffet” ever assembled. Do economists know this?

GDP and Capitalism is not Bad

GDP and capitalism is not bad, just like your surgery bill and your doctor are not bad. It is bad if that is the extent of the accounting.

Economists and the Lamp Pole Effect

Economists are somewhat like the drunk standing under the lamp pole looking for their keys. A police women stops by and asks if the drunk lost his car keys here. And the drunk says, “No, I think I lost them in the park, but the light is better here”.

If you ask an economists where they look for economic growth, they may say in the light of the GDP. They are unable and unwilling to account for the economic externalities that are in the dark.

Time to Sober Up

By only looking in the light of GDP, we are essentially running multiple Exxon Valdez’s into multiple Prince Edwards Sound each day and for nearly every transaction and putting them in the positive economic column.

This should quickly sober up anyone living on the planet, including economists wandering around under their GDP lamp pole.

Capitulating that Economic Externalities and Tumors are not Good

Capitulating that much of today’s capitalism is errant may be easier if we understand capitalism will remain the foundation of the solution and that the solution is emergent, and not a wholesale change.

With this foundation, we can expand the scope of capitalism by developing a natural capital accounting system that can recognize the environmental externalities, both positive and negative, are part of the real economic world. We can shine light on it so the economists can see them and account for them.

And when the light shines on it, they will see positive externalities, those unvalued activities that improve the Earth and the Economy are the candidates and value of eco-markets, ESG goals, and supply chains. This is estimated to be worth $100T.

The solution is not just about subtracting all the value that “Exxon Valdezers” do each and every transaction, but about adding all the value that many good people create. It is those positive externalities that can grow the economy by $50-$100T just by internalizing existing values and hence motivating others to join in that economic and ecological growth.

A Complementary Capitalistic Model

The logic is simple, our current economic system is unable to account for a [large] portion of the global economy’s value. During the last 2–3 decades the “market and policy experiments” of governments, NGOs, corporations, and tech start-ups failed to address the environmental-based externalities of the economy.

By taking a sober approach with plenty of light we will be able to create an complementary economic system to account for that natural capital portion of $50T-$100T.

We can get economic growth, even in a capitalism structure, and enhance the ecological foundation of our economy and society. In fact, it appears that that is the only viable option in front of us. Mitigating economic externalities has proved futile by the big three sectors and 1000s of entities.

In the past, nation-state currency and economic systems defined the global economy. In the future, capital-based currency and economic systems will fill the voids. How else would it even be possible?

Author

Tim Gieseke has managed natural and other capitals during his four-decade career. This led him understanding the importance of natural capital to his livelihood, his communities, his nation, and the global society.

As a farmer for some of those four decades he is instilled with the wisdom that viable shortcuts don’t exist. It is all about emergence and the long game.

In 2011, the published EcoCommerce 101: Adding an ecological dimension to the economy that laid out the conundrum and the micro- and macro-EcoCommerce components that were needed to internalize environmental externalities.

In 2016, he introduced the NCU in Shared Governance for Sustainable Working Landscapes to organize the economic values identified in his first book.

His third book, Collaborative Environmental Governance Frameworks: A Practical Guide (2019) introduces a governance assessment and design model to create a framework for asymmetrical, dynamic, and often temporary governance forms needed to address the complexity of any economic system.

He is nearing the completion of a white paper that describes the EcoCommerce business ecosystem necessary to support an EcoCommerce Crypto-Economic System.

A growing group of individuals are supporting this effort in hopes that they can contribute to internalizing the most valuable economic externalities on Earth. If you are interested, please connect.