The global economy has grown at the expense of destroying nature. It is a fact practically no one disagrees with anymore, not even most denialists. During the coronavirus pandemic, several studies and reports have been published that confirm the evidence of the damage caused to the natural capital of the planet and propose a reform of the economic models that until now have not taken it into account, which is why it has had no impact on public opinion. But change has already started.  

Data for a tangible threat

Last January, the World Economic Forum published The Global Risks Report 2021. The sixteenth edition of the renowned annual report points out that the global economy has grown at the expense of destroying nature and warns that environmental degradation, which continues to be a threat to humanity, risks becoming intertwined with social fractures and bringing severe consequences. Based on the probability of occurrence, the five greatest risks that, according to the report, are directly related to the alteration of the water cycle and its pollution are:

1. Violent meteorological phenomena
2. Failure to combat climate change
3. Environmental damages
4. The spread of infectious diseases
5. The loss of biodiversity

The risks that follow are: 6, the concentration of digital power; 7, the technology gap; 8, the rupture of relationships between states; 9, cibersecurity failures and 10, loss of livelihoods by individuals.

Environmental degradation and the loss of biodiversity directly affect natural capital, a wealth of nature that not only enables life on Earth but also economic growth. Until now, governments and international organizations have had few tools to assess these damages, which means that these tools are not available to assess its benefits either.

The GDP, questioned

The macroeconomic indicator commonly used this past century to assess wealth is the gross domestic product (GDP), which expresses the monetary value of the production of finished goods and services of a country or region. The GDP has been increasingly questioned as a development indicator as it does not take into account the value of biodiversity and the health of the environment, two determining factors of the natural capital of communities.

The denunciation expressed by economists Herman Daly and Robert Costanza to the economic world in 1990 is being admitted by an increasingly higher number of economists: humanity cannot continue growing at the expense of replacing the loss of natural capital with gains in other capitals, such as those obtained from the production of goods and services. It is the foundation of the so called “green economy”: “one that improves human welfare and social equality, while reducing the environmental risks and ecological scarcity.”

In other words, the natural capital is irreplaceable if we wish to fully attain the Sustainable Development Goals (SDGs), and this idea seems to have become more evident to public opinion as the pandemic has progressed. In September 2020, a  report by the Swiss Re Institute highlighted that more than half of the world’s GDP, around 55%, (41.7 trillion dollars in 2018), directly depends on biological diversity and services provided by ecosystems. The Swiss insurance company accounts for these services with its BES (Biodiversity and Ecosystems Services) index and points out that, despite the importance of the services provided by the environment, the GDP does not take this wealth into account and it should do it.

According to the BES index, 39 countries have very fragile ecosystems in more than a third of their territory, with Malta, Israel, Cyprus, Bahrain and Kazakhstan being the lowest ranked. On the other hand, the most important economies of Southeast Asia, Europe and the United States run the risk of decreasing their BES index if they continue growing at the same pace.

Faced with this evidence, already insistently announced this last decade by scientists, economic science is turning towards itself and is facing the urgency of a thorough revision of the way to assess growth. At the beginning of February, Partha Dasgupta, economist at Cambridge University, published The Economics of Biodiversity, one of the most forceful documents regarding the vital importance of the preservation of natural capital, in which he directly questions the concept of GDP.

Dasgupta points out that, between 1992 and 2014, while the capital produced per person doubled and human capital increased by approximately 13%, the natural capital per person decreased by nearly 40%. In his study he highlights that many ecosystems, from rivers to coral reefs, have already degraded beyond repair or are at imminent risk of reaching points of no return, situations in which it is impossible to bring an ecosystem back to health once damaged.

Once this point is reached, the ecosystem loses its capacity to be productive, resistant and adaptable. Dasgupta uses a financial analogy to explain it: just as the diversity in a portfolio of financial assets reduces risk and uncertainty, diversity in a portfolio of natural assets increases the resistance of nature to impacts, reducing the risk of services provided by ecosystems degrading or disappearing.

Taking happiness into account

The new economy must change the way we think, act and measure success to achieve planetary sustainability. The GDP is only a material indicator, it does not express the quality of life or wellbeing of people, it only uses countable variables that can be directly expressed in monetary terms and therefore ignores aspects like the ecological costs or social costs of production, the inequalities in the distribution of wealth and gender inequalities; it does not consider factors such as clean water and air, on which the maintenance of biodiversity and the welfare of people directly depend.

As governments, businesses and societies face Covid-19, social cohesion is more important than ever and the concept of welfare of people is increasingly relevant. Ideas such as incorporating the “gross national happiness” (GNH) or “gross domestic happiness” (GDH) when assessing the progress of a community are taking on a new meaning, if not as an alternative then as an indispensable complement to the GDP.

The idea of the GNH was conceived by Sicco Mansholt, one of the architects of the European Union, and made popular by the decision of the fourth king of Bhutan, Jigme Singye Wangchuck, in 1998, who incorporated them to the economic parameters of his small country with 41,000 km² and 800,000 inhabitants. Nowadays, the government of New Zealand, led by Jacinda Ardern, has promoted the first explicitly welfare-oriented budget. It is not just a question of growth, it is about achieving a growth that results in the greatest possible happiness for the nearly five million inhabitants of the country. Although its critics argue that this change is more rhetorical than a reality, the initiative is very significant due to the change in mentality it implies, something noticed by public opinion, which has introduced into the debate the question of what we mean by development.  

What does the GNH measure? Parameters that are not included in the GDP, such as psychological wellbeing, the use of time for leisure and education, the education level, culture, ecological resilience, environmental health, the health of people, the satisfaction with the government and the vitality of the community. These are subjective data that are difficult to assess, but it is evident that the global society must move forward in complementing material development with the spiritual one, which is synonymous with being in balance with nature.  

The world of water is one of the best platforms to observe and monitor the deterioration of biodiversity, which needs to stop being a silent asset. Rivers, seas and aquifers immediately show the pollution due to the accumulation of waste, which is one of the main factors causing environmental deterioration and the loss of biodiversity. It is the best observatory to understand that our economies are embedded in nature, not external to it, and that the solution starts by understanding and accepting this simple truth.