Document 6520495

 Why Now?
A contribution towards the first IEWG meeting
Contributors: Robert Costanza, Richard Wilkinson, Kate Pickett &
Ida Kubiszewski
January 27 – February 2, 2013
Thimphu, Bhutan
2 Bhutan’s NDP Initiative Why Now?
Robert Costanza, Richard Wilkinson, Kate Pickett,
Ida Kubiszewski
2 A contribution towards the first IEWG meeting 3 Why Now? INTERDEPENDENCE
The world has changed dramatically. We now live in a world that is far more interdependent
than it has ever been. The local self-sufficiency of peasant farmers and craft workers of the past
has been overtaken by the growing global network of economic interdependence. Human
beings everywhere now work to supply the needs of others and depend on what others across
the globe have produced. Spanning continents, the international division of labour now links us
together in an intricate web of trade, communication and exchange. Just as single celled
organisms once came together to form multi-celled organisms, humanity has become a truly
global entity.
The vast scale of the modern system of mutual reliance is changing what it means to be human.
Alongside the expansion of international trade networks has been an equally dramatic
development of communications – cell phones, television, international air travel, email and the
Internet – and out of that has come a worldwide sharing of knowledge, science, music, culture
and sport. Rather than simply being materially dependent on distant people we have never met,
we are also getting to know more about the kind of lives people lead in what were once faraway
places but are now part of the global village.
As we are drawn together, there are growing signs of a corresponding widening of our moral
boundaries, not only through knowledge of each other, but also of our capacity for identification
and empathy, which was once confined to family and tribe. This is shown in the growth of
concern for world poverty, the individual contributions of those who give aid to victims of distant
earthquakes, famines and tsunamis, the increasing concern for social justice and human rights
across the globe, and by the reputational risk companies face if they are found to employ child
labour or expose their employees and local communities to dangerous pollutants.
But despite the profundity of these practical changes in the nature of human life, we appear
politically, economically and socially unable either to tackle problems that threaten humanity as
a whole, or to make use of the productive and creative power of modern societies to maximize
human wellbeing. Much of our thinking, as well as our institutions and economic systems,
remain stuck in what is now a past epoch, unable to cope with new realities. Governments fail to
reach agreement on preventing runaway global warming; they fail to respond adequately to
world poverty or to the burden of preventable disease; they continue to spend appalling sums of
money on armaments; they fail to deal with tax havens, leading to vast losses of revenue from
those who can most afford to pay; and the governments of wealthy countries continue to
promote international trade agreements which often serve only their own interests. Those
failures are symptoms of a paradigm that no longer works.
Thus, our attempts to deal with this new reality have been largely within the obsolete structures
of competition rather than cooperation among nation states, and through preconceptions and
institutions that do more to create than to solve the new problems. The extraordinary potential
of this new world to increase human wellbeing lies wasted and unexplored. Nations compete in
what becomes a race to the bottom, for fear they will go under if they don’t; yet the truth is that
we will go under unless we develop new international cooperative structures, institutions, and
ways of thinking. The problems that confront humanity demand a new paradigm based on a
new level of international agreement and cooperation. Interdependence and competition are not
only antithetical in nature but also risk inflicting irretrievable damage on the planet.
3 4 Bhutan’s NDP Initiative The time has come to make a transition. The challenge is daunting, but we have no choice.
However the problems we face are linked in such a way that solving one paves the way to
solving others. We are, for instance, unlikely to get international agreement on measures strong
enough to check global warming without also addressing world poverty. That will be easier with
the establishment of international trade agreements that prioritize the development of poorer
countries. Similarly, dramatic reductions in the burden of preventable diseases and deaths
would be facilitated if we reduced the exorbitant levels of military spending. And the ability to
promote wellbeing within nations would be very substantially increased if effective international
measures were taken to prevent the use of tax havens for avoiding national taxes.
Envisioning a new world order is not a task for the faint hearted. These problems need to be
solved together because they are so interlinked that they reinforce each other. However, solving
any one of them begins to loosen the tangle, making it easier to solve the others.
THE RELATION BETWEEN ECONOMIC GROWTH AND WELLBEING
So long as our thinking is conditioned by the assumptions of the present consumption and
growth-based paradigm, it will be difficult to make the required transition to a sane world order
and to fashion sane policies that enhance human happiness and the wellbeing of all life forms.
For example, one of the most important obstacles to reaching an international agreement on
policies to reduce carbon emissions hinges on the very different levels of responsibility for past
carbon emissions and the very different stages of economic development and living standards
countries have reached. But it begins to be easier to see a way through this conundrum if we
recognise how the relation between economic growth and human wellbeing changes during the
long course of economic development.
Figure 1 shows the relation between life expectancy and Gross National Income per capita
(GNIpc) internationally. We can see that life expectancy rises rapidly in the earlier stages of
economic growth before levelling out. The levelling out is not simply a ceiling effect as rich
nations approach some limit of life expectancy; life expectancy in these countries is still rising as
fast as it has done during most of the last century. What has changed is that among the rich
countries these increases in life expectancy are no longer related to economic growth. Even
without further growth, life expectancy continues to rise.
If instead of life expectancy, we plot measures of happiness or wellbeing against GNIpc, the
result is a curve very much like that in Figure 1: economic growth makes an important
contribution to health, happiness and wellbeing in its early stages, but makes less and less
difference as countries become richer. That basic curve illustrates a pattern of strongly
diminishing returns to human wellbeing of continued economic growth. Although economic
growth in the past has transformed the quality of life in the rich world, it now appears to have
largely finished its work in these countries. Higher material living standards are clearly still
important for people in poorer countries where many lack important necessities, but for people
in the rich world it looks as if having more and more of everything makes less and less
difference. Indeed, after over a century and a half of rising income levels, it would seem
inevitable that diminishing returns would set in at some point.
4 A contribution towards the first IEWG meeting 5 Why Now? The curve in Figure 1 suggests that there is a threshold level of material living standards at
which absolute poverty ceases to be an important constraint on health and wellbeing. As
middle income countries move from the more vertical to the more horizontal part of that curve,
the infectious diseases of absolute poverty – which kill particularly in childhood – give way to the
degenerative diseases which kill very predominantly in old age. At the same time, as countries
go
through
that
transition,
the
so-called
‘diseases
Figure 1: Only in its early stages does economic income boost life expectancy. Source: [3]
of affluence’ tend to reverse their social distribution. Diseases such as heart disease and
stroke, which once were more common among the better off in each society, become more
common among the less well off. Indeed, in the developed countries it is, for the first time in
human history, the poor who are fatter and the rich who are thinner.
This evidence that economic growth no longer increases wellbeing in the rich countries is
strongly confirmed by the picture gained from successive surveys of people’s life satisfaction
over time. These show that levels of happiness have been relatively flat in the United States
and many other developed countries since about 1975, in spite of a near doubling in per capita
income (Figure 2).
5 6 Bhutan’s NDP Initiative Figure 2: Happiness and Real Income in the United States, 1972–2008. NOTE: Mean happiness (left
scale) is the average reply from respondents to the U.S. General Social Survey. The survey question
asks: "Taken all together, how would you say things are these days? Would you say that you are not
too happy, pretty happy or very happy?" These values were coded as 1, 2 and 3, respectively. Source:
[4]
As a measure of true human wellbeing, Gross Domestic Product (GDP) is limited because it
measures only marketed economic activity or gross income, and also because it counts all of
this activity as positive. It does not separate desirable, wellbeing-enhancing activity from
undesirable, wellbeing-reducing activity. So, for example, an oil spill increases GDP because
someone has to clean it up, but it obviously detracts from society’s wellbeing. Similarly, from
the perspective of GDP, more crime, more sickness, more war, more pollution, more fires,
storms, and pestilence are all potentially good things, because they can increase marketed
activity in the economy.
GDP also leaves out many things that do enhance wellbeing but are outside the market. For
example, the unpaid work of parents caring for their own children at home does not show up;
but if these same parents decide to work outside the home to pay for childcare, GDP suddenly
increases. The non-marketed work of natural capital in providing clean air and water, food,
natural resources, and other ecosystem services, does not adequately show up in GDP either;
but if those services are damaged and we have to pay to fix or replace them, then GDP
suddenly increases. Finally, GDP takes no account of the distribution of income among
individuals. But it is well known that an additional dollar of income produces more wellbeing if
one is poor rather than rich. In fact, GDP is maximized by allocating resources to those with the
greatest willingness to pay. In a highly unequal society, a rich person may be willing to pay
more for drinking water to flush their toilets than a poor family can pay to prevent a child from
dying of dysentery. It is also clear that a highly skewed income distribution has negative effects
on a society’s social capital.
A new development paradigm will certainly require new and more comprehensive measures of
progress that properly account for core determinants of wellbeing and that thereby enhance
opportunties for human happiness. For example, one emerging alternative measure which
makes adjustments to GDP to take account of its weaknesses as a measure of wellbeing is the
Index of Sustainable Economic Well-Being (ISEW) and a variation on it called the Genuine
Progress Indicator (GPI). The GPI separates the positive from the negative components of
marketed economic activity, adding in estimates of the value of nonmarketed goods and
6 A contribution towards the first IEWG meeting 7 Why Now? services provided by natural, human, and social capital, and adjusting for income-distribution
effects. While the measure is by no means a perfect representation of the real wellbeing of
nations, GPI ⎯ or for that matter Bhutan’s Gross National Happiness Index ⎯ is a much better
approximation of wellbeing than GDP. As many have noted, it is much better to be
approximately right in these measures than precisely wrong.
Comparing GDP and GPI for the United States (Figure 3) shows that, while GDP has steadily
increased since 1950, with the occasional dip or recession, GPI peaked in about 1975 and has
been flat or gradually decreasing ever since. From the perspective of the real economy, as
opposed to just the market economy, the United States has been in recession since 1975. The
United States and several other developed countries are now in a period of what Herman Daly
has called "uneconomic growth," where further growth in marketed economic activity (GDP) is
actually reducing wellbeing, on balance, rather than enhancing it.
GPI is certainly not a perfect indicator of wellbeing or quality of life (QOL) and there are several
other alternatives, like Bhutan’s GNH Index and new measures developed by the OECD,
European Union, Japan and others, under active discussion [5,6]. QOL is a complex interaction
of objective and subjective factors and the relationships among them, and with sustainable
human wellbeing is an active area of research. Nevertheless, GPI is certainly a better
approximation to the objective elements of wellbeing than GDP, a function for which GDP was
never designed.
7 8 Bhutan’s NDP Initiative Figure 3: GDP (Gross Domestic Product) and GPI (Genuine Progress Indicator) for the U.S. from
1950 to 2005) Source: [7]
In summary, the conclusion that GDP growth no longer contributes to human wellbeing and
happiness in the rich developed countries is strongly and consistently supported by a number of
quite different kinds of evidence: by the international cross-sectional relations between GDP
growth and both life expectancy and happiness; by the time series analyses within countries of
the relation between measures of happiness and wellbeing; and by measures such as the GPI
over time within countries.
8 A contribution towards the first IEWG meeting 9 Why Now? The significance of further economic growth for wellbeing and happiness is then very different in
richer and poorer countries. This fact is part of the essential basis for reaching international
agreement on reducing carbon emissions. Figure 4 is just one illustration of its importance. It
shows the relation between life expectancy and carbon emisions internationally. The curve is
very similar to that shown in Figure 1. It shows that high levels of life expectancy – and so
presumably of wellbeing – can be achieved at very much lower levels of carbon emisions than
are typical of many rich countries. Even on the basis of existing technology, the conclusion that
in many rich countries carbon is being emitted far above the minimum levels needed to attain
current levels of wellbeing, is almost unavoidable. This implies that it would be possible to
reduce emissions in many rich countries without sacrificing wellbeing. However, more positively,
the decoupling of wellbeing from GDP growth may also mean (as we shall discuss later) that it
is possible to make further improvments in wellbeing by methods which do not involve growth,
such as improving the quality of the social environment.
Figure 4: Relation between life expectancy and carbon dioxide emissions. [8]
9 10 Bhutan’s NDP Initiative CLIMATE CHANGE AND NATURAL RESOURCES
Clearly any new development paradigm must rest on a re-definition of humanity’s relation to
nature. Indeed, sustainability and human survival is obviously the most basic prerequisite for
human happiness and the wellbeing of all life forms. And yet, our understanding of how the
thinking, policies, and behaviour that characterize our present economic system have severed
humanity’s connection with nature and literally threatened the survival of this and countless
other species is still emerging. Only relatively recently, with advances in environmental
sciences, global remote sensing and monitoring systems, has a more comprehensive
assessment of local and global environmental deterioration become possible.
The CO2 content of the atmosphere, for example, has risen from 290 ppm to 390 ppm since the
late 19th century – a rise of over one-third – and sharply in excess of the 350 ppm that leading
scientists say is the safe upper limit for carbon dioxide, beyond which runaway climate change
in the form of melting ice caps, sea level rise, and rapidly spreading drought becomes a real
danger. [9] Global emissions were at record levels in 2011 and are expected to rise substantially
again during 2012. [10] An international goal of limiting the warming of the planet to 2.0oC,
established three years ago, is on the verge of becoming unattainable. [10] This is despite what
is likely to be only a temporary drop in emissions from the developed countries during the
economic turn down. The 2.0oC threshold had been regarded as essential to avoid the most
serious damage to natural and human systems. Average global temperatures during each of the
last 12 years have been among the highest on record and the last decade as a whole has been
the hottest for hundreds of years (UN’s World Meteorological Organization). [11] Sea levels are
now rising at a rate of around 3mm a year, mainly due to the expansion of warmer water. [12] In
September 2012, scientists at the US National Snow and Ice Data Center in Colorado said the
area of Arctic Sea ice was 18 percent below the previous record low set in 2007. [13]
Although it is not yet possible to attribute specific extreme weather events to global warming,
global warming is predicted to produce more of them, and more are being experienced.
Estimates of the number of deaths attributable to global warming therefore vary widely, but
several reputable studies – including one led by former U.N. Secretary General Kofi Annan –
suggest that they may already be as high as several hundred thousand a year and rising.
Evidence is also accumulating of an accelerating loss of vital rain forests, of species extinctions,
depletion of ocean fisheries, increasing freshwater shortages in some areas and flooding in
others, soil erosion, depletion and pollution of underground aquifers, decreases in quantity and
quality of irrigation and drinking water, and growing global pollution of the atmosphere and
oceans (even in the polar regions). (See sidebar, Evidence of Environmental Decline.) [1,14]
The exponential growth of human population (which recently surpassed 7 billion) is rapidly
crowding out other species, even before we have any real understanding of our dependence on
species diversity.
10 A contribution towards the first IEWG meeting 11 Why Now? Evidence of Environmental Decline
•
•
•
•
•
•
•
•
•
•
•
•
Half of the world’s tropical and temperate forests have disappeared,3 and a high rate of
deforestation in the tropics continues.4
About half the wetlands and a third of the mangroves are gone.5
An estimated 90 percent of the large predator fish are gone, and 75 to 80 percent of marine
fisheries are now overfished or fished to capacity.6
Twenty percent of the corals are gone, and another 20 percent damaged and threatened.7
Species are disappearing about a thousand times faster than they did on average in the
past before humans.8 The planet has not seen such a spasm of extinction in sixty-five
million years--not since the dinosaurs disappeared.9 Though decried for decades, the
decimation of the planet’s rich endowment of species and ecosystems continues. Recent
assessments show a continued, steady overall decline in wild species’ population sizes
and in the extent, condition, and connectivity of many habitats with accelerating levels of
extinction risk and accelerating or steady declines in the benefits people derive from
biodiversity.”17
Over half the agricultural land in drier regions suffers from some degree of deterioration
and desertification.10
Persistent toxic chemicals can be found by the dozens in essentially each and every one of
us.11
We have pushed atmospheric carbon dioxide up by more than a third. The earth’s ice
fields are melting almost everywhere.12
Industrial processes are fixing nitrogen, making it biologically active, at a rate equal to
nature’s; one result is the development of more than two hundred dead zones in the
oceans due to overfertilization.13
Human actions already consume or destroy each year about 40 percent of nature’s
photosynthetic output, leaving too little for other species.14
Freshwater withdrawals doubled globally between 1960 and 2000, and are now over half of
accessible runoff.15 The following rivers no longer regularly reach the oceans in the dry
season: the Colorado, Yellow, and Nile, among others.16
In just the first five years of this century, the extent of world forests declined by 3 percent.20
Mangrove forests are now being destroyed at four times the rate of other forests.21 A recent
assessment by the United Nations Environment Programme (UNEP) concluded that if
overfishing trends continue, we will have largely exhausted commercial ocean fisheries in
forty years.22
Emissions of greenhouse gases have already committed the planet to a global average
warming of 1.4°C over the preindustrial (1880) level. Even if all the emission cuts pledged
by governments in Copenhagen in 2009 are met, it is estimated that global average
temperatures will rise between 2.5°C and 5°C over the preindustrial level by 2100.23
Estimates vary, but additional global warming of 1.5°C to 2.5°C over today’s level will likely
put 20 to 30 percent of species at increased risk of extinction.24 Staying on the course we
are on today will likely lead us to:26 Extensive drought.27 Sea level rise of 2–3 feet in this
century, and possibly up to five feet. 30,31, 32 Extensive loss of forests, 33,34 Killer heat
waves,35,36 Millions of climate refugees37,38More-intense hurricanes and floods.
39 40
, Potential climate tipping points. 41.42 Ocean acidification. 43,44 ,45Potential food, water,
and resource shortages..46 ,47 .48 49,50,52 Ongoing energy supply problems 53 and profound
strategic challenges 54
Sources: Various, drawn from Speth, J. G., America the Possible: Manifesto for a New
Economy (New Haven: Yale University Press, 2012)
11 12 Bhutan’s NDP Initiative Our planet’s ability to provide an accommodating environment for humanity is being challenged
by our own activities. The environment—our life-support system—is changing rapidly from the
stable Holocene state of the last 12,000 years, during which we developed agriculture, villages,
cities, and contemporary civilizations, to an unknown future state of significantly different
conditions. We have entered what Paul Crutzen [15] has identified as a new geologic era—the
Anthropocene.
One important way to address this challenge is to determine “safe boundaries” based on
fundamental characteristics of our planet and to operate within them. “Boundaries” here mean
specific points related to a global-scale environmental process beyond which humanity should
not go. Identifying our planet’s intrinsic, non-negotiable limits is not easy, but recently a team of
scientists has specified nine areas that are most in need of well-defined planetary boundaries
[1]. These nine areas are (1) climate change, (2) biodiversity loss, (3) excess nitrogen and
phosphorus production, (4) stratospheric ozone depletion, (5) ocean acidification, (6) global
consumption of freshwater, (7) change in land use for agriculture, (8) air pollution, and (9)
chemical pollution (Figure 5). Rockström and colleagues estimate that humanity has already
transgressed three of these boundaries: climate change, biodiversity loss, and nitrogen
production, with several others rapidly approaching the safe boundary.
As well as crossing these boundaries, there are numerous ways in which human activity could
trigger natural systems to contribute to further, possibly ‘run-away’ global warming.
Locked into the assumptions of our present consumerist and growth-based development
Figure 5: Planetary Boundaries [1,2]
12 A contribution towards the first IEWG meeting 13 Why Now? paradigm, remedial policy responses to date have been local, partial, and inadequate. Early
discussions and the resulting responses tended to focus on symptoms of environmental
damage rather than basic causes, and policy instruments tended to be ad hoc rather than
carefully designed for efficiency, fairness, and sustainability. For example, in the 1970s,
emphasis centred on end-of-pipe pollution which, while a serious problem, was actually a
symptom of the way expanding populations and inefficient technologies fuelled exponential
growth of material and energy use, and simultaneously threatened the recuperative powers of
the planet’s life-support systems. But as a result of early perceptions of environmental damage,
people learned a lot about policies and instruments for attacking pollution. These insights will
help in dealing with the more fundamental and intractable environmental issues identified here.
The basic environmental problems that can only be solved by a radically new development
paradigm, and for which we need truly innovative policies and management instruments,
include:§
§
§
unsustainably large and growing human populations with growing per capita consumption
levels that are fast approaching, or already exceed, planetary boundaries;
highly entropy-increasing technologies that deplete the earth of its resources and whose
unassimilated wastes poison the air, water, and land; and
land conversion that destroys habitat, increases soil erosion, and accelerates loss of
species diversity, and which, coupled with resource extraction and waste emissions,
decreases the ecosystem services that support humanity.
These problems are evidence that the material scale of human activity is rapidly approaching, or
already exceeds, the safe operating space for humanity on the earth.
We believe that, in addressing these problems, a new development paradigm should adopt
courses of action based on:§
§
§
§
an understanding that the purpose of development is human happiness and the
wellbeing of all life forms rather than the narrow consumerism and limitless growth that
characterize the present system;
a recognition of the planetary boundaries that the earth places on the type and scale of
economic activity;
a fair distribution of resources and opportunities among groups not only within the
present generation but also between present and future generations, and between
humans and other species; and
an economically efficient1 allocation of resources that adequately accounts for protecting
the stocks of natural and social capital.
1
“Economically efficient” simply means that increasing marginal costs and diminishing marginal benefits
from an activity are in balance. Marginal costs and benefits should be measured in terms of contributions
to the sustainable welfare of humans and other species. Precise measurement of these contributions is not
currently possible. Conventionally, economists emphasize purely monetary costs and benefits, which are
determined by willingness to pay, and hence fail to reflect both costs and benefits for those with limited
purchasing power and a wide range of environmental, social, and human benefits and costs. Under these
conditions, as defined by conventional economists, an efficient allocation is simply one that maximizes
13 14 Bhutan’s NDP Initiative These four principles were presented to and endorsed by the high-level meeting hosted by
Bhutan at the United Nations on 2nd April this year, which was attended by 800 distinguished
representatives of governments, academia, civil society, business, and major religions. These
four principles now also constitute the basis for our present endeavour to elaborate the details
of the new development paradigm. The first principle constitutes the goal of development, and
the remaining three principles constitute the essential conditions and prerequisites for
realization of that goal.
Thus the new paradigm acknowledges that homo sapiens’ activities on the planet have now
reached such a scale that they are beginning to affect the ecological life-support system itself.
The entire concept of economic growth (defined as increasing material production and
consumption) must be rethought, especially as a solution to the growing host of interrelated
social, economic, and environmental problems. What we need now is real economic and social
development (qualitative improvement without growth in resource throughput) and an explicit
recognition of the interrelatedness and interdependence of all aspects of life on the planet. We
need to move from an economics that ignores this interdependence to one that acknowledges
and builds on it. We need to develop an economics that is fundamentally “ecological” in the
broadest sense and in its basic view of the problems that our species currently faces.
ECONOMIC MODELS – PAST AND FUTURE
To take the first and most basic condition of human survival, the evidence now clearly and
incontrovertibly demonstrates that our present path is unsustainable. As Paul Raskin said:
“Contrary to the conventional wisdom, it is business as usual that is the utopian fantasy; forging
a new vision is the pragmatic necessity.” [16] But we do have a choice about how to make the
transition and what the new state of the world should be.
Sustainability involves environmental, economic, social and political components. The current
mainstream model of the economy is based on a number of assumptions about the way the
world works, what the economy is, and what the economy is for. These assumptions arose
when built capital was the limiting factor, while natural capital was abundant. Then it made
apparent sense not to worry about environmental “externalities,” since they could be assumed
to be relatively small and ultimately solvable. It appeared to make sense to focus on the growth
of the market economy – as measured by GDP – as a primary means to improve human
welfare. It made apparent sense, in that context, to think of the economy as comprised only of
marketed goods and services and to think of the goal as increasing the amount of these goods
and services produced and consumed.
But we now live in a world relatively full of humans and their built capital infrastructure. In this
new context, we have to re-conceptualize what the economy is and what it is for. We have to
first remember that the goal of the economy should be to sustainably improve human wellbeing
and quality of life, which in turn can enhance opportunities for human happiness. We need to
remember that material consumption and GDP are merely partial means to that end, not ends in
themselves. Crucial is a better understanding of what really does contribute to sustainable
human wellbeing (SHW) and happiness, including the substantial contributions of natural and
social capital and of other factors unrelated to income which are now limiting wellbeing in many
countries. We should also recognise, as both ancient wisdom and new psychological research
marketed exchange value. While measurements may be fairly precise, this narrow goal is inappropriate to
the purpose of the new development paradigm.
14 A contribution towards the first IEWG meeting 15 Why Now? tell us, that too much of a focus on material consumption can actually reduce our wellbeing and
happiness. [17] It is also necessary to distinguish between the effect of absolute poverty, in
terms of an absence of material necessities, and the psychosocial effects of poverty relative to
others. Ultimately we have to create a new vision of what the economy is and what it is for, and
a new model of the economy that acknowledges this new “full-world” highly interdependent,
context and vision.
Some argue that relatively minor adjustments to the current economic model will produce the
desired results. For example, they argue that by adequately pricing the depletion of natural
capital (e.g. by putting a price on carbon emissions), we can address many of the problems of
the current economy while still allowing GDP growth to continue. We call this approach the
“green economy” (GE) model. Some of the areas of intervention promoted by GE advocates,
such as investing in natural capital, are necessary and we should definitely pursue them.
However, we believe they are insufficient to achieve sustainable human wellbeing and
happiness. We need a more fundamental change, a change of goals and paradigm as
discussed throughout this report.
Table 1. Basic characteristics of the current economic model, the green economy model, and the
ecological economics model (as a contribution to a new development paradigm) [18]
Current
Model
Economic
Green Economy Model
Ecological Economics Model
Primary policy goal
More:
Economic
growth
in
the
conventional sense, as
measured by GDP.
The assumption is that
growth will ultimately
allow the solution of all
other problems. More
is always better.
More but with lower
environmental impact:
GDP growth decoupled
from carbon and from
other material and energy
impacts.
Better: Focus must shift from
merely growth to “development”
in the real sense of improvement
in sustainable human wellbeing
and happiness, recognising that
growth has significant negative
by-products. More is not always
better.
Primary measure of
progress
GDP
Still GDP, but recognising
impacts
on
natural
capital.
Index of Sustainable Economic
Welfare
(ISEW),
Genuine
Progress Indicator (GPI), GNH
Index,
or
other
improved
measures of real welfare.
Scale/carrying
capacity/role
environment
Not an issue, since
markets are assumed
to be able to overcome
any resource limits via
new technology, and
substitutes
for
resources are always
Recognised,
but
assumed to be solvable
via decoupling.
A primary concern as a
determinant
of
ecological
sustainability.
Natural capital
and ecosystem services are not
infinitely substitutable and real
limits exist.
of
15 16 Bhutan’s NDP Initiative available.
Distribution/poverty
Given lip service, but
relegated to “politics”
and a “trickle-down”
policy: a rising tide lifts
all boats.
Recognised as important,
assumes greening the
economy will reduce
poverty via enhanced
agriculture
and
employment in green
sectors.
A primary concern, since it
directly affects quality of life and
social capital and since poverty
is often exacerbated by growth:
a too rapidly rising tide only lifts
yachts, while swamping small
boats.
Economic
efficiency/allocation
The primary concern,
but generally including
only marketed goods
and services (GDP)
and market institutions.
Recognised to include
natural capital and the
need to incorporate the
value of natural capital
into market incentives.
A primary concern, but including
both market and nonmarket
goods and services, and effects.
Emphasis on the need to
incorporate the value of natural
and social capital to achieve true
allocative efficiency.
Property rights
Emphasis on private
property
and
conventional markets.
Recognition of the need
for instruments beyond
the market.
Emphasis on a balance of
property
rights
regimes
appropriate to the nature and
scale of the system, and a
linking
of
rights
with
responsibilities. Includes larger
role
for
common-property
institutions in addition to private
and state property.
Role of government
Government
intervention
to
be
minimized
and
replaced with private
and market institutions.
Recognition of the need
for
government
intervention to internalize
natural capital.
Government, at local, national,
regional,
and
international
levels,
plays a central role,
including new functions as
referee, facilitator, and broker in
a new suite of common-asset
institutions.
Laissez-faire
capitalism.
Recognition of the need
for government.
Lisbon principles of sustainable
governance.
Principles
governance
of
market
GROWTH IN MATERIAL CONSUMPTION IS UNSUSTAINABLE
Historically, human recognition of our impact on the earth has consistently lagged behind the
magnitude of the damage we have imposed, thus seriously weakening efforts to control this
damage. [19] Even today, technological optimists and others ignore the mounting evidence of
global environmental degradation, including climate disruption. Even some serious observers
draw comfort from arguments such as the following:§
GDP figures are still increasing throughout much of the world.
16 A contribution towards the first IEWG meeting 17 Why Now? §
§
§
§
Life expectancies are still increasing in many nations.
Evidence of human-caused climate disruption is still not absolutely definitive.
Some claims of environmental damage have been exaggerated.
Some previous predictions of environmental catastrophe have not been borne out.
Each of these statements is correct. However, not one of them is a reason for complacency.
The pervasive uncertainty about the basic nature of our ecological life-support systems and the
recognition that complex systems often exhibit rapid, nonlinear changes and threshold effects
emphasizes the need for building precautionary minimum safety standards into our policies. [1]
Our purpose in this contribution to a new development paradigm is to lay out a new model of
development and of the economy based on the four principles outlined above. These principles
are fully consonant with the worldview and principles of ecological economics, of Bhutan’s
Gross National Happiness development philosophy, and of related “new paradigm” approaches
[5,8,9] and include the ideas that:(1) our material economy is embedded in society which is embedded in our ecological lifesupport system, so that we cannot understand or manage our economy without understanding
the whole, interconnected system;
(2) growth and development are not always linked. True development must be defined in terms
of the improvement of sustainable human wellbeing and happiness, not merely in increasing
material consumption; and
(3) a balance of four basic types of assets (built, human, social, and natural capital) are
necessary for sustainable human wellbeing that in turn can provide the basis for enhancing
human happiness. (Financial capital is merely a marker for real capital and must be managed
as such).
World Poverty, Inequality and Ill-health
Our discussion above has focussed on the first basic condition of wellbeing and happiness ⎯
namely ecological sustainability, which in turn, as we have seen, requires limits to growth,
material consumption, and waste generation. But having acknowledged the finite limits of
planetary boundaries and resource availability, a new development paradigm must then address
how those limited resources are to be fairly distributed and most efficiently utilized. Again, the
contrast in these areas between the assumptions, thinking, policy, and behaviour of the existing
economic system and those proposed to characterize a new development paradigm is stark.
Our world is still unacceptably divided between the haves and the have-nots. Infant mortality
rates are as low as 2 per thousand live births in some of the Scandinavian countries but at least
50 times that in some of the poorer nations of Africa such as the Democratic Republic of Congo,
Sierra Leone, or Somalia. [20] We are used to dividing the globe into First World wealthy
nations and the poor states of the Third World. But in 1820 (when the data start), rich countries,
such as Great Britain and the Netherlands, were only three times as rich as China and India;
now the current gap between the real incomes of the richest and poorest countries is over a
hundred-fold. [21]
The World Bank (WB) and the International Monetary Fund (IMF), both founded at the Bretton
Woods conference at the end of World War II, were chartered to speed economic development,
17 18 Bhutan’s NDP Initiative stabilize the world economy, and end poverty. But although we could now rather easily feed,
clothe, educate and shelter every living person on earth, we have failed to do so. It was
estimated in 1998 that it would cost only US $40 billion to provide basic education, water and
sanitation, basic health and nutrition for all, and reproductive health for all women. [22] In the
same year, $50 billion were spent just on cigarettes in Europe alone, $35 billion were spent just
on business entertainment in Japan, and worldwide military spending came to $780 billion.
And yet today, nearly 1.3 billion people, or 22% of the world’s population, remain below the
extreme poverty line, with an income of US $1.25 or less a day. [23] In 2000, the global
target of halving extreme poverty by 2015 was set as the first Millennium Development Goal and
whilst this will likely be achieved five years early (⎯ extreme poverty had fallen from 43% of the
world’s population in 1990), almost all of this progress can be accounted for by economic
growth in China. [24] However, rising food and fuel prices and financial crises may stall, or even
reverse, these positive trends. Even if these price rises can be averted, hundreds of millions of
people will remain in poverty, especially in Sub-Saharan Africa and South Asia. As well as those
in extreme poverty, almost 2.5 billion people – more than one-third of the world's population
– live on less than US $2 a day, and 80 percent live on less than $10 a day. [24]
The Food and Agriculture Organization estimated that there were 739 million people without
adequate daily food intake in 2008. [23] Over a quarter of all children in developing countries
are underweight, close to a third are stunted, and more than 26,000 children die each day,
most from poverty-related causes. [25] Conservative estimates are that 863 million people
live in slum conditions, 61 million children who should be in primary school are not, 122
million young people cannot read or sign their name, and many millions of women spend
hours each day just collecting water. [26]
But poverty is only one side of the present equation of “unfair distribution”. At the other
extreme is gluttony of excess consumption that is rapidly depleting resources, generating
massive wastes, spewing carbon into the atmosphere, and destroying the ecological life
support systems that sustain us. Thus:
•
•
•
•
•
20% of the world’s people presently consume 86% of its goods while the poorest 20%
consume just 1.3%;
the richest 20% use 58% of all energy and the poorest 20% less than 4%;
20% of people produce 63% of the world’s greenhouse gas emissions while another
20% produce only 2%;
12% of the world’s people use 85% of the world’s water;
the richest 20% consume 84% of all paper and have 87% of all vehicles, while the
poorest 20% use less than 1% of each.
The stress on the planet of the lifestyles of the rich is no less than the stress of poverty on the
lives of countless millions of our fellow human beings. Indeed, the two phenomena are closely
related. Given the reality that we live on a finite planet with limited resources, we simply cannot
alleviate the extreme poverty of 1.3 billion of our fellow global citizens without curbing the
excess consumption of more than a billion more. Humanity is already consuming resources and
generating waste 60% faster than the planet can regenerate, absorb, and sustain. If everyone
were to consume at North American levels, we would need four more planets to provide the
necessary resources. Put another and perhaps less palatable way, we presently need a billion
people to live in extreme poverty if we are to maintain the lifestyles of the rich without creating
even more damage to our planet. In sum, as Mark Mancall writes in his companion piece in this
18 A contribution towards the first IEWG meeting 19 Why Now? volume, poverty alleviation cannot be tackled without also addressing ‘wealth alleviation’ and
glaring present inequities. This is why “fair distribution” is one of the four core principles of the
new development paradigm.
And all these statistics are only the visible tip of the iceberg, the numerated facts of the
waste of human life, energy, resources, and talent that is a scourge of catastrophic
proportions. Below the water line is the burden of ill health and premature death it causes.
The World Health Organization’s Commission on the Social Determinants of Health has
called for action to close the world’s health gap in a generation. This means addressing the
health of the poor, the social gradient in health within countries, and the striking disparities
in population health and access to health care between nations. [27] According to the
World Health Organization:
“This unequal distribution of health-damaging experiences is not in any sense a
‘natural’ phenomenon but is the result of a toxic combination of poor social
policies and programs, unfair economic arrangements, and bad politics….
Certainly, maldistribution of health care – not delivering care to those who most
need it – is one of the social determinants of health. But the high burden of illness
responsible for appalling premature loss of life arises in large part because of the
conditions in which people are born, grow, live, work and age.”
— Closing the Gap in a Generation, World Health Organization, 2008
The Commission’s three overarching recommendations are to: improve daily living
conditions; tackle the inequitable distribution of power, money and resources; and lastly, to
measure and understand the problem and assess the impact of action.
Disease prevention and health promotion could prevent a large proportion of the global
burden of disease, and there is a compelling economic argument to be made in favour of
preventive action. But the Millennium Development Goals for 2015, relating to poverty
reduction, universal primary education, gender equality, reductions in child mortality,
improving maternal health, and combating HIV/AIDS, malaria and other diseases, seem
unlikely to be met in the wake of the global economic crisis. Indeed progress has been slow
or has reversed for some MDG targets: vulnerable employment has decreased only slightly;
maternal mortality rates are a long way off target; clean and safe water sources are still
lacking – particularly in rural areas; world hunger has risen; and the number of people living
in slum conditions is rising. According to the United Nations Secretary-General:
“Achieving the MDGs by 2015 is challenging but possible. Much depends on the
fulfilment of MDG-8—the global partnership for development. The current
economic crises besetting much of the developed world must not be allowed to
decelerate or reverse the progress that has been made.”
— Ban Ki-moon, Secretary General, United Nations, The Millennium Development
Goals Report, 2012
An estimate of what it would have cost in 2010 to close the MDG financing gap for every
low-income country is U S$143 billion. [28]
19 20 Bhutan’s NDP Initiative INTERNATIONAL T RADE AND G LOBALIZATION
To a large extent, current global inequities are maintained and reinforced through the
institutions, structures, and regulatory mechanisms of the existing growth-based paradigm,
and it will therefore be one of the key tasks of our working group to define appropriate
institutions, structures, and regulatory mechanisms for the new development paradigm. At
the beginning of this paper we mentioned the increasing economic interdependence of
nation states – through international movement of capital, goods, services, technology and
communications. Economic globalization has been supported by reduced regulation of
international trade, and the removal of tariffs and tax barriers. Supporters of globalization
see it as a contribution to raising world GDP; critics point to its impact on rising inequality
and social disruption, poverty levels, and environmental degradation.
The World Bank (WB) and the International Monetary Fund (IMF) have relied largely on the
current economic model as described above and in Table 1. The inability of these
institutions and the World Trade Organization (WTO) to fully achieve their original goals of
improving lives even in the poorest countries and of stabilizing the global economy has
given rise to many critics, who are no longer merely marginalized voices. These critics
include former World Bank economists, the Group of 77 (G-77), and, increasingly, the
millions of people in developed countries who have taken to the streets in protest.
A strong critique of globalization points to the rise in power and autonomy of multinational
corporations over nation states and international institutions. Such corporations can even
over-ride national laws instituted through democratic processes. As examples, the WTO
once ruled that the United States Clean Air Act was a barrier to free trade, and a report
from the Economic Policy Institute describes how the North American Free Trade
Agreement gives corporations protection from government policies and rights to the
privatization of public services, whilst omitting protections for workers, the environment,
and the public. [6]
Such policies are antithetical to the goal of developing in a way that is sustainable,
democratic, and equitable. Too often they reflect the dictates of a few powerful countries
and their attendant organizations rather than a broad consensus of agreement. Lending
countries and their economists have driven these policies, and borrowing nations have had
little say in their implementation. Loans have required cuts in government salaries and
privatization of social services. The conditional loans foisted upon many Latin American
countries resulted in massive unemployment and devastating economic crises. In short,
the execution of policies that flow from the assumptions underlying the present economic
system has led to unemployment, falling worker wages, biodiversity loss, environmental
degradation, and disintegration of the social fabric.
Economist Herman Daly describes how international competition and trade, rather than
lowering production costs through efficiency, does so by externalizing costs. [7] Within
richer nation states, production costs include workplace safety, minimum wages, welfare,
social security, medical and accident insurance, and restrictions on the length of the
working day, on child labour and on pollution. With globalization, the shift of production
from high to low cost nations that do not have such controls or welfare provisions, lowers
the moral and ethical standards of production, increasing exploitation and child labour,
weakening human rights, and escalating environmental damage. The costs are
compounded by the environmental impact of transport.
20 A contribution towards the first IEWG meeting 21 Why Now? As Daly points out [7]:
“…even the General Agreement on Tariffs and Trade (GATT) concedes that it is
too much to expect the working class in one country to freely compete with
prison labor in another. But then what about child labor? Or sixteen-hour-perday labor? Or uninsured risky labor? What about subsistence-wage labor in
overpopulated countries? What about cheap goods subsidized by the uncounted
divestment of natural capital?”
A new development paradigm must pay serious attention to the contrast between fair trade
and free trade, to supporting the globalization of communication and people while opposing
the expansion of exploitative corporate power: a coherent and viable alternative is sorely
needed.
INEQUALITY W ITHIN C OUNTRIES
Increasingly, and antithetically to our growing sense of social justice and human rights, we
also live in a world of growing within-nation inequality – more than 80 percent of us live in
countries where income gaps are widening. Large income gaps between nations drive
unsustainable and increasingly problematic international migration; large income gaps
within nations foment political instability and conflict. [21]
Whilst a growing body of research recognises that the distribution of income is an important
determinant of social capital, health and quality of life, the conventional economic development
model, while it claims to reduce poverty, has assumed that the best way to do this is through
growth in GDP. However, this has not proved to be the case, and attention to distributional
issues is now urgent. Increasing inequality of income actually reduces overall societal
wellbeing, not just for the poor but across the income spectrum. Wilkinson and Pickett have
produced empirical data that show strong links between income inequality in rich countries and
a whole range of health and social problems. [3] Countries with larger income differences suffer
higher rates of almost all the health and social problems associated with low social status. In
effect, inequality strengthens all the ways class and status imprint themselves on us from
earliest life onwards. More unequal countries tend to have:•
•
•
•
•
•
•
•
Lower life expectancy and poorer health
Higher homicide rates
More mental illness
Lower standards of child wellbeing
Higher prison populations
Greater use of illicit drugs
Higher rates of teenage births
Lower math and literacy scores and lower social mobility
Each of these indicators is anything from twice as common to ten times as common in the more
unequal of the developed countries (such as USA, Portugal, UK) as they are among the more
equal Scandinavian countries. The differences are so large because, rather than being
confined to the poor, the effects of inequality extend to the vast majority of the population.
Inequality damages the social fabric of the whole society: the effects are biggest among those
lower on the social ladder, but the disadvantages of greater inequality are experienced to a
21 22 Bhutan’s NDP Initiative lesser extent even among the better off. Indeed, countries with bigger income differences
between rich and poor seem to suffer a general social dysfunction. They are less cohesive,
community life is weaker, and people trust each other less. [3]
Since before the French Revolution, people have recognised that inequality is divisive and
socially corrosive. Now that we can compare data for more and less equal countries, it is clear
that this is profoundly true. Key to the impact of inequality is its effect on the quality of social
relations: – in more unequal societies reciprocity and cooperation give way to status competition
and status insecurity and to feelings of superiority and inferiority. And because humans are
highly social beings, the quality of social relations is a key component of the real quality of life,
of SHW, and of human happiness. Indeed, the World Happiness Report shows that differences
in just one form of social network (having someone to count on in times of trouble) are as
important as differences in GDP per capita in explaining subjective wellbeing differences across
139 countries [44. Table 3.1].
Particularly pertinent in the present context is that Wilkinson and Pickett found that among the
rich countries both their Index of Health and Social Problems and the UNICEF Index of Child
Wellbeing in Rich Countries were strongly affected by the scale of inequality in a society but,
just like the measures of wellbeing discussed earlier, unrelated to GDP per head.
AN INTEGRATIVE DEFINITION OF QUALITY OF LIFE AND WELLBEING
Just as abundant and growing evidence now points to the failure of the present consumption
and growth-based development paradigm, there is equally a substantial and growing body of
research on what does actually contribute to human wellbeing, quality of life, and happiness.
While there is still much on-going debate, this new science clearly demonstrates the limits of
conventional income and consumption in contributing to wellbeing. For example, psychologist
Tim Kasser, in his 2003 book The High Price of Materialism [4], points out that people who
focus on material consumption as a path to wellbeing are actually less satisfied with their lives
and even suffer higher rates of both physical and mental illness than those who do not focus so
much on material consumption.
Economist Richard Easterlin has shown that wellbeing tends to correlate with health, level of
education, and marital status and shows sharply diminishing returns to income beyond a fairly
low threshold. He concludes [30] that
“…people make decisions assuming that more income, comfort, and positional goods
will make them happier, failing to recognise that hedonic adaptation and social
comparison will come into play, raise their aspirations to about the same extent as
their actual gains, and leave them feeling no happier than before. As a result, most
individuals spend a disproportionate amount of their lives working to make money,
and sacrifice family life and health, domains in which aspirations remain fairly constant
as actual circumstances change, and where the attainment of one’s goals has a more
lasting impact on happiness. Hence, a reallocation of time in favor of family life and
health would, on average, increase individual happiness.”
British economist Richard Layard synthesizes many of these ideas and concludes that current
economic policies are not improving wellbeing and happiness, and that “happiness should
become the goal of policy, and the progress of national happiness should be measured and
analyzed as closely as the growth of GNP.”[31] Economist Robert Frank, in his book Luxury
22 A contribution towards the first IEWG meeting 23 Why Now? Fever [32], also concludes that some nations would be better off—that is, overall national
wellbeing would be higher—if we consumed less and spent more time with family and friends,
working for our communities, maintaining our physical and mental health, and enjoying nature.
There is also substantial and growing evidence that natural systems contribute strongly to
human wellbeing. In a paper published in the journal Nature [5], the annual, nonmarket value of
the earth’s ecosystem services was estimated to be substantially larger than global GDP. This
estimate was admittedly a rough first cut – the paper’s goal was simply to stimulate interest and
research on the value of natural capital and ecosystem services. The UN Millennium
Ecosystem Assessment [33] was a global update and compendium of ecosystem services and
their contributions to human wellbeing. The Economics of Ecosystems and Biodiversity (TEEB)
Synthesis report [34] is a more recent contribution to this rapidly expanding field of study and
policy. The World Bank has recently announced its Wealth Accounting and Valuation of
Ecosystem Services (WAVES) project. The new Intergovernmental Platform on Biodiversity and
Ecosystem Services (IPBES) is also in the formation stages (www.ipbes.net). Finally, the
recently established Ecosystem Services Partnership (ESP) is a global effort to coordinate the
thousands of researchers and practitioners around this topic (www.es-partnership.org).
In sum, if we want to assess the “real” economy—all the things that contribute to real,
sustainable, human wellbeing and happiness—as opposed to only the “market” economy, we
have to include the non-marketed contributions to human wellbeing – from nature, from family,
friends, and social relationships at many levels, and from health and education. What does
such a more comprehensive, integrative definition of wellbeing, quality of life, and happiness,
which constitute the goal and purpose of development in the new development paradigm, look
like?
The Prime Minister of Bhutan, in his introduction to this volume, has already explained the
profound meaning of the term ‘happiness’, as it used in the context of his country’s unique
Gross National Happiness development philosophy that fundamentally challenges existing
materialist development approaches and that is one of the core inputs into the new development
paradigm. Here we delve into some detail into ways of defining wellbeing and quality of life that
are seen as providing vital opportunities for the pursuit of happiness.
When we evaluate the state of human affairs or propose policies to improve it, we typically
proceed from assumptions about the characteristics of a good life to assumptions about how to
achieve them. We might suppose, for example, that access to particular material resources is a
part of a good life and, therefore, that increasing economic production per-capita is an
appropriate goal. But our underlying assumptions are rarely tested and established. We
therefore need a more basic approach to defining wellbeing or quality of life (QOL) that, in turn,
can guide our efforts to improve human experience. Examinations of QOL often fall under two
headings:
(1)
So-called “objective” indicators of QOL include, for example, indices of living standards,
literacy rates, life expectancy, and other data that can be gathered without a subjective
evaluation being made by the individual being assessed (although subjective judgments of the
researcher are likely to be involved in the process of defining and gathering “objective”
measures). Objective indicators may be used singly or in combination to form summary
indexes, as in the UN’s Human Development Index (HDI) [36], the Index of Sustainable
Economic Welfare, or the Genuine Progress Indicator. To the extent that such measures can
be shown to be valid and reliable across assessment contexts (sometimes a difficult task), these
23 24 Bhutan’s NDP Initiative relatively objective measures may help us gather standardized data that are less vulnerable to
social comparison and local adaptation. For example, a valid measure should minimize the
degree to which QOL is largely a function of comparing one’s life to others’, whether in one’s
locale, in the media, or in some other narrowly construed group: In other words, a person’s QOL
should not be considered high simply because others in the locale are more miserable.
(2)
Subjective indicators of QOL typically rely on survey or interview tools to gather
respondents’ own assessments of their lived experiences in the form of self-reports of
satisfaction, happiness, wellbeing, or some other near-synonym. Rather than presume the
importance of various life domains (e.g., life expectancy or material goods), subjective
measures can also tap the perceived significance of the domain (or “need”) to the respondent.
Diener and Suh provide convincing evidence that subjective indicators are valid measures of
what people perceive to be important to their happiness and wellbeing [37]. Nevertheless, there
are individuals who cannot provide subjective reports or whose subjective reports may not be as
trustworthy in reflecting their true welfare because of the internalization of cultural norms [38],
mental illness, lack of information, or other reasons.
The best strategy is likely to be an approach to QOL that combines objective and subjective
approaches. Our integrative definition of QOL is as follows: QOL is the extent to which
objective human needs are fulfilled in relation to personal or group perceptions of subjective
wellbeing (Figure 6). Human needs are basic needs for subsistence, reproduction, security,
affection, etc. (see Table 1 and below). Subjective wellbeing (SWB) is assessed by individuals’
or groups’ responses to questions about happiness, life satisfaction, utility, or welfare. The
relation between specific human needs and perceived satisfaction can be affected by mental
capacity, cultural context, information, education, temperament etc. in complex ways.
Moreover, the relation between the fulfilment of human needs and overall subjective wellbeing is
affected by the varying priority individuals, groups, and cultures give to fulfilling each of the
human needs relative to the others.
24 A contribution towards the first IEWG meeting 25 Why Now? Figure 6: Quality of Life (QOL) as the interaction of human needs and the subjective perception of
their fulfilment, as mediated by the opportunities available to meet the needs [29]
From this ‘new paradigm’ perspective that sees wellbeing and happiness as the goal and
purpose of development, the role of policy, therefore, is to create opportunities for human needs
to be met, understanding that there are different ways to meet any particular need. Social
norms affect both the weights given to various human needs when aggregating them to overall
individual or societal assessments of SWB, and also policy decisions about social investments
in improving opportunities. Social norms evolve over time due to collective population
behaviour [40]. The evolution of social norms can be affected by conscious shared envisioning
of preferred states of the world. [41]
A convenient way to summarize the opportunities for meeting human needs is to group them
into four basic types of assets or “capital” that are necessary to support a genuine humanwellbeing-and-happiness-producing economy: built capital, human capital, social capital, and
natural capital. Time is also an independent constraint on the achievement of human needs.
We refer to these assets as “capital” in the sense of a stock or accumulation or heritage—a
patrimony received from the past and contributing to the welfare of the present and future. (Our
use of the term “capital” here is much broader than that associated with capitalism.) These
assets, which overlap and interact in complex ways to produce all benefits, are generally
defined as follows:
25 26 Bhutan’s NDP Initiative •
•
•
•
Natural capital: The natural environment and its biodiversity.
Among other things,
natural capital is needed to provide ecosystem goods and services. These goods and
services are essential to basic human needs such as survival, climate regulation, habitat
for other species, water supply, food, fibre, fuel, recreation, cultural amenities, and the
raw materials required for all economic production.
Social and cultural capital: The web of interpersonal connections, social networks,
cultural heritage, traditional knowledge, and trust, and the institutional arrangements,
rules, norms, and values that facilitate human interactions and cooperation between
people. These contribute to social cohesion; strong, vibrant, and secure communities;
and good governance, and help fulfil basic human needs such as participation, affection,
and a sense of belonging.
Human capital: Human beings and their attributes, including physical and mental health,
knowledge, and other capacities that enable people to be productive members of
society. This involves the balanced use of time to fulfil basic human needs such as
satisfying employment, spirituality, understanding, skills development, creativity, and
freedom.
Built capital: Buildings, machinery, transportation infrastructure, and all other human
artefacts and services that fulfil basic human needs such as shelter, subsistence,
mobility, and communications.
We recognise that human, social, and produced assets depend entirely on the natural world,
and that natural capital is therefore ultimately non-substitutable. Sustainability therefore
requires that we live off the interest (sustainable yields) generated by natural capital without
depleting the capital itself.
To think of nature, the biosphere, the earth, as a form of capital is a way of recognising its
importance to the economy, an importance that is often overlooked. Ecological economics
understands economies as embedded in cultures and societies, which in turn are embedded in
the geo-biosphere. This means that economies rely on the geo-biosphere to provide materials
and energy and accommodate all the wastes that economic activity inevitably produces. Natural
capital is conceptually similar to built capital (buildings, machines, infrastructure, warehouses) in
the sense that it provides goods (e.g., minerals, fossil fuels, timber, water) and services (e.g.,
pollination, flood control, watershed protection, nutrient cycling) without which economies could
not function.
In speaking of “natural capital” we are using the term “capital” in its physical, not financial sense,
e.g., in the same way that we might speak of a carpenter’s stock of tools or a factory assembly
line. A herd of livestock is a capital stock that yields a flow of new members. The physical herd
converts grass, water, etc., into new animals. The net increment is income or sustainable yield.
The constant herd is capital, reproducing stock. This is a physical stock-flow relation
independent of financial arrangements. Indeed the word “capital” derives from “capitas,” ⎯ the
number of heads the herdsman has in his livestock. Similar stock-flow relationships hold for
forests, fisheries, and other populations.
Problems may arise when the physical descriptive term “natural capital” is converted into
financial monetary terms, and especially when natural growth rates are converted into monetary
yields of different physical stocks, and then compared to the rate of interest on a stock of money
in the bank. But reasonable concerns with misuses of the monetization of nature should not
keep us from recognising the physical importance of natural capital as a stock that yields
desired flows. Nor should such concerns prevent us, as a strategy, from demonstrating the
26 A contribution towards the first IEWG meeting 27 Why Now? extraordinary economic value of nature to human society through demonstrating, for example,
what it might cost even partially to replace services currently provided by nature for ‘free’.
Natural capital is also very different from built capital in other ways. First of all, built capital is
made from natural capital. In other words, nature can exist without built capital, but built capital
cannot exist without nature. There is, therefore, an essential hierarchy limiting the extent to
which built capital can substitute for natural capital, and they are better thought of as
complements than substitutes.
Second, built capital represents a ‘fund’ that provides a ‘service’ as, for example, a lathe
provides a service when it is used to shape wood. The lathe is not consumed in the process.
Natural capital can also be a fund that provides services, such as when a forest provides habitat
for forest creatures. But natural capital can also be a stock out of which a supply of material
flows. So the forest that provides habitat as a fund-service is also a stock of trees that supplies
a flow of wood (the very wood used on the lathe.) Services do not deplete funds, but material
flows do deplete stocks, which can however be regenerated if renewable. Since materials
flowing from natural capital are usually sold through markets, and ecosystem services often are
not, there is an ever-present tendency to overuse natural capital for the material flows it can
provide to the detriment of its capacity to provide services.
A third and more profound reason for differentiating between natural and built capital is that built
capital is simply an object for the benefit of humans. That is why it exists. When built capital no
long provides a useful service, it is frequently demolished. Nature, of which humans are an
integral part, is much more than that. Nature is populated by countless species, many of whom
are sentient, experience a range of emotions, learn, and live in communities of their own
making. Reverence for all life, which is a cardinal principle of the new development paradigm,
acknowledges that the rest of nature has rights and that a fair distribution of resources needs to
acknowledge those rights. Thus, thinking of built capital and natural capital as substitutes is not
appropriate, as a common designation of both of them as forms of capital might otherwise
suggest.
With these caveats in mind, we employ the concept of natural capital in this report cognizant of
its limitations. [42]
Lest the evidence on the failures of the present growth-based economic system and the case
for a new development paradigm presented to this point appear too conceptual or separated
from policy and fiscal realities, we now examine two examples of the kinds of practical policy
choices and actions that might be taken in the shift to the new paradigm. These examples have
been chosen because they illustrate that the financial resources exist for substantial social,
human, and natural capital investments that can genuinely enhance wellbeing and happiness.
They show that one policy consequence of adopting the new paradigm is the diversion of
unproductive (and even destructive) expenditures that reflect detriments to wellbeing and widen
inequities to constructive investments that enhance wellbeing. In conventional accounting
procedures, such productive investments in common assets are generally labelled as costs, and
are often the first items on the chopping block as indebted governments cut social expenditures.
But the following two examples clearly demonstrate ample available resources for such social
and common asset investments.
R EDUCING AND D IVERTING M ILITARY E XPENDITURES
27 28 Bhutan’s NDP Initiative The New Internationalist magazine famously observed that it would cost less than one percent
of what the world spends on weapons every year to put every child in the world in school. In
1997, the same magazine observed that “this kind of comparison between military and social
spending is […] now somewhat out of fashion.” [30] Perhaps we have become desensitized.
And yet the enormous financial cost of the international arms trade and the typically high
proportion of national wealth spent on the military must be seen through just such a comparative
lens. Reductions in world military expenditure must be part of a new development paradigm
because without such reductions, all other goals – sustainability, reducing world poverty, and
higher levels of human wellbeing – are that much less attainable. But as well as the cost of
diverting money that could be spent on positive social, economic and cultural goals, conflict and
the arms trade have a devastating impact on human rights, security, and economic
development.
“Every gun that is made, every warship launched, every rocket fired signifies, in
the final sense, a theft from those who hunger and are not fed, those who are cold
and are not clothed. The world in arms is not spending money alone. It is
spending the sweat of its laborers, the genius of its scientists, the hopes of its
children…”
— Former U.S. President, Dwight D. Eisenhower, in a speech on April 16,
1953
The world should take note of examples such as Costa Rica, which abolished its army in 1949,
redirecting its military spending to security, education, environmental conservation, and culture.
Despite its location in a conflict-prone region and the instability of its neighbours, Costa Rica
has had no civil war or been engaged in external conflict since that time. It is one of the most
stable, peaceful, and seasoned democracies in the world; ranked among the High Human
Development countries by the United Nations [31]; fifth in the world in 2012 by the
Environmental Performance Index and top of the Americas [32]; the only country in the world to
meet all five criteria for environmental sustainability; and first in both the 2009 and 2012 Happy
Planet Index from The New Economics Foundation (NEF) [33]. Costa Rica has a tax on water
pollution and produces more than 90% of its electricity through renewable sources; it aims to
become carbon neutral by 2021. It has a higher life expectancy than the United States,
provides universal health care, and has a literacy rate of 95%.
Even a single conflict can massively distort the money available for development and incur
unaccountable costs in terms of human life and wellbeing. The invasions of Afghanistan and
Iraq cost the USA at least US$1.2 trillion by 2011 and may cost as much as $4 trillion in the
long-term – that is without counting the costs of the destruction of capital and infrastructure, loss
of economic activity and investment, and loss of life and human capital.[34]
World military spending came down after the Cold War ended, but has since risen again, even
while public welfare spending is cut. Global military spending now stands at over US $1.6
trillion, a 50 percent increase since 2001.This compares with the total annual cost of the United
Nations of around $30 billion each year ⎯ less than 3 percent of the world’s military
spending.[35]
28 A contribution towards the first IEWG meeting 29 Why Now? If we are to develop sustainable economic systems, respond adequately to world poverty, and
invest adequately in health, education, culture, and other wellbeing enhancing activities, it is
clear we must reduce military expenditure. A new development paradigm must consider ways
of reducing world military expenditure, including phased annual percentage reductions, as well
as a prohibition on the import and export of arms wherever they fuel aggression, support
conflict, or undermine democracy.
T AX H AVENS AND F INANCIAL R EGULATION
A second policy option in the new development paradigm ⎯ both to reduce currently
widening inequities and to make more resources available for wellbeing enhancing social
investments ⎯ is to prevent the presently high levels of tax avoidance by the wealthy.
There is increasing recognition that the tax avoidance of a small group of rich people and
rich corporations operating outside the laws, regulations and norms of society, has a
massive and adverse international impact on public funding for everything from foreign aid
to welfare, increases inequality, and punishes individuals and institutions who comply with
both the letter and the spirit of the law.
Over and above the assets of corporations, research by the Tax Justice Network suggests
that, worldwide, US $32 trillion of assets are held offshore by rich individuals. [36] If this
earned even a modest rate of return of 3 percent, then just the tax not paid as a result of
this money being held offshore is likely to amount to between US $190-280 billion every
year. This is twice the amount spent on overseas development aid by all the OECD
countries combined.
Beyond rich individuals, the scale of corporate use of tax havens is staggering. Nicholas
Shaxson, author of Treasure Islands, reports that more than half of world trade passes
through tax havens (at least on paper) and that more than half of all banking assets and a
third of foreign direct investment by multinational corporations is channelled offshore. [37]
In 2010, small island tax havens had approximately a third of the world’s GDP (US $18
trillion) on their balance sheets. The charity Action Aid reports that 98 of the 100 biggest
corporations listed on the London Stock Exchange use tax havens. [38]
Tax havens are not only problematic because of tax avoidance. As so-called ‘secrecy
jurisdictions’, they also shelter individuals and institutions from scrutiny, from financial
regulation, and from criminal law. Following the global financial crash, a meeting of G20
leaders in London in April 2009 concluded that the crisis was kick-started by a lethal mix of
byzantine financial products moved through tax havens. [38]
Tax havens undermine the economies of both developed and developing countries,
particularly in the current era of financial austerity in rich countries. The adverse impact on
the ability of governments, particularly those of poorer countries, to raise the taxes they
need amounts to theft from the poor and is the strongest argument for regulating tax
havens.
Focusing on 139 mainly low-to-middle income countries, The Tax Justice Network reports
that private elites in those countries had accumulated between US $7.3 and $9.3 trillion of
unrecorded offshore wealth by 2010. [36] In that year, the same countries had foreign debts
of US $4.08 trillion. However, after subtracting foreign reserves, net foreign debts were
actually minus US $2.8 trillion. In other words, when offshore assets are included in the
29 30 Bhutan’s NDP Initiative balance sheet, these ‘indebted’ developing countries are actually net lenders of some US
$10.1 to $13.1 trillion to the developed world. But while the assets are held by the wealthy
private elites of those countries, the debts are held by the state, and the consequences are
suffered by ordinary citizens. While climate change and resource depletion are markers of
the ecological failure of the current paradigm, and growing global inequities epitomize its
social failure, the grotesque distortions of tax havens typify and symbolize its economic
failure.
The primary argument used against government action to prevent this tax avoidance is that
countries acting alone will harm their national enterprise and economic growth. This is why
a new international paradigm is needed to tackle this scourge on development.
Preventing tax avoidance is merely one contribution to funding a new global development
paradigm that ensures humanity’s survival and enhances human happiness and the
wellbeing of all life forms. The organization Share the World’s Resources suggests very
practical ways of raising US $2.8 trillion each year to “mitigate the human impacts of
climate change” and to “prevent life-threatening deprivation”. [28] This sum includes
proceeds from preventing tax avoidance, increasing Official Development Assistance from
donor countries to 1 percent of GDP, ending support to ‘agribusiness’, as well as smaller
contributions from other sources. The organization estimates that $650 billion could be
raised from a financial transactions tax alone, which would have the additional benefit of
reducing the volume of destabilizing financial transactions. Another $531 billion could be
gained by ending subsidies to the producers and consumers of fossil fuels. If, over a
number of years, world military expenditure were reduced by 25 percent, that would yield
over $400 billion.
In sum, there is no shortage of money in the world and no dearth of very practical means to
break from the destructive and inefficient present system, to implement the new
development paradigm, and to invest in actions and infrastructure that genuinely enhance
sustainability, equity, human happiness, and the wellbeing of all life. It is simply a matter of
what that money is used for and how it is allocated.
VIABLE ALTERNATIVES EXIST THAT ARE BOTH SUSTAINABLE AND DESIRABLE, BUT THEY REQUIRE
A FUNDAMENTAL REDESIGN OF THE ENTIRE “REGIME”
A new model of the economy and new development paradigm consistent with our new full-world
context will be based clearly on the goal of sustainable human happiness and wellbeing. It will
use measures of progress that clearly acknowledge this goal (e.g., GPI or GNH instead of
GDP). It will acknowledge the importance of wellbeing and happiness, ecological sustainability,
social fairness, and real economic efficiency.
Ecological sustainability implies recognising that natural and social capitals are not infinitely
substitutable by built and human capital and that real bio-physical limits and planetary
boundaries exist to the expansion of the market economy. Climate change is perhaps the most
obvious and compelling of these limits.
Social fairness implies recognising that the distribution of wealth is an important determinant of
social capital and the quality of life. The conventional economic model, while it claims to reduce
poverty, has bought into the assumption that the best way to do this is through growth in GDP.
This has not proved to be the case, and explicit attention to distribution issues is sorely needed.
30 A contribution towards the first IEWG meeting 31 Why Now? As Robert Frank has argued [39], economic growth beyond a certain point sets up a “positional
arms race” that changes the consumption context and forces everyone to consume too much of
positional goods (like houses and cars) at the expense of non-marketed, non-positional goods
and services from natural and social capital. As we have seen, increasing inequality of income
within societies reduces overall societal wellbeing, across the income spectrum. [3]
Real economic efficiency implies including all resources that affect sustainable human wellbeing
in the allocation and management system. Our current market-focused allocation system
excludes most non-marketed natural and social capital assets and services that are huge
contributors to human wellbeing. The current economic model ignores this and therefore does
not achieve real economic efficiency. A new, sustainable model will measure and include the
contributions of natural and social capital in ways that go well beyond the market. This will better
approximate real economic efficiency.
The new development paradigm will also acknowledge that a complex set of property rights
regimes is necessary to adequately manage the full range of resources that contribute to human
wellbeing. For example, most natural and social capital assets are part of the commons.
Making them private property does not work well. If a resource is ‘non-rival’ (meaning that use
by one person does not leave less for others to use), market prices will ration access to those
who can afford to pay, even though additional use incurs no additional costs. The clearest
example of this is information and almost all the other products of human creativity which can be
reproduced digitally. In fact, for information that protects the environment or provides other
social benefits—for example, an inexpensive, carbon-free energy technology—additional use
actually reduces social costs. The value of such resources is paradoxically maximized at a
price of zero (or less). Since the private sector will not provide products for free, the public
sector must be responsible for their protection and provision.
What is needed, therefore, is a third way to propertize these resources without privatizing them.
Several new (and old) common-property-rights systems have been proposed to achieve this
goal, including various forms of common-property trusts.
The role of government also needs to be reinvented. Beyond government’s present role in
regulating and policing the private market economy, local, national, regional, and international
governmental structures have a significant role to play in expanding the commons sector, which
can propertize and manage non-marketed natural and social capital assets. Government can
also help develop new common-ownership models at various levels of scale that are not driven
by growth principles, and it can play a planning and coordinating role to help manage a
reduced-growth regime. [40] Government also has a major role to play in facilitating societal
development of a shared vision of what a sustainable and desirable future would look like. As
Tom Prugh and colleagues [41] have argued, strong participatory democratic forms, based on
developing a shared vision, are an essential prerequisite to building a sustainable and desirable
future that supports human happiness and the wellbeing of all life.
One way to look at our goals for the new development paradigm is shown in Figure 7 below.
This figure combines planetary boundaries (Figure 5 above) as the “environmental ceiling” with
basic human needs as the “social foundation”[42]. This creates an environmentally sustainable
and socially desirable and just “doughnut” as the space within which humanity can thrive and
realize its true purpose.
31 32 Bhutan’s NDP Initiative Figure 7. A safe and just space for humanity - the sustainable and desirable
doughnut [43]
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