Dean Gus Speth on Economic Growth and Disaster

Question: Will the world economy's obsession with growth lead to disaster?

Gus Speth: Well, first I think there is a-- you have to appreciate that economic activity, in general, is destructive of environment. It could be more so, or less so, but in general it is. And the more of it you have, the more destructive potential there is. And if you look at the big trends, the big trends in environmental deterioration, the release of greenhouse gases and the release of toxic chemicals, the overuse of ecosystem services and the destruction of those services, the overharvesting of the fisheries, these are driven by economic growth, by and large, by the economic activity of human beings. And now that economic activity is expanding enormously. It took all of history to grow to the $7 trillion world economy that we had in 1950, we now add that much activity to the world economy every decade, not all of history, but every decade. So the world economy is slated to double within 15 to 20 years in size and doubled again within another period of that length. So the potential for additional deterioration of the environment is simply enormous. And we can see, perhaps, the worst of that unfolding in China today. It's not just for growth, per se, this growth is driven by a profound commitment to profit. And profit is enhanced when the environmental costs of this economic activity are kept off the books of the companies. The economists refer to this as the externalities and these external dis-economies, so called. So this externalization of environmental costs sustains profitability, but it also has another effect. It means that the prices that we pay in the market for the goods and services that are produced are artificially low, both in general and particularly low for activities that are enormously destructive of environment. And so we are running this mammoth market economy where the principle signals that are steering that economy are prices, including the price of labor, but let's think about the price of goods and services. And those prices are fundamentally dishonest from an environmental point of view. So we not only have all this growth, but it's out of control in an environmental sense, profoundly out of control.

Recorded: 3/23/08

 

 

The fundamental dishonesty of pricing.

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