Blog

Imagine a world where human well-being, social equity and protection of our natural environment are the primary considerations for making business decisions. Sounds too utopian? Not if you go by what today’s foremost environmental think-tanks call the “Green Economy”. Indeed, the term has become a buzzword in environmental circles today, almost as popular as the well-bandied term “sustainability”. The United Nations Environment Program, an international organization coordinating the United Nations’ environmental activities, and assisting developing countries in implementing environmentally sound policies and practices, thinks there is a lot of promise in the premise of green economy. But what exactly does this term mean? To understand it, we need to first look at India’s track record in economic terms.

For years, the Indian economy has been the cynosure of the global markets. Will it surpass last year’s growth? Will it outpace China’s? Will the aftermath of the global recession take a bite out of India’s economic dream run? India is often seen by most economists as a rising economic superpower. However, India’s dreams of becoming an economic superpower are limited if the country does not face certain facts. Between 1990 and 2008, India’s wealth as measured by gross domestic product (GDP) per capita rose by a whopping 120%. But a myopic focus on economic capital is flawed, contends Professor Anantha Duraiappah, Executive Director of the International Human Dimensions Program on Global Environmental Change. When measures of natural, human and manufactured capital were considered together to obtain a more comprehensive value in a recently released report (see Image 1), India’s “Inclusive Wealth” rose by a mere 9% from 1990–2008. In other words, India continues to post positive GDP growth but is rapidly exhausting all its natural resources while doing so. The GDP then becomes an unintended but nevertheless dangerous smokescreen; what is needed is an indicator that estimates the true wealth of nations—it natural resources, human and manufactured, coupled with the social and ecological constituents of human well-being. 

Above: How does India really fare economically? According to a new “Inclusive Wealth Indicator” designed to augment the GDP as a measure of economic progress, India’s natural capital or the sum of a country’s assets from forests to fossil fuels and minerals, declined by as much as 31%.

As Manish Bapna, Executive Vice President and Managing Director of the World Resources Institute, puts it, “The prevailing economic growth model is focused on increasing the GDP above all other goals. While this system has improved incomes and reduced poverty for hundreds of millions, it comes with significant and potentially irreversible social, environmental and economic costs. Poverty persists for as many as two and a half billion people, and the natural wealth of the planet is rapidly being drawn down. In a recent global assessment, approximately 60 percent of the world’s ecosystem services were found to be degraded or used unsustainably. The gap between the rich and poor is also increasing; between 1990 and 2005, income inequality rose in more than two-thirds of countries.” This is exactly where the “Green Economy” concept comes in; it promotes the triple bottom line: sustaining and bettering not just economic, but also environmental and social well-being.

However, transitioning from a business-as-usual economy to a Green Economy is not easy. It requires a variety of institutional reforms and regulatory, tax, and expenditure-based economic policies and tools, customized to the country in question. For example, the Republic of Korea has adopted a national strategy and a five-year plan for green growth for the period 2009–2013, allocating as much as 2 per cent of its GDP to investment in several green sectors such as renewable energy, energy efficiency, clean technology and water. Countries are also constantly exploring ways to tax pollution so that those that generate it can be made to take responsibility for the environmental and social costs associated with it. This would presumably drive businesses to seek more environmentally friendly and socially responsible ways of providing products and services, thus helping to green the economy.

While many heartwarming possibilities for altering patterns of production, industry, agriculture, the organization of cities, construction systems, and transport have been highlighted as economy-greening initiatives, the truth is, it is easier said than done. Not surprisingly then, the Green Economy has its detractors, who label the very idea as a “naïve expression of very good intentions, without any possibility of altering the current course of the planet”. As Edgardo Lander, Professor of Social Sciences at the Universidad Central de Venezuela in Caracas, points out, “the capacity of existing political systems to establish regulations and restrictions to the free operation of the markets—even when a large majority of the population call for them—is seriously limited by the political and financial power of the corporations”. He goes on to provide the example of the United States, where no environmental regulatory policy and no international commitment can be assumed by the government without the prior approval of major corporations potentially affected by such measures. It is a sad fact that these corporations have the capacity to veto policies they do not agree with. 

Above: The protracted failure of the United States to against making a commitment to reduce greenhouse gas emissions in the United Nations climate change negotiations is a glaring example of politics triumphing over policies.

Sadly, the political cost of altering corporate interests for the larger good is simply too high. The extraordinarily unequal power relations existing in today’s world and the prevailing interests in the operation of this global system can put a spanner in even the most well-intentioned of ideas.

According to India’s erstwhile Environment Minister, Jairam Ramesh, by 2015, India will report a GDP that takes into account environmental degradation. How well India maneuvers its way towards the entrenching the Green Economy remains to be seen.