How Creative Accounting Hides the Environmental Impact of Countries

State accounting practices are quite flimsy when it comes to measuring a country’s impact on the environment. The national figures on greenhouse gas emissions that we often hear bandied about exclude emissions from imported goods and international shipping and flights – known as “international bunker fuel emissions” – which are reported separately (UNFCCC, 2013).

Claims towards more efficient use of natural resources or ‘resource productivity’, which are used to support important claims of ‘decoupling’ resource use from economic growth, are similarly inept. In calculating how much material is used up in an economy state economists:

“take[] the raw materials we extract in our own countries, add[] them to our imports of stuff from other countries, then subtract[] our exports, to end up with something called ‘domestic material consumption’” (Monbiot)

What’s missing from this are the raw materials in other countries used to manufacture the imports. When these are included rich country claims to recent improvements in “resource productivity” prove false. In fact a country such as the UK is shown to have been “becoming less efficient in its use of resources”prior to the financial crisis (Monbiot).

This weak appraisal of the environment has long been a common feature of the instruments of mainstream economics employed by states everywhere. Just look at how the primary indicator of a nation’s supposed well-being, the gross domestic product (GDP), accounts for the environment. GDP actually has the capacity to record positively or omit completely the erosion of the environment. Environmental destruction is usually dismissed in GDP calculations as an unrecorded “externality” (external to the market) but expenditure for dealing with environmental disasters along with traffic congestion increases GDP. Moreover GDP operates on a scale that inputs no limits to how much growth can be achieved regardless of the finiteness of natural resources. The econometric similarly devalues the local, community and quality of life through excluding non-market household or community-based voluntary services (Jackson, 2009: 40-41, 234 note 40).[1]

[1] It can also record increasing firm productivity positively even if that productivity leads to lay-offs. “From 2007 to 2011 the total hours worked in the Irish economy fell by nearly 17 percent, while output declined by 9 percent” (NCC, 2012: 20-1). This also partially explains the phenomenon of jobless growth where periods of rising GDP are accompanied by job loss as was experienced in South Africa during the 1990s (Altman, 2003: 12).


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