Saturday, October 09, 2010

Unabated growth

I am talking with reference to economics. Unabated growth is overrated – and dangerous in current situations. Globally, the accepted performance indicator is growth %. Nothing else even seems to matter. Why? Because, for publicly listed companies, this ties back to how much the shareholders get in the pocket.

Now, a 400 billion dollar company like Walmart is looking to grow. Though it is the largest, there are a lot of comparable sized companies also looking to grow. Extrapolate this to the entire spectrum of companies all over the globe looking to “grow”. If Exxon wants to grow, it has to mine more petroleum. It also has to encourage growth of its business which means more cars and more driving. About 100 years ago, this sort of question wouldn’t have existed. Within this century we’ve created an inflexion point where a finite planet cannot expand to cater to the goals of gazillion companies all trying to grow and impress shareholders.

It is time for a new performance parameter to be introduced. Along with growth %, a sustainability index must be introduced. What this must measure is that – if the company aimed to grow like this for the next 10 or 15 years, is it sustainable (not measured from a standalone perspective but from a collective perspective of all competitors put together along with allied industries that must match this company’s growth to keep pace)? Our population was 1.5 billion at the start of this century. Within this 100 years we have made it 500% fold and clearly everyone with some math skills will say this isn’t sustainable. Ditto for all the companies vying to break records in growth. This new equation where corporations try to establish a sustainable baseline point is vital.

It would be healthy if corporations decide this inflexion point consciously of their own will. If Governments are forced to do it, it will be ugly. If the planet decides to do it, the consequences are unpredictable, but inevitably devastating.

Note: A book has been screaming about this for nearly three decades. As long as money rolls in or the course of growth is not forcibly altered, this message will be last priority to economics.

A review summary - "Briefly, humanity has overshot the limits of what is physically and biologically sustainable. That overshoot WILL lead to the collapse of the planetary environment's ability to support not only our species but much of the rest of the biosphere if we do not act rapidly and effectively to reduce our footprint. These conclusions provide reasons for both optimism and alarm: optimism because humanity has demonstrated its capacity to act appropriately in one specific instance; and alarm because thirty years have been largely wasted since the consequences of our failing to act were detailed. There is still time but the need to act quickly and effectively is urgent. The authors demonstrate that the most critical areas needing immediate attention are: population; wasteful, inefficient growth; and pollution. They show how attention to all three simultaneously can result in returning the human footprint on the environment to manageable, sustainable size, while sharply reducing the disparity between human well-being and fostering a generous quality-of-life worldwide. Absent this, the prospects are grim indeed."

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