Metrics

“Mismeasuring our Lives: Why GDP Doesn’t Add Up,” a panel discussion held at Columbia University on December 7, brought four distinguished economists together for an open conversation that began with the need for policymakers to look beyond GDP as a standard economic measure to address both ecological constraints and human well-being but moved to the central challenge of our time: can economies continue to grow without degrading the ecosystem and if not, what are the alternatives?

Sponsored by the public policy research and advocacy organization Demos, the event featured panelists Alan B. Krueger, most recently the US Treasury's Chief Economist and currently Bendheim Professor of Economics and Public Affairs at Princeton University; Glenn-Marie Lange, Senior Environmental Economist at the World Bank; Juliet B. Schor, Professor of Sociology, Boston College; and Joseph Stiglitz, Nobel Laureate and Co-Chair of the Committee on Global Thought at Columbia University.

The Center for the Advancement of the Steady State Economy (CASSE) held its first conference, in Leeds, UK, on June 19, 2010, with a focus on finding alternatives to current models of economic growth. Featuring members of the Capital Lab-sponsored 3rd Millennium Economy steering committee Tim Jackson and Peter Victor, the conference brought economists, scientists, business leaders, government officials and the NGO community together to help mold the vision of a steady state economy.

While most global leaders and economists extol the virtues of unfettered economic growth, conference speakers made the point that the economy is a subsystem of the earth’s ecosystem and is a human construct. Despite these known facts and the recent global financial meltdown, exponential economic growth continues to be almost universally perceived as a desirable outcome.

If you open up the papers lately, you’ll find the discussion of the sovereign debt crisis tends to focus narrowly on offending nations’ profligate spending and borrowing habits. While these behaviors have no doubt contributed to fiscal deficits, what is often overlooked is that addressing another kind of deficit--an ecological one--is of equal importance if nations are to sustain healthy and resilient economies. One bank is working to advance this notion by incorporating into its sustainability rating of sovereign debt  a country's resource efficiency.  

Bank Sarasin, a Swiss private bank founded in 1841, launched the first investment fund based on the concept of eco-efficiency in 1994 and has been including social factors in its sustainability ratings since 1997. Sarasin’s sustainability rating of sovereign debt assesses a country’s creditworthiness based not only on resource availability but also on resource efficiency. Viewing a country’s ability to repay its debt over the long-term through this holistic prism yields some noteworthy results: resource-rich but inefficient economies such as the United States and Russia appear particularly vulnerable to future rating downgrades while resource-scarce but efficient countries like Japan, the Netherlands, and Germany appear much less at risk.

August 2012 Update— In January of 2012 the CARS™ system was spun-off the Opportunity Finance Network and re-launched as an independent organization.  CARS™ continues to focus on providing intelligence on the CDFI industry to investors of all sizes. The organization, has released new products in tandem with its independent re-launch and Paige Chapel has continued on as director. The new CARS™ programs include: customized analytic services, specialized financial trend analysis, training and webinars and subscriptions to CARS™ CDFI ratings database. These services enhance the ability of CARS™ to draw capital into CDFIs by facilitating connections between CDFI’s and investors, while increasing CDFI transparency. Mark Pinsky chairs the new organization. Pinsky had spoken of possible collaborations between CARS™ and the Small Business Administration (SBA); since the original posting of this article the SBA has decided to employ the CARS™ system in their lending selection process. Currently, CARS™ rated organizations manage almost 50 percent of on balance sheet assets among CDFI fund-certified loan funds.—Evan Lozier. Evan is Capital Institute's Summer 2012 intern.