Eco-Economics

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EVERY day of war in the Persian Gulf means good news for the world economy. Launch another Patriot missile or lose another Mirage fighter, and the weapons-plant assembly lines move faster. Clearing the rubble and rebuilding the blasted apartments of Tel Aviv and Baghdad will put thousands to work. Even cleaning up Saddam Hussein's ``eco-terrorist'' oil spill means a boost to somebody's profits and some country's gross national product. Does this sound too cynical? Does it ignore the war's potential benefits - liberating Kuwait, preserving cheap oil, establishing a ``new world order''? More important, does it overlook the horrendous costs of war - the tragic loss of human life and massive environmental damage, to cite just two? Of course it does, but that's the nature of economic calculation. Or at least traditional economic calculation in which growth by definition is good, the ``invisible hand'' of private interest and competition inevitably works to the benefit of all, and anything that can't be accurately quantified is disregarded.

A new trend in economic thinking takes a wider range of factors into account when figuring the bottom line. It includes the ecological bills that not only will come due generations from now but in fact are already waiting to be paid. Acid rain. Toxic wastes. Depletion of nonrenewable resources. Loss of farmland to erosion and chemicals. Loss of wetlands to development. Noise pollution. Such thinking also factors in the social impact of the economy as measured, for example, by the relative equality in distribution of goods and services, the cost of urbanization, and the cost of auto accidents.

Leading proponents of this view are World Bank economist Herman Daly and theologian John Cobb. In their book, ``For the Common Good'' (Beacon Press, 1989), they describe their economic model: the ``Index of Sustainable Economic Welfare'' (ISEW). Viewed through this lens, the United States economy looks very different from the more well-known gross national product. Whereas the country's GNP rose 42 percent from the late 1970s to the late '80s, the ISEW actually flattened out and then began to drop.

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``Economic welfare has been deteriorating for a decade,'' they write, ``largely as a result of growing income inequality, the exhaustion of resources, and the failure to invest adequately to sustain the economy in the future.''

Daly and Cobb make a lot of sense. Why shouldn't the depreciation of ``natural capital'' be included in figuring economic health? Why should runaway land costs add to that health when more and more people are cut out of home ownership and ecologically damaging development is often the result?

David Orr, a faculty member at Oberlin College in Ohio, puts the problem clearly. ``We add the price of the sale of a bushel of wheat to GNP while forgetting to subtract the three bushels of topsoil lost in production,'' he writes in the quarterly journal In Context. ``As a result of incomplete education, we've fooled ourselves into thinking that we are much richer than we are.''

The ``new world order,'' from this perspective, means we're all in this together. But the chief burden is clearly on the relatively wealthy. The 24 member countries of the Organization for Economic Cooperation and Development (OECD) - the industrial leaders - include 16 percent of the world population but account for 50 percent of all energy use. Those in the top 20 percent US income bracket create three times the garbage and waste and four times the air pollution of those in the bottom 20 percent.

Meeting in Paris last week, OECD environmental ministers agreed on goals for the next decade - including fees, fines, and taxes to be paid by polluters. Policymakers also are beginning to wake up to the need for a more realistic way of gauging a nation's economy. As reported recently in the New York Times, a gadfly economist in the Netherlands Central Bureau of Statistics named Roefie Hueting has prodded the Dutch government to develop a system of accounting that reflects environmental damage and the cost of repairing it. France, Germany, Norway, and Sweden are headed in the same direction, and the US Congress has ordered the Commerce Department to come up with an environmental cost/benefit system of accounting.

When the Exxon Valdez dumped 11 million gallons of crude oil into Alaska's Prince William Sound, the cleanup counted toward economic growth. We shouldn't make the same mistake about war in the Gulf.

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