The economic system of the world measures GDP growth as a measure of success. GDP growth is, however, an extractive process; it extracts natural resources which God has created over millions of years. In so extracting, or over-extracting, it creates another set of problems, namely, climate change, which are, and will continue, to have, natural, social and economic consequences.
In their must-read book, ‘Natural Capitalism’, authors Paul Hawkin, Amory Lowins and Hunter Lowins, suggest that instead of GDP growth as a measure of success, we should concentrate on ‘natural’ capitalism.
For example, the P&L of, say, a coal mining company would, under its expense side, debit the ‘royalty’ paid and not the replacement cost of the extracted coal.
This results in wastage. In order to boost GDP growth, China overbuilt homes. The construction of these resulted in a demand for steel, cement, glass and other things, all extracted. GDP growth touched double-digits. Was that cause for celebration?
Empty homes of China
No. A fifth of China’s homes, or 50 million homes, are empty. What this means is that credit for GDP growth was taken earlier, but the assets created remain unused. The resources, though, have been extracted from the earth, with consequences for the environment.
What consequences?
Greenpeace, for example, points to disappearing glaciers in western China’s provinces of Qinghai and Gansu. These glaciers are the source of rivers that supply drinking water to 180 crore people. A fifth are already gone.
The problems created by politicians’ penchant for GDP growth, irrespective of the cost to future generations, are solved by scientists. Israel leads in water management. The country recycles 80 per cent of its sewage waste water, using the recycled water for agriculture and public works. This compares to only 30 per cent in India.
Looming food crisis
Shortage of water will, obviously, affect food production, and thanks to myopic economic policies, humankind is also hurtling towards a food crisis.
Here, too, science is coming to the rescue. Some 350 crore people use rice as a staple food. Rice production cannot keep pace. Now agri scientists have made breakthroughs in ‘scuba rice’, which survives long periods of flooding, and alkaline resistant ‘sea rice’ already growing on China’s northern coast. China plans to plant ‘sea rice’ on 20 million hectares in its northern Shandon province, which is alkaline, after which it can feed 80 million people.
Natural gas is now a fuel of choice, for environmental reasons. ONGC and OIL can increase production of natural gas by a third, from 90 mmscmd if they get a higher price for it. Achieving the increase would require a capex of $10 billion. However, the government has arm-twisted OIL to spend ₹1,085 crore to buy back 4.45 per cent of its stock, in order to reduce the government’s fiscal deficit.
The global stock market will get a boost from the statement of Fed Chairman Jeremy Powell, that the US Fed may make fewer than the expected three rate hikes in 2019. The Indian stock markets would be influenced by the election results of five States, due on December 11. Investors should lie low till then, unless they can read electoral crystal balls.
(The writer is India Head — Finance Asia/Haymarket. The views are personal.)