What do the worldwide debt crisis and global warming have in common?
They both represent economies drawing down assets faster than they can replenish them.
In the case of the debt crisis, economies are spending more wealth than they are accumulating. In the case of global warming and other symptoms of ecological scarcity, we are using up nature’s capital and its vital services at an alarming rate (see my forthcoming book, Capitalizing on Nature: Ecosystems as Natural Assets). Rather than adding to wealth – both financial and natural – economies are squandering it. This is not a new problem but has occurred throughout history, although this tendency has accelerated in recent times, as I show in my recent book, Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Scarcity.
The connection between economic and natural debt is revealed if our conventional measure of economic progress – Gross Domestic Product (GDP) per capita – is replaced with an alternative indicator – Adjusted Net Domestic Product (ANDP) per capita. As explained in my article, “Tracking the Sputnik Economy” in The Economists’ Voice, calculating ADNP per capita for most economies is straightforward. ANDP is also a better indicator than GDP per capita of whether or not an economy’s real income is spent on adding to capital – human, reproducible and environmental.