TrueValueMetrics ... Impact Accounting for the 21st Century

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Date: 2024-11-21 Page is: DBtxt003.php L07-01-PROGRESS

PROGRESS
of the SOCIO-ENVIRO-ECONOMIC SYSTEM

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ACCOUNTING FOR PROGRESS Measure Balance Sheet Change and You Measure Progress.
NO CHANGE IN BALANCE SHEET STEADY STATE	GROWTH IN THE BALANCE SHEET POSITIVE PROGRESS / VALUEADD	BALANCE SHEET GETTING SMALLER VALUE DESTRUCTION

This is a core concept in conventional double entry financial accounting. It has been used over decades for organizations with 'incomplete records'. In this simplified graphic set three different scenarios are depicted: Steady State; Good Progress and Backsliding.

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BUT IT IS NOT ONLY ABOUT ECONOMIC PROGRESS
ALL THE DIMENSIONS OF PROGRESS MUST BE ACCOUNTED FOR
LOOK AT THESE TRENDS ... THEY ARE CATASTROPHIC

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ACCOUNTING FOR SOCIAL, ECONOMIC AND NATURAL CAPITALS
COLOR CODE	DISTANT PAST	PRESENT NOT GOOD	FUTURE COLLAPSE

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Year by Year Aggregated Socio-Enviro-Economic Trends
What has been happening ... What needs to happen in the immediate future
THE WHOLE SYSTEM	THE ACTUAL PAST	A NO CHANGE FUTURE	A BETTER FUTURE

More and more DEPLETION and DEGRADATION of NATURAL CAPITAL is UNSUSTAINABLE
Industrial pollution has been seen as a problem for a very long time and has been addressed in some parts of the world (mainly Europe) since the early post war years. In the USA President Nixon's administration established the US Environmental Protection Agency (EPA) to address the problem of pollution and environmental degradation. Progress of the industrial revolution improved quality of life, as well as creating economic wealth. In aggregate, the depletion of resources and the degradation of the environment has continued and accelerated to the present time. There is a scientific consensus that this trajectory is unsutainable and must be changed to avoid catastrophic collapse.

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POST WWII PROGRESS GREAT FINANCIAL AND SOCIAL PERFORMANCE TILL THE 1970s
PRODUCTIVITY UP WAGES UP From end WWII to around 1980	STRONG GDP GROWTH GDP growth has been very strong	CAPITAL MARKETS STOCK VALUES UP Stock market has been spectacular	BETTER HOUSING More decent housing to around 1980
In the 'developed countries' there was a lot of social and economic progress post WWII up until the 1970s. Compared to the 1930s, most people in developed countries were better off, and people were also glad to be living in peace rather being at war. People in less developed countries (LDCs) did not share so much in this increasing prosperity and agitated to change things. One result of this was 'independence' for many former colonial administrations. This played out in the 1950s, 60s and 70s with mixed results. At the end of this period, in 1973 there was the massive impact of the formation of the OPEC oil cartel (that is the Organization of Oil Exporting Countries) which succeeded in getting control of international oil markets in 1973 and raising the price of a barrel of oil from $3.50 to $13.50. The resulting 'oil shock' changed the global balances of economic power in important ways. The modern economy has been influenced in many negative ways ... positive and negative ... by this major event. (TPB note: At the time, I described the formation of OPEC as the biggest economic event ever ... bigger than WWII. I may have exaggerated a bit, but the idea was right.)

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STAGFLATION IN THE 1970s
TO REWORK
The world economy was faltering in the late 1960s, not helped any by international events like the Vietnam War, but put into free fall by the OPEC oil shock of 1973. The US was more vulnerable than other industrialized countries because one of its competitive advantages had been low cost / low price oil energy. Other industrialized countries had had the advantage of the global low cost of oil, but many had taxed the use of oil with the result that use of oil in these place was much more effieicnt than in the USA. In 1973, much of the US industrial base was rendered uncompetitive with massive consequences. The administration of President Nixon imposed price controls which proved useless. Stagflation ... that is massive 'cost push inflation' and declining economic activity and profits lasted for about a decade and only ended when the US business community embraced outsourcing to low wage cost countries in the early '80s mainly, but not only, China. Sadly, the Reagan administration that enabled this outsourcing paid little or no attention to the plight of the US industrial worker who lost their employment as this massive economic restructuring was taking place.

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US INDUSTRIAL WORKERS LEFT BEHIND SINCE THE EARLY 1980s
PRODUCTIVITY UP WAGES FLAT From around 1980 to present time	GDP GROWING GPI FLAT While GDP is up, progress (GPI) is flat	MASSIVE INEQUALITY Telling the truth	DEGRADED HOUSING Slums proliferating since 1980
US manufacturing became globally uncompetitive after the 1973 'oil shock'. US competitive advantage had been low energy prices relative to the rest of the world and this was over. US industry was energy inefficient and corporate profits crashed, together with stock markets. Prices soared together with inflation and interest rates. During the Reagan administration, trade unions and worker wages came under attack and since then wages have flatlined even as profits recovered. Since the end of WWII there has been amazing technological progress. This has enabled improved productivity ... that is it has increased efficiency and lowered production costs. Lower production costs has come in big part from lower payroll costs, which has had a negative impact on worker income. Essentially worker wages have not increased significantly in 40 years, while productivity and profits have increased considerably. During the last few decades there have been major generational shifts in social norms. In aggregate the social and economic indicators suggest that this is progress, but more detail analysis suggests that some few have progressed quite well, rather more have regressed significantly. For many, quality of life has deteriorated, with increased stress and in the USA, record levels of suicide.

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TOP 1% ... HUGE WEALTH and EXPENSIVE TOYS
Real Estate	Luxury Yachts	Private Jet	Hermes handbag
The accumulation of wealth during the past half century has been enormous. This has been enabled by 'financialization', the unconstrained concentration of economic power, reduced government regulation and amazing technological progress. Technological progress has enabled more effective profit management, and especially improved international logistics that has made it possible to build very low cost high profit supply chains. There are more billionaires in the modern world than at any time in history ... and new ones being created all the time.

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CATASTROPHIC SITUATION FOR BOTTOM OF THE PYRAMID
Terrible Poverty	Urban slums	Malnutrition	Genocide
The socio-economic performance for people at the 'bottom of the pyramid' has been unsatisfactory. In aggregate there have been billions of people who have moved up the economic ladder, driven in the main by the economic improvement in China, but there are still billions of people who are living in abject poverty. There are many more people migrating because of violence of economic deprivation than three decades ago and little progress being made to mitigate these humanirarian disasters.

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