Date: 2024-06-30 Page is: DBtxt003.php L0900-SEES-how-it-works-01a
HOW THE ENVIRO-SOCIO-ECONOMIC SYSTEM WORKS
ONLY FINANCIAL PERFORMANCE MATTERS
Compared to financial performance, other metrics are mere playthings!
ONLY FINANCIAL PERFORMANCE MATTERS
Compared to financial performance, other metrics are mere playthings!
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• GDP growth is good for corporate profits and the wealth of owners and senior managers.
• Some aspects of GDP growth improve standard of living and quality of life ... but at what cost?
WHAT IS GDP GROWTH BAD FOR?
• GDP growth has a multitude of bad outcomes
• More and more pollution and CO2 emissions
• More and more environmental destruction
• More and more consumer junk
• More and more use of natural resources
WHAT IS THE IMPACT OF FREE TRADE AND GLOBALIZATION?
• More economic activity in locations where workplace regulations are weak
• More economic activity in locations where environmental regulations are weak
• More work for the world's low paid workers
• Less work for better paid workers
• More profit which is good for owners and senior managers
WHY ARE ALL THE NEGATIVES OF GDP GROWTH IGNORED / TREATED AS EXTERNALITIES?
• Mostly because the rules and regulations have been gamed for the benefit ot 'owners'.
• But is is worse than simply this. Much that is 'bad impact' gets to be recorded as a positive in the GDP totals. This is insane, but suits those who use GDP growth in total as a positive.
• Why is it that major economists including Kuznits advocated for changes to GDP more than 50 years ago and it is still used by many major governments including the USA.
THE SOLUTION TO ALL OF THIS IS TO USE NEW AND BETTER METRICS AS AGGRESSIVELY AS GDP GROWTH HAS BEEN USED FOR THE LAST SEVERAL DECADES.
Peter Burgess COMMENTARY
About the Socio-Enviro-Economic System by Martin Luther King
Martin Luther King said this more than 50 years ago:
“The black revolution is much more than a struggle for the rights of Negroes. It is forcing America to face all its interrelated flaws—racism, poverty, militarism, and materialism. It is exposing the evils that are rooted deeply in the whole structure of our society. It reveals systemic rather than superficial flaws and suggests that radical reconstruction of society itself is the real issue to be faced.”Why is it that so many years later, the systemic flaws of the American socio-enviro-economic system are still so deep and unaddressed.
I think the answer is very simple. The people who have the levers of power are concerned about their own earnings and wealth, and really don’t care very much about anything else. I think the header image tells the story!
From the cartoon image ... the key elements of free trade and globalization
- Global GDP ... UP
- Pollution and CO2 emissions
- Environmental destruction
- Consumer junk
- Global cheap labor
- Natural resources
In conventional financial accounting and reporting there are both revenues (good outcomes) and expenses (bad but essential) that go into producing goods and services and generating profits. There is no way to have one without the other. Management is about increasing revenues and decreasing expenses in the best possible way ... a result that is optimized by understanding the behavior of both revenues and costs in the real world ... something that is art as well as science.
Sadly, there are a growing number of economic analysts and managers with high levels of academic training who seem to understand rather little of the system complexity. The reality is that even the best economic models are gross simplifications of the real world, not to mention the problem of financial controllers who have short term interest in corporate economic performance without any interest in the longer term viability of either the company, the society or the environment. This is an important negative of 'financialization' that has been a concern of mine for upwards of three decades!
I keep reminding myself that coal and steam power were crtical drivers of ecomomic and social progress for well over a century ... and to a great extent that was 'good'. There is good news in that better ways of staying warm and generating power now exist or are emerging, and their adoption should be accelerated. This can be encouraged with more relevant management metrics, which is what TVM is all about. The good of coal power less the bad of coal power is not as good as the good of wind power less the bad of wind power ... and the difference is getting bigger all the time.
Peter Burgess
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