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Planetary Deficit is the difference between two World Balance Sheets

5/3/2017

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Looking back from 2200, I can see some of the milestones along the path to global sustainability. 

One of the things that helped us to get to a sustainable 2200 was that in the mid 2100's we worked out that we didn't need the fundamentally flawed and much discredited GDP as a measure of humanity's economic success.  We have an alternative.

As any student of accountancy can explain, there are two ways to calculate profit or loss (or, in other language, surplus or deficit).  One is to add up the income over a period of time (an accounting period) and deduct the expenditure over the same accounting period.  The second, which is much less commonly used but is equally as effective (or more so if there is little confidence in the first method), is to compare the Balance Sheets at the start and end of the accounting period.  The difference between the net assets at those two points in time is the profit or loss (surplus or deficit).  This is because the profit/surplus is added to the net assets at the start of the accounting period to get the net assets at the end of the accounting period. 

What it offers is a way to use World Balance Sheets to calculate the surplus or deficit.  For example, if the Natural Capital (an asset category in the World Balance Sheet) is worse at the end of year2050 than it was at the end of  year 2049 then, all other things being equal, there has been a deficit in year 2050. 

This makes intuitive sense because at the end of year 2050, in this example, there was less Natural Capital than there was at the start of the year, so in a very real sense the world is poorer because there would be less output possible from Natural Capital assets in 2051 to provide for the needs of the global population. 

Contrast this with GDP, the popular measure of economic success invented in the 20th Century.  GDP counts as productive output (ie a plus) many types of activities that use up or damage Natural Capital, for example through the use of industrial processes that damage the atmosphere and the oceans that we and plants depend on.  This is because someone earns an income from these processes, but the costs to the environment are not recorded to set against that income in GDP.   

Using the difference-between-Balance-Sheets method of calculating surplus or deficit  enables us to see the effects of these negatives that are invisible in GDP, bringing us closer to a real appreciation of the true value of the assets that sustain all life and the effects of our activities on either enhancing them for future generations or damaging them for short-term gain but long-term pain.
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