Sustainability should be the true measure of US creditworthiness

Had Standard & Poor’s factored in overconsumption of natural resources, the US would have faced a downgrade years ago

Heavy traffic on an LA freeway

Gas-guzzlers: cars crawl along an LA freeway. Photograph: Robert Landau/Corbis

Standard & Poor’s historic downgrading of the US’s creditworthiness delivers a righteous judgment on the state of American politics. What many missed amid the fallout, however, is that the rating agency astonishingly failed to raise even an eyebrow over the terrible state of its bloated, unsustainable economy.

The US Treasury has since been quick to point out an alleged $2 trillion maths error in S&P’s calculations. Yet the failure of S&P, and indeed the other major rating agencies, to measure what really counts in shaping new economies for the 21st century passed unremarked. After all, the fundamentals of the US economy remain mired in the practice of overconsumption, under-investment in public infrastructure and services, and an unsustainable environmental footprint.

Rating agencies exist in order to provide a view of the future creditworthiness of borrowers. Yet today’s mainstream ratings simply do not count the underlying sustainability of the economies in question, be they companies, cities or countries. Sustainability geeks all know the numbers. The United Nations Environment Programme estimates, for example, that annual environmental costs from global human activity already amounted to $6.6tn in 2008, equivalent to 11% of global GDP. Our current economic model, exemplified by the US, is building wealth on quicksand.

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See Also “Economists Find Flaws in Federal Estimate of Climate Damage

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4 Responses to Sustainability should be the true measure of US creditworthiness

  1. David Wilson says:

    ‘years ago’ Alan (?) say … 30 years and more, surely it merits at least a ‘decades ago’ 🙂

    (for example, E.F Schumacher in 1973:

  2. Alan Burke says:

    You might like to visit my “Economics” page including:

    NewScientist, 17 Nov. 2008: Prophesy of economic collapse ‘coming true’

    Do you remember “The Limits To Growth” commissioned by “The Club Of Rome” and published in 1972? Do you also remember how it was pooh-poohed by economists? A recent study shows just how accurate their “Standard Run” of the model developed at MIT is to the reality over the past 30 years or so. There’s an overview here from “NewScientist” and the paper, by Graham Turner, is here.

    From the NewScientist, 17 Nov. 2008:
    Things may seem bad now – with fears of a world recession looming – but they could be set to get much worse. A real-world analysis of a controversial prediction made 30 years ago concludes that economic growth cannot be sustained and we are on track for serious economic collapse this century. In 1972, the seminal book Limits to Growth by a group called the Club of Rome claimed that exponential growth would eventually lead to economic and environmental collapse. The group used computer models that assessed the interaction of rising populations, pollution, industrial production, resource consumption and food production. Most economists rubbished the book and its recommendations have been ignored by governments, although a growing band of experts today continues to argue that we need to reshape our economy to become more sustainable. Now Graham Turner at the Commonwealth Scientific and Industrial Research Organisation (CSIRO) in Australia has compared the book’s predictions with data from the intervening years.
    Listen to his podcast Examining the limits to growth in MP3 format here.

    (Visit my page for all of the links)

  3. David Wilson says:

    I know it is a book (doh!) and I presumed you would be familliar with it – unfortunately this pdf copy has many words hypenated in error, so it isn’t very useful for searching – and who would even think of reading a book on line (!), but – well ok, if you have not read it Alan (which I can hardly believe) you certainly should, there are cheap copies at Abe’s ( )

    I posted it in reference to sustainability which he discusses

    Schumacher ended his book with a plea for reconsideration of the cardinal virtues: prudentia, justitia, fortitudo, temperantia – these words are unfortunately soiled by long association with the Vatican, and have been further devalued in the ongoing drift towards doublethink (where it is the Justice branch that murders Robert Dziekanski), but they still have currency – I admire Schumacher, he spent much of his life as an ecomomist for the British Coal Board and must have known very well what cognitive dissonance feels like, one of the chapters deals with nuclear energy and his arguments were true then and are still true

    the last sentence of Limits to Growth is, “The crux of the matter is not only whether the human species will survive, but even more whether it can survive without falling into a state of worthless existence.” I have been wondering what they could have meant by ‘worthless existence’ for a long time now … not a misspent youth I don’t think 🙂

    the business of arguing that the 1972 MIT results have (or have not) proven true is somewhat like christians who go looking for a historical Christ – it is difficult to determine (especially considering the state of modelling software in 1972, which I believe both you and I know something about) and probably irrelevant in the end since as I hear regularly from Real Climate, the models we have now are laying it out plainer and plainer

    2015, we turn CO2e emissions around by then or we’re cooked – that’s how I read it, Harper should be running out of rope at that point but too late

    did you read Gwynne Dyer on ‘The Food Bubble’? definitely worth a look –

    be well,

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