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.