Dear BIOPLANNERS,Environmental, or ecological economics has presented with endless, larger and larger estimations of the value of biodiversity and ecosystem services, but sometimes a simple example can speak more eloquently and clear about what the loss of natural capital can mean.As part of my preparation for a combined work/vacation trip to the Pacific, I re-discovered this succinct revelation of the difference between "hard" and "soft" sustainability.More details of the current plight of the Nauruans can be found at these links:Best wishes--David Duthie******************Gowdy, J., & Krall, L. (2009). The Fate of Nauru and the Global Financial Meltdown. Conservation Biology, 23(2), 257–258. doi:10.1111/j.1523-1739.2009.01189.xAs David Orr points out, the current financial meltdown has, among other things, exposed the absurdity of the economic notion of sustainability. Standard economics uses a financial model to translate “nature” into money-producing assets (Arrow et al. 2004). An economy is sustainable if at least as much money can be added to the balance sheet by transforming the natural world into money than by leaving it alone. By this logic people in the future will be better off because they will have enjoyed a greater rate of return (more GDP) on their capital investments (manufactured, human, and natural capital). There is no need to worry about running out of any particular thing because money is a perfectly fungible substitute for anything (Gowdy 2000).
The ephemeral nature of financial capital and the irreversibility of the destruction of nature were lessons learned the hard way by the small island nation of Nauru, located just south of the equator between Australia and Hawaii. The recent history of Nauru provides a sobering perspective from which to judge the current global transformation of nature into financial capital.
Until the beginning of the last century Nauru was a pleasant South Sea island with a stable population and a bountiful environment. But around 1900 it was discovered that the island was made almost entirely of phosphate, a valuable and essential ingredient for fertilizer. Over the course of the last 100 years or so most of Nauru has been rendered uninhabitable by mining, leaving only a narrow strip of land around the island’s perimeter.Today the island is impoverished and it seems certain that Nauru’s population will have to be relocated.But according to the economic model of sustainability the people of Nauru made the correct decision when they decided to continue phosphate mining after independence in 1968 (Gowdy & McDaniel 1999; McDaniel & Gowdy 2000). At that point Nauru was saving over 20% of its annual phosphate income, apparently assuring its continued prosperity after the phosphate was gone. Nauruan financial wealth reached its peak in the mid 1980s as the value of its trust fund reached one billion Australian dollars and annual phosphate revenues were still about US$100 million. Per capita income was the highest in the world and most services - education, health care, utilities - were free and Nauruans paid no taxes.But as history has shown time and again, financial capital can evaporate overnight. Nauru’s trust fund was decimated by bad investments, predatory financiers, and the Asian financial meltdown of the late 1990s. Today the US$1 billion trust fund is nonexistent. The people of Nauru face a bleak future with no source of income other than foreign aid. The island’s educational and health care systems are in disarray. Nauru’s once bountiful environment is no longer capable of supporting even a fraction of the island’s current population. Foraging and fishing skills that supported the population for thousands of years have been forgotten. Nauru traded its biophysical environment for money and now it has neither.The current worldwide economic crisis, which began with the burst of the housing bubble, has exposed a labyrinth of financial instruments totally unfamiliar to most of us. The sheer size of the alphabet soup of these financial concoctions—ABXs, CDOs, CDSs—is staggering. For example, the value of credit default swaps (CDSs), intended to insure against bonds and other debt instruments going into default, amounted to more than US$50 trillion (Soros 2008). This is many times the value of the assets CDSs were supposed to insure and about 3 times the annual U.S. GDP.As we watch the collapse of the financial bubble it is easy to dismiss the evaporation of these assets as “imaginary.” But like Nauru’s trust fund these assets were created by trans-forming nature’s bounty (cheap energy, biodiversity, and a stable climate to name a few) and human ingenuity and labor power into what was thought to be safe investments. The guiding idea is that one form of capital is as good as another and in aggregate can expand ad infinitum.The damage we are doing to the Earth’s climate and biological diversity will not be repaired for tens if not hundreds of thousands of years (Archer 2009). The logic of this destruction makes sense only within one peculiar and parochial value system (market capitalism) which, like all other human social systems, will come and go in a geological instant. But within this geological instant, as a consequence of our value system and its misguided myths, the human experience on Earth will be diminished forever if we do not somehow gain control of the forces destroying the biophysical basis of human prosperity.