Oil spill a wonderful boost to the economy

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The BP oil spill in the the Gulf of Mexico has generated a lot of discussion across the net. Again, this leads me to ask questions about the value of things and how large corporations externalize costs that do not directly affect their bottom line, but do impact others.

Current reports suggest that BP has spent $450 million on clean-up and efforts to plug the leaking well. This cost is now continuing at a rate of $33 million per day. According to current legislation in the US, BP is liable for the expenses uncured for the clean-up, but what of other costs? In an article from CNN Money, they bring up the issue of costs to other industries:

But the cleanup costs could be dwarfed by liability costs resulting from damages to the fishing, tourism and shipping industries if the oil washes ashore in large quantities. Those Gulf industries are worth billions a year.

Again, there are a number of articles on the net about increased cost of shrimp, loss of tourism revenue because people don’t want to lay on oily beaches, etc. These are the liabilities referred to in the above article and are all to do with loss of revenue for some commercial sector.

But what of the impact in the non-human world? There is significant concern over some endangered species of sea turtle that inhabit the Gulf, as well as birds dolphins, birds, and mollusks.¬† What would we say the cost of oil is if just one of these species became extinct because of our search for oil? What should we make BP pay for the loss of a species and what would we do with that money? Our search for resources also demands that the consumer pays a reasonable price for the product while the shareholders make a reasonable profit for their investment. Considering the potential for environmental destruction, what is “reasonable”?

I am not trying to stand of my high-horse and say that oil is bad and it all must stop. The very act of writing this blog requires oil. The keyboard I am typing on is made of oil. The point I want to raise is that our values appear to be totally out of whack. Lets ask the question like this: how many species can become extinct due to our search for resources before you would be willing to pay a lot more for your iPhone?

As with all dark clouds, there is a silver lining. We have all experienced the affects of the economic downturn and watched the GDP figures for some hope of a return to positive growth. Well this oil spill is manner from heaven in that respect. Thanks to BP, an extra $33 million dollars a day is being pumped into the global economy. Not to mention the benefit of all the spin-off fund raising and environmental work. (I hope you read this with the sarcasm it required).

You see, Gross Domestic Product (GDP) is calculated based on the value of goods and services consumed in a time period. There are no negatives in the calculation of GDP. If we consumed X many tonnes of a non-renewable resource in the period, the fact that it is no longer an environmental asset  is not measured. If X many species become extinct because of our resource extraction methods, it is not measured or accounted for. However, GDP is the most common measure in the western world for the health of an economy and the people that participate in it.

There is an old axiom in the business world: “peoples behavior changes based on how they are measured”. If this is indeed true on a societal level, then we desperately need to change the way we measure value and success.