Ecological and Financial Deficits: A Double Whammy for Future Generations

As the world (especially, the U.S. and members of the European Union) struggle to deal with their fiscal deficits, it is easy to forget the other deficit, namely, the ecological. I analyse the two deficits of nations with the goal of ensuring that the world does not lose sight of either because tackling both deficits is important for the well-being of future generations of people. Crucially, it is important that the effort to reduce the fiscal deficits of nations does not result in the deepening of ecological deficits. First, we present data and analysis of current ecological and economic deficits of nations. Second, we develop a simple index, the ecolonomics index, and use this to rank countries of the world in terms of their ecological and economic deficits. This index is intended to provide a guide to countries around the world on how they are doing both in terms of economics and ecology. Two datasets underpin the work reported in this paper. The first is ecological deficits data computed and reported by the Global Footprint Network (http://www.footprintnetwork.org/), who define ecological deficit as the level of resource consumption and waste discharge by a population in excess of locally sustainable natural production and assimilative capacity. In other words, the ecological deficit is the difference between a given population's effective ecological footprint and the geographic area it actually occupies. For instance, if a country consumes more fish than what its waters can sustainably reproduce in a given period, the country has an ecological deficit with respect to fish. The second dataset is financial deficits as reported by the International Monetary Fund, which is defined as the ratio of national financial deficits to GDP. Here, if a country has a GDP of $100 billion in a given year and a deficit of $5 billion in the same year, the fiscal deficit is 5% of GDP.