The Economist has an interesting story this week on China's efforts to incorporate environmental degradation into national income accounts.
In short, Chinese officials are offering incentives to Communist Party and government officials for reaching environmental targets as well as growth goals.
AN ELABORATE points system that determines the careers of officials is often blamed for many of China's problems. In their drive to meet targets for economic growth, local mandarins squander money, ride roughshod over citizens and ravish the environment. So now China is trying to devise and embed into its assessment of officials a way of calculating a “green GDP”—which allows for environmental costs in national accounts—to help mitigate some of these excesses.
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Targets are usually set by the next-highest level of the party (for party leaders) or government (for government officials). To minimise the need for subjective judgments, they are often very precise. A leader is told that his area must achieve a certain rate of GDP growth, attract a certain sum of inward investment and increase government revenues by a specified amount. Some of these are designated as “veto” targets: failing to meet them will ensure that the cadre is rated as underperforming, even if he scores well in other areas. GDP growth, population control and social order are often among the veto categories.
In an autocracy, officials often feel at liberty to pursue these targets at any cost. This is why, in order to limit births or prevent public protests, officialdom is guilty of widespread abuses of human rights. The same system causes colossal waste and environmental damage as officials doggedly pursue growth targets. China is littered with extravagant and often useless building projects with no purpose except to impress superiors. One egregious example is a vast $40m airport completed in 1998 in the remote city of Fuyang in Anhui province. It has been closed for several months because it was hardly used. Of China's 660 or so cities, no fewer than 183 have vowed to turn themselves into “modern international metropolises”.
...devising a green GDP target would help to focus official minds on the price of reckless development. Such a figure would be calculated by subtracting the cost of the natural resources used and the pollution caused from regular GDP [see here for an explanation of Green GDP]. If only it were that simple. From calculating the market value of the extinction of a species, to the cost of soil erosion resulting from the felling of trees, to the health damage from pollution, the exercise is riddled with complexity. China's normal GDP figures are often suspect enough, particularly those produced by local governments, without adding a whole new layer of numbers even more prone to manipulation and dispute.
Pretty cool stuff. Using objective measures and targets (read economic incentives) to achieve environmental improvements. Could it be that socialist China is setting an example for how to incorporate environmental degradation into growth objectives? Seems unlikely, but not out of the realm of possiblilty. As Env-Econ reader Adam put it recently:
Isn't everyone aware by now that China is not "socialist" in any way shape or form? China is just a system of state-capitalism...where a bureaucratic elite controls the means of production and tries to extract as much wealth from them as possible.
Sounds an awful lot like a nice description of a profit maximizing corporation. How do CEO's get middle-managers to meet corporate objectives? One way is to give themanagers objective targets to meet and then reward (or punish) them for meeting (or failing to meet) the targets. Could such a strategy work in a planned economy? We might get the chance to find out.
