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Accounting for Military Systems

Why are High GDP economies often war economies?



The rationale over how we account for GDP is important. The United States has a disproportionately unfair and unjust advantage over most other countries over how it accounts for military expenditures.

The US BEA pushed for these accounting revisions before the UN System of National Accounts back in 2008. Arguing that “national security” benefits our national income as a fixed asset is a spurious logic that only benefits militarized economies, especially considering that the more just, fair and equitable “ecological security” was rejected.

Fixed assets are essentially infrastructure, or “common good” accounts that CANNOT easily be converted into cash. What the US did was change how we accounted for weapon systems, away from being an inventoried expenditure, something we account for when we take it off the shelf.

Imagine that in 2008, we could just as easily have had environmental degradation and resource depletion and household work accounted for in our national income estimates.

Here is the argument from the U.S. Bureau of Economic Analysis as to why Military Weapon Systems need to be treated as a fixed asset:

“The 1993 SNA states that destructive military weapon systems designed for combat, such as warships, fighter aircraft, and tanks, should be treated as intermediate consumption by general government rather than as fixed assets. This treatment is problematic for several reasons: 

  • It fails to recognise that weapon systems provide a nation with economic benefits by protecting the liberty and property of its citizens. 
  • It fails to recognise the role of capital in the production of defence services. 
  • It fails to recognise that existing military equipment have value and can be sold. 
  • When a government sells or transfers used military equipment, the treatment requires a counter-intuitive accounting entry of negative intermediate consumption. 
  • The distinction between destructive equipment and non-destructive equipment that can be used for peaceful purposes is difficult to make in practice. 
  • The treatment of military equipment used by the military is inconsistent with the treatment of the same equipment (for example, armoured vehicles) used by internal police. 
  • The treatment is inconsistent with the latest international public sector financial accounting standards. 
  • Many countries now maintain military equipment for long periods and are concerned about scheduling and providing for its replacement. “

To be clear, high GDP does not always mean that countries need to focus on military systems. Sometimes, as in the case with China, it really does mean positive growth of national income. The difference is that in China, the evidence is tangible with the rise of living standards and the hundreds of millions of people having moved out of poverty over the last two decades. Contrast that with the United States where millions have fallen out of the middle class and stagnant wages have only increased the cost of living. If people have less financial security and environments become more fragile when GDP increases, then clearly there is something wrong with how we account.

Imagine if ecological justice hawks and warrior accountants were sitting at this table rather than war department weapons industry and war machine lobbyists.

This is why ecological revisions to our national accounting system needs the participation of developing countries, indigenous and customary peoples and poor and impacted peoples. We would never allow this….

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Reweaving the Ecological Mat: WCC/PCC Webinar

The World Council of Churches and the Pacific Conference of Churches hosted a webinar on the Reweaving the Ecological Mat program conducted by the Pacific Theological College, the Pacific Conference of Churches and the Oceanic Centre for Arts, Culture and Pacific Studies, University of South Pacific. The REM program was a three year program that explored how our ecology, economy, and cultural wellbeing could be a viable and tangible way to account for our future.

If climate change is the greatest threat to our existence on this planet, what the REM program did was to offer a solution on how to reverse climate change and pollution while promoting wellbeing and development for our region. This was done not by asserting another top down program demanding our consent, rather, through a bottom up program that respects and values people and planet.

Dr. Reverend Cliff Bird discusses the Oikonomics, a return to the ecological, economic, ecumenical and cultural relationship from which these terms derive;

Dr. Elise Huffer introduces the cultural and wellbeing factors necessary for any Pacific development scheme;

Arnie Saiki lays out what is behind the intermerate accounting scheme; and

Daphne Kiki, provides a view of the role our Pacific youth will need to play to shape our way forward.

What I think is clear is the role our churches and other religious institutions are going to need to perform to promote a new accounting framework if we are to survive the greatest existential challenge we have ever had to make.

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SEEA Intervention from the Intemerate Working Group on Data, Statistics and Valuation


DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS STATISTICS DIVISION UNITED NATIONS
     

System of Environmental-Economic Accounting—Ecosystem Accounting

UN SEEAEEA REVISION

Global Consultation on the complete document:

General comments

Question 1: Do you have comments on the overall draft of the SEEA Ecosystem Accounting?

SEEA intervention from the Intermerate working group on data, statistics and valutation

Ecological accounting is the foundation that we, as an interdependent global society, require to determine economic value and to safeguard that which cannot be given price. The SEEA and our preferred approach to ecological accounting both spring from the recognition of this fact.

This is because these values are unreliable indicators of the overall impact of production on our lives and our planet, being based on the exchange prices of labour, land and other factors or resources which are in turn skewed by exchange rates, historical conventions and the relative scarcity of the item in the market in which it is purchased and consumed.

The logic of the SEEA is, as often repeated in the draft document, the provision of reliable data and information to facilitate decision-making.

Indeed, the document does provide clear definition on ecosystems, their extent, condition and interaction with the economic.

We applaud the effort to develop a platform that would allow adoption of environmental-economic accounting by national statistical offices and countries across the globe.  

Historical Background

However, considering how the SEEA has progressed since the World Commission on Environment and Development in 1983;

Proceeding to the formation of the Integrated Environmental Economic Accounting workbook in 1992 where it was affirmed that “the economy was a part of nature and that integrated environmental and economic accounting should not consist in an economic accounting of the environment; rather, the economy should be treated as part of an environmental accounting system;”

Recognizing that the revision of the SNA in 2008 rejected environmental degradation and resource depletion because it was “too experimental”, while moving Military Systems from an inventoried account to a fixed asset, which embraced a value of National Security over our global ecological security;

Recalling that the 2012 Central Framework where environmental accounting structures are being harmonized for private investment regimes;

And concerned that the current 2020 Ecosystem account where our ecological asset valuations are set to be standardized to investment markets;

As a working group we feel the need to intervene with a People’s equation for an ecological-economic account  

Alternative: Intemerate Accounting

We present our alternative: the Intemerate Accounting Equation.

We submit that biodiversity underlies both current and future factors of production. Climate change and environmental degradation constitute a massive factor in reducing wealth creation, and pose imminent danger to effective democratic and economic systems.

We submit that environmental assets and ecological services are defining features of our choices with regards to civilization and human settlement. Individual administrative areas, especially cities are already historically defined by environmental conditions, most notably the availability of water and arable land. It is fundamental for the maintenance of human civilization that reference conditions be established and restored in a manner that combines the advantages of technology, democracy and traditional stewardship. We submit that ecological accounting will only be effective if it increases communities’ sense of engagement and efficacy in recording, safeguarding, and increasing ecological value.

We respectfully reject this initiative, and ask you to support a People’s Revision of ecological-economic accounts, and submit our equation to be considered for the improvement and democratization of the current national accounting system.

Comments by sets of chapters

Question 2. Do you have comments on Chapters 1-2 of the draft SEEA Ecosystem Accounting?

1.4.3 Connection to the System of National Accounts   In earlier iterations of the SEEA (2003), the aspiration for reversing climate change was to fold GDP into the SEEA. At face value, that would suggest that degradation would be accounted for as a deficit rather than to enhance the value of depletion. We feel that in principle, it is disingenuous to expand the value of ecosystem assets in order to compensate for degradation and loss.   This inversion of now folding the SEEA into the consumption and production values of GDP will do very little to reverse climate change and instead seeks to use ecological accounts to enhance  GDP by expanding the value of ecosystem assets, which benefits further privatization of our public assets like water.

Our intemerate equation does not put a value on our ecological biodiversity, anymore than we would put a value on immaculate conception. If we believe that existentially, our ecological biodiversity is sacrosanct, one would not undervalue degradation by overvaluing depletion. In our accounting matrix, we acknowledge GDP and the function of investment markets and service industries. What we have done was to  put the value on what we call the intemerate offsets, thereby treating restoration as a service, and allowing states to transition away from GDP at their own rate, while measurable indicators value restoring our ecological biodiversity towards the intemerate baseline.

While GDP may very well reflect the US and privilege NIPA over other accounting systems, by definition, our national accounts are supposed to mirror a country’s economy. For developing countries, GDP has never adequately reflected the productive interactions between peoples and their environment. Hence, our intemerate accounts, establishes an accounting sidetable for developing countries who will benefit from a restoration economy.  It will not take anything away from already existing industries and partners, but our accounting sidetable will adjust GDP towards our intemerate assets, and place well being as a modulator to the country’s GDP.    

Question 3. Do you have comments on Chapters 3-5 of the draft SEEA Ecosystem Accounting?

Addressing 5.8x, While we understand the need to mainframe and standardize aggregated values, particularly for investors, the weighting of values does not properly account for the relationship that people have with their land and resources. Our ecological data must remain the property of the state/community. It will be far too easy to perpetuate economic disparties through capitalizing data if we standardize the measurements of standards and fllows. It will be far too easy to undervalue that which is sacrosanct, and overvalue that which primarily values degrading and depleting industries.

Our intemerate model values the offsets and monetizes the incremental restorative offsets rather than commodify ecological assets, and weighs values according to people and their relationship to their resources. What is standardized are the offsets, and those can be valued to the marketplace.

Question 4. Do you have comments on Chapters 6-7 of the draft SEEA Ecosystem Accounting?

The benefit of the SEEA has been an in depth analysis and description of linking biodiversity and ecosystem services. I would only add that we all have the opportunity to measure, to count, to examine, to protect, to nurture, to analyze, to collect, to describe, to compile, to publish, to monitor and manage our environments.  This is a service, and it is  how we interact with the environment. Global peoples need to play a greater role in ecosystem services. It is the Peoples interactions that  should be accounted for in our national economies.  

Question 5. Do you have comments on Chapters 8-11 of the draft SEEA Ecosystem Accounting?

Understanding that there are different strategies for monetizing ecosystem services, the SEEA has an opportunity to promote a system where traditional and customary peoples who have stewarded their lands and environments for generations will  benefit as we move towards a restoration economy. It is also important for people to “own” and manage their own ecological data. The environmental data will be a tremendous revenue source for people, especially as markets for environmental data become more defined.

The intemerate accounting framework includes a financial scheme that includes equalization, promoting just, fair and equitable  accounts.

Question 6. Do you have comments on Chapters 12-14 of the draft SEEA Ecosystem Accounting?

In 12.30 of this draft, it states that it was considered that there was no market of institutional mechanism by which the restoration costs are confronted with the benefits associated with the change in environmental quality.

I beg to differ, and would cite that the justification of moving weapons systems to being a fixed asset was extremely imaginative, even if it does not make sense in the context of valuing peace. Valuing weapons systems according to the value of national security is a slight of hand that is also, probably very difficult to justify when weighted against the value of our environment, our ecological biodiversity and our general welfare.

The best accounting minds in the UNSD might easily dismiss our intemerate equation because it does not fit into conventional aggregates or standards, but then, those same accounting minds should also put to task the same energy to remove how weapons systems are accounted for.   The best accounting minds should also consider how intemerate accounting– how a people’s accounting framework– can reverse the impacts of climate change and move the global economy forward in a way tht embraces the spirit of the 1983 World Commission on Environment and Development, and find ways to enhance the global economy rather than to manage it under the same economic system of management that led to the ecological miasma we are currently in.   Thank you for your time and the opportunity to submit this intervention.
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President Konrote of Fiji considers Ecological Accounts

Officiating the Voices in the Deep (VOID) art exhibition, it’s really good to hear the President of The Republic of Fiji, His Excellency Major-General (Ret’d) Jioji Konusi Konrote, speak so favorably about the Reweaving the Ecological Mat movement.

With his attention fixed on these issues around our ecological biodiversity and the process for national accounting, the hope that he references might turn to practice and action.

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Towards our Ecological Economic Star Line

Our Pacific Voyagers carry a tremendous burden.  They carry the weight of our history and who we are as Pacific Islanders.  They are risk takers who defy western conventions to prove that our traditional knowledge has a place in the world. They are revolutionaries who defy decades of the colonial system that has sought only to diminish our customary knowledge and technologies.  As heroes of the Pacific, they have also become metaphors for struggle, for faith, for diligence and resilience.

As Pacific Islanders, we hold our traditional navigators high because they represent the value of who we most identify with in the world.  Culturally, we move through the world with the regality of ambassadors. When we speak, our voices are heard and our music and dance brings joy.

Yet when it comes to valuing our inherent Pacific assets, why do we suddenly become weak, dependent, our hands wide, arms stretched across the ocean as if we have lost our way home. How do we not know our own value?

Our ecological assets are immense, yet for some reason, we do not believe in the value of our ecological assets. As part of the global economy, we have the ability to interact with the world as equals– with mutual cooperation and exchange.

There is a constellation that our Pacific Navigators have traditionally followed. In Hawaiian it is called Hanaiakamalama (“cared for by the moon” otherwise called the Southern Cross) and its alignment with the navigational starline to Ka Iwikuamo’o was a backbone for our Pacific Voyagers to traverse our Liquid Continent.

Our ecological way forward is in view, and just as our Pacific Voyagers can stand on the shore and look towards the heavens to know when it is time to voyage, it is time for our leaders to move us forward now, rather than hold us back by signing legally binding investment and trade agreements that will further tether us to the post-colonial ambitions of our so-called big brother countries.

The navigational star line is in front of us. Our regional economic well-being is in front of us. There is a rational accounting framework that reflects who we are and measures our engagement in the global economy.

When one considers the wake-up call that is Covid-19; or that the western economy is in shambles; or that Australia’s fear of losing its control over the Pacific to China who is offering the region access and infrastructure; or that there are new data technologies in communication, finance and artificial intelligence that would benefit our regional security; or that there may be an economic incentive to finally liberate us from our struggles against extractive industries, depletion and degradation… it is as if the heavens finally heard the clarion call of Epeli Hauofa and lifted the obstructions and barriers that have kept us tethered to the yoke of colonialism.

And so, if we are so free then why are we still standing on the shore with our hands and arms outstretched? Maybe we have lost our understanding of value, the way that we almost lost our ability to read our navigational star lines. What motivates our liberation in the Pacific must be more than cultural, it also has to be economic, for if it is not, we will not be able to adequately address climate change on our terms, nor will we be able to remain in our homes. But what is the future that we want? Is it to enhance our well being and steward our environment with our own resilient technologies?

This requires investment and capital that neither Australia nor the US will provide, unless they can own and privatize it.  With a new ecological accounting framework, we can increase our national accounts and provide our own services to meet the needs of our region.

Who is really saying that the Pacific cannot assert an economic-ecological scheme independent of the post-colonial privatization agenda?

For those who say “no,” then they are no different from the early colonizers who set fire to our voyaging canoes, ensuring that they restrict our movements. Whose vision do we really hold when we dream, what language do we speak?  It is evident that the only ones who would seek to inhibit our attempts to advance our ecological-economic ambitions are the very same ones who want to continue exploiting our resources.

A Pacific economy should not simply be a dream or something one hopes for.

But what is the cost of this Just, Fair and Equitable society? Is there a value of the dream?

Ecological Economic Accounts provides a formula for how we can actively protect and restore  our ecological biodiversity. Rather than simply give value to what we extract, we can also account for the cost of environmental damage, revalue our food and water security and our well being?

Value and costs are tricky because they are terms that can slip in and out from being measured with money. Not everything that one buys is valuable, while what has the most value can often not be monetized no matter how much investment markets try to assign a monetary value on our public and existential goods.

If we approach the world as a commodity, then it is only the few who expend capital that are setting the costs by placing its value in the marketplace.

And if the few who expend capital enforces the commodification of the world, then it is we in the world that has to change what things are worth.

National accounting is supposed to mirror our economy, our society, our interactions. If GDP is the standard by which we measure our economy, it is obvious we have no place in it.  If we do not manufacture, if our populations are too small to have a viable well rounded labor source, if our production capacity is limited to just a few resources like coconuts, shells or fish bones, if the transport of our goods across borders cost too much, if we do not have an aircraft carrier, then clearly we are not looking at ourselves in a mirror. We are not seeing who we are, that we are all Pacific voyagers.

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