Friday, September 02, 2011

If everyone on Earth had the same income, we’d each have US$10,000 p.a.

To respond to climate change, we’ll need to reduce our standard of living, and consumption of energy and resources. To figure out a starting point for what that would look like, I tried to calculate what it would mean if everyone on Earth had the same income. My conclusion: we’d each have US$10,000 to live on each year.

Eaarth, by Bill McKibben, argues that Earth’s climate has already been affected by climate change: effectively, we are now living on a new planet. The new world we live on looks similar to Earth but its climate is far harsher, and prone to more extreme and damaging weather conditions.(*)

(*) Living in Wellington last month, I found
 that argument persuasive.

McKibben says that to respond to climate change, we’ll need to reduce our consumption of energy and resources. This will lead to a general reduction in standards of living (including less travel, less disposable consumer goods, and more use of locally grown food and locally generated energy).

But for me, McKibben’s vision of what that standard of living would involve raised a question the book didn’t answer:

What would it look like if everyone on Earth had the same, equal standard of living?

I had no idea about how to go about finding this out. A little bit of Wikipedia-searching led me to the concept of GDP based on Purchasing Power Parity (PPP), which I think involves the following steps:
  • calculate the final value of all goods and services produced within a country in a given year
  • adjusted that value so it’s being calculated in terms of being able to by the same goods and services in other countries
  • divide that result by the average (or mid-year) population for the same year,
According to the CIA World fact book (via wikipedia), the total global GDP (PPP) in 2010 was US$74 trillion.

If you divide the results of GDP evenly amongst all the people alive on Earth, everyone should get US$10,000 each.(**)

(**) This is my best guess, until I figure out 
a better way of calculating this.

We all know that standards of living are distributed completely unevenly across the world, and the developing world has extreme levels of poverty.
(***) Figures sourced from Wikipedia 
and the World Bank.

But even that figure for average American income is deceptive. The average doesn’t convey how deeply unevenly the wealth is spread around, as it’s distorted by the massive wealth held by a few thousand billionaires in the USA. While the bottom 40% of the US population hold just 0.3% of its wealth, the top 20% of American households own 85% of its privately held wealth.

Let’s let Jon Stewart explain it:

The Daily Show With Jon StewartMon - Thurs 11p / 10c
World of Class Warfare - The Poor's Free Ride Is Over
Daily Show Full EpisodesPolitical Humor & Satire BlogThe Daily Show on Facebook

So, leading on from that …

If we, as a global civilisation, have to:

a) reduce our energy consumption by 90 percent, and
b) use financial incentives like the Emissions Trading Scheme, carbon taxes, and increasingly scarce and expensive resources to modify behaviour ...

... then what’s to stop the top 1 to 20 percent of wealth-holders from just buying their way out of it and maintaining their lifestyle?

I don't have a good answer for that.
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