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The Pacific’s Data Divide

May 1, 2018
By
data dark ocean

If we do not own and steward our vast ocean of data, we are likely to repeat the mistakes of the past and allow the large economies to dominate our region.

 

Introduction

Why are Pacific economies smaller than those of other nations? The standard answer to this question highlights the unique vulnerabilities and dependencies of the region, such as size, distance from markets, and climate and disaster vulnerabilities. But what if these barriers were actually the source of Pacific equity? What if there existed an opportunity to treat them as benefits that could be accounted for in our national economies? And what does this have to do with oceans governance in the Pacific?

The key point to raise here is that there is an opportunity for the Pacific to determine how best to account for the equity in the region. Often our distant and remote islands have been seen as barriers to economic development. However, we can measure our economic welfare in a way that recognizes and accounts for the bond that people have with their environment, particularly in a context of increasing loss and damage associated with environmental degradation caused by climate change.

Natural Accounting Defined

National Accounts mirror national economies. They reflect the overall accounting of a fluid set of statistical data. Whether that is determined by the market values of goods and services, or reflected in existence values that contextualizes the cost of loss and damage by climate change, economist, ecologists, and indigenous/customary rightsholders should work together from the beginning to ensure that the statistical data can be appropriately linked.

At the moment GDP or Gross Domestic Product is the national accounting system that most States have adopted to measure their national economies. How we measure our accounts affects the size and strength of what we might elusively define as our economy– and that influences what we can leverage for investment, debt, our exchange rates and purchasing power, the value of our bonds, and how we value insurance for loss and damage. How states account for data, where it is stored, aggregating and accounting for it in a statistical framework is all managed by a coherent set of standards and policies that is managed within the UN Statistical Division in a System of National Accounts (SNA).

There are many different variables that can be used to measure our economies. Hence, it is more of an ersatz mirror than a true reflection. Capital formation is an aggregate that accounts for the net capital accumulation of capital stock, such as equipment, tools, transportation assets, electricity, research and development, military systems, etc. Yet, what is the value of environmental degradation, resource depletion, household work, and intangibles like stewardship and our biodiversity? These are values that are largely ignored by capitalization and monetization because they do not contribute to the way that industrialized economies view economic strength.

Currently, the SNA ignores the priorities of the Pacific particularly in relation to accounting for ecological biodiversity and impacts. Despite the ecological and development priorities of the 21st century, consumption remains heavily overweighed in the current GDP system and advanced economies continue to privilege their own industries and economic priorities. But alternatives are possible. For example, in Soviet-era Russia, labor and transport were weighed more equitably in their MPS (Material Product System) national accounting system. As a means to raise the national economy, they did not treat the less populated and remote areas as deficits, but as an indicator to build regional interdependence.

Typically, GDP data consists of figures concerning production and consumption, trade of goods and services, research and development, and other economic indicators that make up a composite of indices weighted according to economic priorities. When the US pushed for military systems to be included in the 2008 national accounting system revision, US GDP went up 3 percent. When R&D was included into the national accounting system revision, Japan’s GDP improved by 4.2 percent. The result was that both these countries who had surpassed their 90% debt threshold (US 106% debt-to-GDP and the Japan 240% debt-to-GDP) were able to leverage even more financing for their quantitative easing programs. Environmental degradation and resource depletion (ED/RD) and other well-being indicators was also considered to be included in the 2008 national accounts revision, however, no one was there to motivate that change in a way that would benefit non-industrialized economies.

How statistical indicators are mainframed into complex aggregates measuring the size of our economies are not written into stone, but rather continually updated in the System of National Accounts by the UN Statistical Division. Ecological indicators, while having been envisioned as an economic indicator, have not yet been adopted, presumably because influential countries have been resistant to any accounting composites that will undermine their economic or industrial influence.

If the Pacific does not regionalize a data and statistical accounting program, the same dominant self-serving countries who are already developing natural accounting systems will further benefit their economies through public-private environmental trusts and new environmental privatization schemes. Currently, global data trends, like collection and analyses are creating an entirely new sector of services to be added to global value chains. Why this is critical for the Pacific region is that Big Data schemes will be integrated into new legally-binding trade agreements like the TPP and shape its outcome within APEC and the WTO.

By weighing economic priorities more equitably, a regional consortium of Pacific Island States managing their data and adding ecological indicators to their national or regional accounting systems can provide the greatest potential for reversing the impacts of climate change while raising its GDP to be more on par with other regions.

At some point very soon, unless the Pacific regionalizes its own data and accounting framework, Pacific Island countries are simply going to be expected to sign on to whatever valuation methodology the dominant countries produce.

Myth 1: Data Governance is only for large economies—False
There are data lakes and data streams, but what about the ocean of data, the literal ocean? The data ocean is vast, and they are the Pacific island rightsholders who should be designing and implementing the tools we need to adequately manage our regional data. This is predicated on the idea that the Pacific needs to account for its data, because the value of that data is what is going to raise the well-being of the Pacific.

The value of data governance cannot be quantified at this time, however, as it will have to harmonize with the global metrics of environmental and economic accounting. Suffice to say, we will be unable to appropriately value our regional data at all if we do not own it.

Myth 2: Pacific Island Statistics are too small to impact GDP —False
The strength of our economies are calculated by statistical data. Algorithms aggregate various sets of data indicators that measure volume, value and price. Our vast ocean and relatively small population has been grossly undervalued. How do we give value to that volume?  Do we prescribe value by measuring and managing our ocean of statistical data? Is it simply because of an accounting decision that biodiversity and Pacific Island assets have not been included in the accounting of our GDP the way that, for example, oil has been valued for OPEC countries?

Should we price biodiversity according to the demand of global carbon reduction, sustainability and biodiversity?

Myth 3: Markets do not Value Environments —False

How do you give value to biodiversity?  You account for it by measuring it and managing that data. And how do you price it?  That is the “trick question.”  You do not value biodiversity by pricing it, you give it value by stewarding, protecting, and maintaining it. If you price it according to the demand of global carbon reduction, then sustainability and biodiversity become open to both privatization and futures speculation. Valuation schemes that include “willingness to pay” and “willingness to accept” are little more than asserting a wish factor onto the environmental marketplace and the region should avoid any potential for the kind of debt obligations that will rise from valuation schemes that will only obstruct our development options.

To be clear, debt is good, and it is something that we want to maximize in good faith and with good planning, but how we leverage that debt needs to be discussed within a regional forum and with a clear understanding of what is at stake and what the options and potential traps are. Having control over our data management systems and the valuation process is going to be critically important to the region.

“The Blue Economy” – imagine how much the Pacific Island community as a whole would gain by creating opportunities for those communities on distant islands, where their presence would really be treated as an economic asset rather than a burden or deficit, as they are included in the accounting for managing and stewarding data collection, all for the purpose of treating biodiversity and sustainability as a national accounting indicator.

 

SEEA
The System of Environmental Economic Accounting (SEEA) is one of the centers of this discussion. The SEEA was adopted by the UN Statistical Commission in 2012 and is an internationally agreed upon statistical framework measuring the environment and its interactions with the economy.[i] The SEEA helps us understand how to place a value on biodiversity and degradation and how to incorporate it into the national accounting system. By integrating this statistical data with our GDP, these new accounting aggregates will not only provide us with a greater determination of how to value our regional equity, but give us greater capacity in the struggle over the ecological wellbeing of our planet as well.

The adoption of the 2012 SEEA framework, however, should not be seen as an automatic big win for small island states. Rather, it should be seen as a call to action to begin the necessary task of monitoring and assessing our regional equity and investment/development priorities. As we begin to account for our statistical data as a region instead of as individual island states, this shifts how our region is valued, as the equity we possess changes. Our ecological regulatory policies should reflect that.

Current Challenges for Implementing Accounting changes

Challenge 1: Escaping the resource curse of underdevelopment
Natural Accounting schemes are generally dependent upon the monetization of natural assets. If we value ecosystem services as an application of goods and services, then those services will be modified to conform to accounting aggregates in the ledger of global trade. By itself, that could provide some small benefit to the region, however, global financial markets are more likely to gobble up these services, once again providing the region with scraps.

For the Pacific, national or regional financing of its goods and services will never be able to compete with the international investment regime that would provide the same rules for acquisition and privatization that governs small and medium enterprises in traditional trade, perpetuating the resource curse of underdevelopment.

Challenge 2: Promote an accounting scheme that values our regional biodiversity
By drafting a statistical data framework of biodiversity, we need to promote an accounting scheme that values our regional biodiversity in a way that is balanced and equitable with other regions.  The immediate baseline value for our accounting scheme should be measured against an aggregate of various economic indicators, particularly to GDP indicators whose economic assets and carbon outputs are directly derived from the degradation and depletion from extractive industries, for example.

A data accounting scheme should establish an economic baseline for biodiversity that attributes value that is scalable and inclusive of the labor of stewardship and the management of our ecological biodiversity. For the Pacific, with its vast territory and relatively small population, the objective for reducing carbon emissions and reversing the impact of climate change, for example,  could be valued as directly proportionate to the degradation outputs from the industrialized economies.

Challenge 3: Build equity through data management
The technical calculations towards approaching an economic baseline requires we begin to assemble and manage a data set of measurable environmental indicators for establishing our economic-ecological baseline. Well-being indicators can be converted and applied into already existing economic data indicators. Examples with which we use to provide value for intangibles and loss may require that we work with internationally reputable auditors who have the skill set and legitimacy to crunch these variables into a measurable data set, a literal and figurative ocean of data. Our goal should be to develop and manage our own data accounting framework that would harmonize with existing national accounting systems.

Unlike accounting schemes that offset the degradation of ecosystems and the depletion of resources linked to climate change, we need an intemerate[ii] accounting scheme that proposes a value for biodiversity that mirrors the nominal value of national accounting systems where the measurement of industrialized economies are derived from degradation and depletion.

Recommendations: A Pacific Regional Data, Statistics and Valuation working group composed of national accounts planners, auditors, well-being statisticians, ecologists, trade specialists, and indigenous/customary rightsholders might develop a program to account for our regional data and be tasked with promoting our interests at the UN Statistical Division and other international forums. A regional mandate will enhance attempts to appropriately maximize the value of our Pacific equity.

Conclusion
By owning and stewarding our ocean of data, we have an opportunity to assert a regional data policy designed to protect our well-being, and economic and ecological security.

 

[i] United Nations. Integrated Environmental and Economic Accounting, 2003. p1.

[ii] Intemerate is defined as, “inviolate, pure, undefiled,” in the Webster’s Third New International Dictionary (1971); and the Oxford English Dictionary (1971) quotes, “The absolute sinlessness of Mary, as well as her intemerate virginity.” Hence, intemerate accounts refers to the valuation of what is inviolate, pure and undefiled.

 

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