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Traditional government economic policy goals measure economic progress in terms of GDP growth. In the first comprehensive study of global welfare using the broader ‘Genuine Progress Indicator’, scholars challenge the notion that we’ve made any economic progress since 1978. A collaborative research article published later this year in the Journal of Ecological Economics indicates that material growth of the global human system has been a poor indicator of progress.
By Louisa Clarence-Smith
Regardless of the political spectrum, macroeconomic growth is the answer politicians provide for global economic problems. Yet it’s hard to believe that one set of figures can reflect a nation’s long-term economic welfare. An upcoming study in the Journal of Ecological Economics titled, “Beyond GDP: Measuring and achieving global genuine progress”, provides a close examination of Gross Domestic Product (GDP) in relation to a broader alternative metric: the Genuine Progress Indicator (GPI).
While originally GDP was only ever intended as a measure of economic output, it has come to serve as a proposed solution for overall welfare. An increasing number of scholars are arguing that GDP does not account for important factors like the health of a population, non-monetary contributions to the economy and inequality.
GDP is already being challenged by governments keen to find new ways of comparing their progress to that of other nations. Alternative metrics such as the ‘Happiness Index’ are becoming widely used alongside GDP. The report’s seven authors find that GPI provides a more accurate representation of economic welfare by distinguishing between beneficial and damaging forms of economic activity. GPI not only considers economic production, but takes into account the costs of economic growth such as environmental damage and uneven economic distribution.
Scholars examined data from 17 countries (representing 53% of the global population) between 1950 and 2005 to see how GDP compares to GPI. By combining their data they were able to calculate a global GDP and a global GPI. They found that since 1978 global GDP growth has not been accompanied by a rise in global economic welfare. With this study, it appears that 1978 was close to the time when economic growth exceeded the material limits of natural capital. While global GDP continued to rise until 2005, life satisfaction has not increased since 1975. These findings suggest that beyond a certain point, material production does not improve a nation’s economic welfare.
The Netherlands, a country with a relatively high GPI/capita, were able to reduce the widening gap between GDP and GPI in the 1980’s as a result of increased environmental consciousness which led to greater support for renewable energy and positive environmental policies. The research suggests that factors such as good environmental policy, access to birth control, technological progress and a fairer distribution of capital could enable us to sustain moderate levels of economic production without sacrificing welfare.
Most importantly, the report sends a red signal to policy-makers that they need to go beyond GDP if they want to improve economic welfare. Researchers accept that GPI has limitations, but they show how it can be supported by other measuring systems of welfare such as the Ecological Footprint, to more accurately value economic welfare and judge whether it is sustainable. By taking into account limits to growth, GPI reveals that our current levels of economic production are unsustainable.
“Beyond GDP: Measuring and achieving global genuine progress” is a report by Ida Kubiszewski, Robert Costanza, Carol Franco, Philip Lawn, John Talberth, Tim Jackson and Camille Alymer. It will be published this Fall, in the Journal of Ecological Economics Issue 93.
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