Magazine article Earth Island Journal

Numbers Crunched

Magazine article Earth Island Journal

Numbers Crunched

Article excerpt

For decades, progressives have complained that the Gross Domestic Product (GDP, formerly known as the Gross National Product) is a crude tool for measuring societal well-being. GDP, developed in the 1930s, records the total value of market transactions that occur in any given period. When GDP rises, the economy is said to grow, which is usually taken to mean that a country is achieving progress.

But there are a great many things that GDP fails to measure, or calculates poorly. For example, GDP doesn't include "natural capital." A 1,000-year-old redwood has no value unless it's chopped down and turned into lumber or until someone is willing to pay for the pleasure of admiring it. Also, GDP lacks a subtraction function. Any and every economic transaction is counted as a benefit, including the cleanup costs of oil spills, cancer bills from pollutants, the paving of wetlands. The $80 billion in damage caused by Hurricane Katrina counted as economic growth.

There have been attempts at creating more accurate alternatives to GDP. Redefining Progress, a US NGO, has developed a "Genuine Progress Indicator" that it says is a more comprehensive measure for societal health. Since 1972, the-Himalayan nation of Bhutan has employed a "Gross National Happiness" index to track quality of life.

Now, a much larger and more influential government has decided that GDP is incomplete. In September, the European Union announced plans to launch an indicator to measure environmental stress. Although conceived of as a supplement to GDP not a replacement of it--the new measure could eventually lead to a "Green GDP," says Stavros Dimas, head of the European Commission, the EU's executive arm.

"To change the world, we need to change the way that we understand the world," Dimas says. "And to do this we need to go beyond GDP."

The new index, which will be published alongside the GDP, will measure environmental damages that occur within the bloc's member states, including the impacts of climate change, biodiversity loss, air pollution, water use, and waste generation. …

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