The world's fixation on economic growth ignores a rapid and largely irreversible depletion of natural resources. Combined with an increase in poverty and inequality, this will seriously harm future generations. Gross Domestic Product (GDP) is the current indicator of growth and focuses only on monetary value. However, it is no longer accurate given our ecological and social constraints.
The IWI looks beyond the traditional economic and development yardsticks GDP and the Human Development Index (HDI) to include a full range of assets such as manufactured, human and natural capital. It presents governments with a true depiction of their nation's wealth and sustainability of its growth.
The IWI report examined changes in the combined wealth of twenty countries, which together account for almost three quarters of global GDP, from 1990 to 2008. Despite reporting a growth in GDP Brazil, China, South Africa and the United States were shown to have significantly depleted their natural capital including fossil fuels, forests and fisheries. Moreover, life satisfaction results were only relatively stable, and even decreasing in countries including Belgium. As income and happiness levels do not increase simultaneously where potential happiness being capped at a certain level of income.
GDP is not inherently bad, it simply isn't a comprehensive measure of our livelihood. No one indicator can be perfect as aspects will always be left out. The IWI is no different with no measurement mechanisms for things including life satisfaction, access to housing or suicide rates. But, it is clear that the IWI more accurately reflects the reality we live in.
The launch of the IWI indicates that there is a move away from Keynesian economic policies to those more closely aligned with Amartya Sen or Joseph Stiglitz's thinking. American hegemony has been replaced by committed emerging economies, who prioritise social development too.
As Danish environment minister Ida Auken confirmed, "we need to move beyond GDP as soon as possible."
By Cécile Schneider, photo by Lachie McKenzie.
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