Using GDP as the sole metric for prosperity is “woefully inadequate”, according to the Worldwatch Institute. Its latest report argues that most approaches to global economic health also ignore the planet’s capacity to provide the resources necessary to sustain it.
Figures show that in 2012 gross world product, the sum of GDP across all countries, increased to just over $83 trillion (£50.5 trillion) – a 4.85% increase when compared to 2011. The rise suggests that the effects of the 2008 financial crisis have somewhat passed. However, other indicators, such as unemployment levels, suggest this is not the case.
The Worldwatch Institute said, “Conventional economics regards economic growth as an unalloyed good, necessary to improve human well-being. But it is only a nominal indicator, lacking the many intricacies and more subjective goods that are essential to a more encompassing, holistic, and meaningful metric.
“Given the disparity benefits, it is clear that in and of itself, growth is far from an effective measuring stick.”
Newer metrics could paint a more comprehensive and accurate picture of global welfare, the organisation said. Alternatives include the Genuine Progress Indicator (GPI), which counts the economic cost of expenditures that diminish “community capital”.
The United Nations also prepares a Human Development Index, which measures health, education and living standards, which could provide a more inclusive picture of how countries are developing.
The Worldwatch Institute added that humanity has reached the point where it now consumes a year’s worth of resources in less than 365 days. As a result economic indicators should take into account the planet’s finite resources.
Victor Anderson, author of Alternative Economic Indicators, recently said it was “depressing” that his book, which outlined the need for alternative measures of economic success, had recently been reissued over two decades after first being published. He added it demonstrated how little progress has been made since 1991.
Economies also need to take into account the impact of climate change. More than 60 countries, including India and China, with a total output of $44 trillion (£26.7 trillion), are at high risk of extreme climate events by 2025, another recent study found.