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04/12/2016

OECD countries want new measures for growth in Rio

OECD countries want new measures for growth in Rio

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SPECIAL REPORT / One of the questions that world leaders will discuss while gathering at the UN summit in Rio this week is whether future national development should be measured in terms other than the economic.

“Some countries within the OECD have difficulties living up to their promises on economic growth and therefore there is an increased interest in pointing at other aspects than economic,” Marco Mira d'Ercole of the Paris-based Organisation for Economic Cooperation and Development told Swedish Radio.

As OECD's chief statistician, d'Ercole has been asked to help the Swedish government’s Commission on the Future investigate the need for an alternative growth measure. Recently, he has participated in conferences in developed countries as well as in Latin America, Africa and Asia, as countries with rapid economic development have begun to evaluate the consequences of growth on the environment and society. 

D'Ercole says that some families have to split and children are forced to grow up without their parents when the parents move to seek better jobs. This affects people’s opportunities to live a happy life and instead makes them dissatisfied even if they have more money.

In Denmark, Minister for Development Cooperation Christian Friis Bach said the Scandinavian country no longer wants to measure GDP only in terms of economic progress. The Danish government seeks introduce a so-called ‘green GDP’ to measure how much Denmark’s growth is affecting the environment.

“Today, the measure for growth is way too simple,” he told the newspaper Politiken.

Deforestation can, for example, have a positive economic effect in the short term, but it has negative consequences for the environment in the long term. Environmental deterioration should be subtracted from economic results, said the Danish minister said.

Denmark plans to fund a World Bank study on green indicators and has offered to become a pilot country for the research.

Richard Dobbs, who heads the McKinsey Global Institute, said it’s waste of time to measure a green GDP as consideration on nature conservation and the environment  will be the key to success in the future because of the growing middle class.

When resources such as water and energy come under pressure, countries and companies that understand how to save the resources will be those who will earn the most – no matter if a green GDP is being measured or not.

”My fear is that measuring a green GDP will be stranded in theoretical discussions instead of actions,” Dobbs told Politiken.

Background

GDP, or gross domestic product, is widely used by economists to measure individual countries' economic performance. However, its value as an indicator of standard of living is widely seen as limited, as it does not show how a country's wealth is distributed. 

The indicator was created in the wake of the Great Depression in the 1930s, and experts agree that GDP alone cannot reflect the economic performance of modern society.

An alternative measurement is the United Nations Human Development Index, which measures life expectancy, literacy, education and standard of living worldwide. GDP contributes to this calculation. Another indicator is the World Wildlife Fund for Nature's (WWF) Ecological Footprint, which measures human demands on nature.

A global statistics forum bringing together major international organisations, ranging from the UN and the EU to the Islamic Conference, decided in June 2007 to launch a global project to measure societal progress beyond conventional economic measures in individual countries. Participants agreed that national statistical offices, academics and public and private bodies would work with civil society to develop new approaches which go beyond conventional economic indicators like GDP.

Timeline

  • 20-22 June 2012: UN Conference on Sustainable Development in Rio de Janeiro

Further Reading

European Union