The tenth Conference of the Parties to the UN Convention on Biological Diversity (COP-10) met in Japan last week to debate the ongoing friction between declining global biodiversity and economic development. Amongst an extensive list of (somewhat hazy) outcomes featured a compelling new challenge to recognised measurements of economic development, as the World Bank emerged as the latest contester of Gross Domestic Product (GDP) as a proxy for economic progress.
GDP measures a country’s annual economic output; the value of all goods and services made within national borders during a year. This economic measure has long been adopted as an indicator of a nation’s quality of life, on the assumption that the benefits of high national output are shared equally among citizens, leading to increased personal incomes and improved standards of living. But the flaws in this theory are increasingly recognised. Not only does it overlook the fact that national economic activity and personal income can be completely decoupled (see individual earnings in the United States between 1990 and 2006, compared with GDP), it also fails to consider the negative externalities that arise alongside economic growth. Externalities may include, among other things, environmental degradation, erosion of natural resources, social inequities and poor human development, which can threaten the quality of life within any context of economic growth. By neglecting the ‘bads’ associated with higher production, GDP overstates the true economic wellbeing of a country and its citizens. Indeed, Simon Kuznets, the architect of GDP, noted in his first report to Congress (1934) that
the welfare of a nation [can] scarcely be inferred from a measure of national income.”
Theorists and critics the world over have put forward alternative indicators thought to better reflect a country’s prosperity. Challenges have emanated from international organisations (the United Nations gave us the Human Development Index as a combined measure of GDP, life expectancy and education); the non-profit sector (see the World Wide Fund for Nature’s Living Planet Index, and the New Economics Foundation’s Happy Planet Index); as well as from national governments. In 2008, the government of Bhutan adopted Gross National Happiness (GNH) as its mechanism for monitoring national progress in terms of human wellbeing. In a more high profile attack on GDP prior to the 2009 G-20 Summit, President Sarkozy of France called for a “revolution” against financial statistics, to acknowledge the wider influences on a nation’s wellbeing. Sarkozy’s Commission on the Measurement of Economic Performance and Social Progress is mandated to explore a more appropriate metric for ‘progress’, under the leadership of eminent economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi.
It is against this commotion that the latest proposition emerged in Japan last week, as the World Bank stood up in agreement that “our failure to properly value ecosystems” has led to the alarming decline of global biodiversity. Picking up the conclusions of a United Nations’ study on The Economics of Ecosystems and Biodiversity (TEEB), the Bank announced a new global partnership to integrate the economic benefits of ecosystems into national accounts. “The natural wealth of nations should be a capital asset valued in combination with its financial capital, manufactured capital, and human capital”, said the Bank’s President, Robert Zoellick. By factoring the cost of environmental degradation into economic calculations, it is anticipated that the development trajectory of nations would be set on a more sustainable course.
This is tantalising talk, and with the World Bank at its roots, perhaps this sapling initiative has the potential to bear fruit across a broader geography than others have achieved. But how will governments really take to the notion of a new metric, which rebalances the books to revise the sum of national accounts downwards? Call me a pessimist, but it seems to me that GDP is so engrained into the modern economic psyche, that no more holistic metric could possibly take precedence. To do so would need a radical overhaul of accepted wisdom, and a whole host of more enlightened political leaders. And what is more, even if the World Bank’s initiative does win political appeal, will we ever achieve a metric that accounts for all things and all people? What place for the social indicators that others have espoused? Is there any metric comprehensive enough to provide the full picture of truly sustainable development?








