60-Second Earth

For Sustainability, Go Beyond Gross Domestic Product

The widely used economic measure grossly distorts the environmental and social costs of some growth, David Biello reports

Gross domestic product, or GDP, measures goods and services produced in a given country in a given period, with a focus on growth. It's a measure many countries watch closely. 

But GDP doesn't actually tell us much about the value of natural capital, like clean air or healthy forests. Such natural goods and services, despite their great economic contributions, are largely viewed as free.

Now, the United Nations Environment Program is offering an alternative as part of the Rio+20 negotiations in Brazil this week. It’s called the Inclusive Wealth Index. The IWI  adds natural capital to the list of economic measurements in a bid to assess the sustainability of a country's growth.

For example, China's growth drops from more than 400 percent since 1990 as measured by GDP to just 45 percent in the IWI, thanks to the decline in that country's natural resources. Other countries, like Nigeria and Russia, actually register negative growth. Talk about shifting baselines.

GDP also isn't a very good measure of whether people are benefiting from growth, as the economist who invented GDP warned in the 1930s. After all, a rise in cancer diagnoses registers as growth. But that’s growth nobody wants.

—David Biello

[The above text is an exact transcript of this podcast.]

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