GDP’s blind spots: Growth and resource use go hand in hand
There are many small-scale examples that illustrate how the GDP can fail to capture the sustainable use of resources. For example, if people are more unhealthy and consume more healthcare services, GDP goes up. Similarly, purchasing new clothing every year contributes more to GDP than repairing existing garments.
At the same time, there is the idea of planetary limits – that there are only so many resources we can use from the Earth. This idea can be traced to the Limits to Growth Report by the Club of Rome as early as in 1972, and it was recently revived through the planetary boundaries framework proposed by scientists. The framework maps out 9 planetary boundaries, such as biodiversity, climate change and water use, and it is estimated that we are now crossing several of them.
The GDP is at the core of the economic model that we orient our institutions and businesses around. If what we need is a paradigm shift and to move away from prioritizing GDP but rather prioritize social and environmental outcomes, what would our economic system look like?
Recently there have been many initiatives which focus on how society can become ‘post-growth’. One of the more well-known ideas within is Doughnut Economics proposed by Kate Raworth. The idea of the doughnut is simple but powerful – our economy needs to use enough resources so that we can sufficiently meet the needs of society, but it needs to stay within the various planetary boundaries as mentioned earlier, like our use of water, or the greenhouse gasses emitted into the atmosphere. There is also the Earth4All initiative which lays out action points in 5 areas to achieve what they call “The Great Leap”.
There has also been much discussion and action in policy circles when it comes to post-growth, especially in Europe. The EU-supported Beyond Growth conference earlier in May brought together policy makers, academia, business, and civil society to discuss what a post-growth Europe could be like. Amsterdam was the first city to officially adopt Doughnut economics.
Could businesses be part of a post-growth future? Would it be possible to prioritize socio-environmental objectives first and profits second, rather than the other way around as it is for most companies now?
It is worth noting however, that there are already businesses who do not pursue profit for profit’s sake. Some examples can be found amongst cooperative business models, where there is often a prioritizing of other objectives like fair income.
Norway, often cited as a success story in various aspects of socio-economic development, is an interesting example of how GDP alone can be misleading.
Over the past four decades, Norway has experienced remarkable economic growth, which the oil industry has contributed significantly to. Norway ranks high on the Sustainable Development Goals Index, yet it faces substantial challenges on environmental fronts, with lower ratings in SDGs 12 (Responsible Consumption and Production), 13 (Climate Action), and 15 (Biodiversity). This situation prompts critical questions: How do economic growth, social well-being, and environmental sustainability interconnect? Can Norway achieve stronger environmental performance while maintaining its current economic growth rate?
The call for a broader measure
Ultimately, economic growth is important, but it must be balanced with regard to the environment and sustainability. It is time we reassess our priorities and workers towards a more holistic approach to well-being and progress that includes both economic and environmental considerations. Finding the balance between economic growth and sustainability will be the key to tackling the major challenges we face in the 21st century.