GoKawiil‘Beyond GDP’ approaches must take natural capital and planetary health into account.Credit: Matjaz Corel/Alamy
The world seems ready to move beyond gross domestic product (GDP), a measure of economic growth, and towards metrics that are more representative of sustainability and people’s well-being. United Nation member states ratified this move in 2024, and the World Bank concurs.
A UN group, tasked last year with recommending how this transition should work, released a draft of its interim report in November last year. A final report is expected on 7 May. The proposed framework has drawn strong reactions from many experts in beyond-GDP metrics, few of whom were part of the group. In short, the report is vastly complicated and untethered from the substantial body of work that has been gathered over many decades in this field.
How to measure a good life — tips for moving beyond GDP
The framework for the transition aims to cover all bases of well-being — including health, education and ‘subjective well-being’. It rests on three foundations (peace, respect for the planet and human rights). But it fails to recognize the core dependence of human needs on nature. And because it isn’t firmly grounded in economic and ecological sciences, the proposal lacks robustness and credibility.
Without solid backing from environmental economists, the UN will struggle to provide an authoritative pathway to move governments beyond GDP.
I have worked on such alternative measures for three decades. I agree that GDP, which focuses on markets, provides a useful statement on the level of economic activities in a nation. But it is unable to factor in contributions from nature, including the value of a stable climate or accessibility of clean air and water. GDP omits aspects of human capital, such as people’s health, skills, knowledge and cultural practices. Therefore, decisions based solely on GDP can be misguided because they consider only part of the picture.
Heatwaves, droughts and floods, land degradation, species extinction and pollution all undermine human well-being. Any measure of sustainability must assess and account for changes in natural resources. Destroying them to manufacture goods and produce services will hamper, not boost, growth and prosperity.
Beyond growth — why we need to agree on an alternative to GDP now
Instead, I and many environmental economists would like to see governments assess ‘inclusive wealth’. This includes human and natural capital as well as the manufactured capital that falls under GDP. It includes infrastructure, the ability of a country’s population to be productive, and both renewable and non-renewable natural assets. Assigning monetary value to these three types of capital (human, natural and manufactured) provides an estimate of inclusive wealth, which is more representative of the health of a society than is income alone. Economists know how to calculate inclusive wealth. But it remains to be integrated into the UN System of National Accounts, which is used by most governments. Several countries, including the United Kingdom, Canada and Pakistan, have already started calculating their wealth including natural capital.