Reforming Gross Domestic Product

Current definitions and measures of progress and development, such as Gross National or Domestic Product, are known to be both inadequate as measures of welfare and for taking into account the destruction of the ecosphere. They can give skewed signals to the markets by externalizing costs such as pollution, resource depletion, human suffering [etc]. Additional measures and accounting systems, addressing full social and environmental costs and benefits, need to be included and integrated into financial systems of accounts. Accounts should increasingly reflect true wealth. The concepts of progress and development should be decoupled from growth and profits, recognizing that people do not exist for the market, the market exists for the people. Evidence of the ways growth simply for the sake of growth can be destructive to communities and societies needs to be made available and factored into social and economic policy decisions.

Nordhaus and Tobin introduced the [Measure of Economic Welfare] (MEW) in 1974 to prove the adequacy of the GDP as a surrogate. This seemed justified by the then available data. However, divergence of the two measures observed since the mid 1970s has encouraged the development of other measures, the [Index of Sustainable Economic Welfare] (ISEW) and the [Genuine Progress Indicator] (GPI). Using these calculations, which include some of the missing factors in the GDP-measures, the current economic and resource crisis is clearly manifest. GPI figures show that the factors of welfare mentioned are either levelling off or have been on the decline in countries so far examined, such as the USA, UK, Denmark, Austria and the Netherlands.