Inadequacy of economic accounting systems
- Excessive reliance on economic indicators of human development
- Inadequacy of GNP statistics
- Misleading Gross National Product index
- Inaccurate economic growth measures
- Reliance on GDP as measure of human progress
- Inappropriate application of Gross Domestic Product
Nature
Traditional and economic accounting systems for national accounts do not place value on natural assets, both ecological and human, and do not have indicators which directly take into account environmental and social factors, such as ecosystem health, literacy rates, personal safety, infant mortality, wealth distribution, human rights, religious freedom, the free flow of information and democratic participation.
Background
Gross Domestic Product (GDP) is the sum of all incomes derived from the current production of goods and services earned in the economic territory, wherever the earner of the income may reside. Gross National Product (GNP) is the sum of all incomes earned by the citizens of the state. Some of this income arises from abroad, but none of it accrues to non-residents. Natural resource accounts show stocks, flows, inputs, outputs and balances for natural resources, such as water, minerals or forests. These may be in physical terms or converted to monetary values. They can be used to help in the management of natural resources.
Incidence
Because GNP is actually boosted by money spent on pollution clean-up, rehabilitation of drug addicts, control of soil erosion, and the like, the productivity of countries with remedial rather than preventative programmes for social and environmental care is actually boosted. Hidden social costs are built up, which also increase with such social ills as pollution and crime. This will then increase the need for further remedial social services and a subsequent round of deficit spending.
Claim
National accounts, particularly the concepts of gross national product or gross domestic product, provide an incomplete and often misleading record of economic performance, especially of welfare, between countries and over time. Much greater weight needs to be given to other measures of performance of a society, to employment, to the distribution of income and wealth, to indicators of social conditions, of education, of health, and of housing. Recently in developed countries, the costs of high rates of material progress have been publicized in terms of pollution, environmental damage and the unpleasant aspects of a modern urbanized and motorized society.
GDP growth has been sold to us as the only way to create a better world. But we now have robust evidence that it doesn’t make us any happier, it doesn’t reduce poverty, and its externalities produce all sorts of social ills: debt, overwork, inequality, and climate change. We need to abandon GDP growth as our primary measure of progress, and we need to do this immediately
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SDG
