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by: Rutger Hoekstra

Gross Domestic Product (GDP), the way we measure economic growth, has become the primary measure of success of societies. Countries that have a high GDP are considered important and governments that experience high economic growth are admired. As a result, there is a dominant narrative in society that “growth is good”.

But we have known for many decades that this narrative is flawed and that GDP is not a comprehensive measure of success. It does not measure important components of wellbeing such as health, education and social relationships. As far back as 1968, Robert Kennedy already proclaimed that GDP “measures everything….. except that which makes life worthwhile”.

Crucially, GDP also does not account for the growth in environmental degradation or growth in inequalities that are caused by growth in GDP.

To remedy this gap, many hundreds of alternatives for measuring economic success have been suggested: the Human Development Index, Sustainable Development Goals (SDGs), Genuine Progress Indicator, Ecological Footprint, Happy Planet Index, Adjusted Net Savings, Comprehensive Wealth, and the Inclusive Wealth Index. Many brilliant scientists, thought leaders and important institutes have contributed to this impressive body of research, which is foundational to the creation of a Wellbeing Economy, an economy that delivers social justice on a healthy planet.

Yet, despite 50 years of understanding the drawbacks of  GDP and the introduction of hundreds of alternative ‘Beyond-GDP’ measures of economic success, it seems that the “growth is good” economic narrative is becoming stronger every day. But now,  more than ever before, we need our economy and society to focus on delivering wellbeing, sustainability, and equity. The election of Joe Biden, the introduction of climate targets in China and Europe, marches for racial justice and climate action are all signs of  the dire need and public demand to ‘Build Back Better’ after the COVID-19 pandemic. There has never been  a better time to replace the growth narrative. WEAll’s  new briefing paper describes a three-pronged strategy which should be adopted to do just that:

1) Harmonise. There are simply too many Beyond-GDP alternatives and new ones are being created every month. One of the most powerful features of GDP is that it is measured in the same way all over the world. The United Nations and OECD played a crucial role in developing a global economic accounting framework: the System of National Accounts, which allows for the global comparison of GDP. We need the United Nations and other international institutions to step up and help harmonise Beyond-GDP indicators to ensure there are consistent measures of success for the performance of a Wellbeing Economy.

2) Develop Policy Tools. Statistics help us to measure how things have developed in the past. But policy makers also need advice about their policy options in the future. Macro-economists have developed many tools to help inform difficult policy decisions, mainly focused on GDP growth. This community needs to create tools which show governments how to enhance wellbeing, sustainability and equity in their societies. A prime example of such a tool is New Zealand’s pioneering Wellbeing Budget that is designed expressly to prioritise the wellbeing of citizens.   

3) Change the Social Narrative. This strategy will only be successful if it manages to change societal discourse on economic success. Currently, our media plays a key role in spreading the “growth is good” economic narrative. The development of globally harmonised statistics and policy tools will help journalists and the general public to shift their belief on economic success to a narrative which values wellbeing, sustainability, and equity. If you would like to learn more about these ideas, download and share our new paper here.

Webinar Recording is below:

Download the Measuring the Wellbeing Economy Briefing Paper PDF

By Rebecca Humphries, Senior Public Affairs Officer at WWF European Policy Office

WWF is one of the world’s largest and most experienced independent conservation organisations, with over five million supporters and a global network active in more than 100 countries. The European Policy Office contributes to the achievement of WWF’s global mission by leading the WWF network to shape EU policies impacting on the European and global environment.

Before it’s even over, 2020 is already a year like no other. It has been marred by an unprecedented crisis caused by the COVID-19 pandemic, affecting people’s health, livelihoods, and social connections, with no end currently in sight.

Governments across the world have adopted measures to address the economic fallout of the crisis. In the EU, leaders have subscribed to calls for a ‘green recovery’ – but already there are signs that short-term economic interests are being prioritised over longer term considerations of environmental and social sustainability. This crisis has arrived at a time where we are facing an ecological crisis without precedent: runaway climate change and biodiversity loss are driving us towards a sixth mass extinction.

The wrong choices could have catastrophic implications for future generations: propping up destructive sectors such as fossil fuel energy or intensive agriculture with public funding could lock in investments for decades to come, making it all the more difficult to tackle the ecological crisis we’re facing.

That’s why WWF believes that now is the time for a paradigm shift, to take the EU on a different trajectory. Our new report ‘Towards an EU Wellbeing Economy – a fairer, more sustainable Europe post Covid-19’ calls on EU leaders to rethink what to prioritise and how to measure progress. With GDP growth as the only basis for political decision-making, policy-makers will inevitably miss what their citizens value most, such as our quality of life, wellbeing, health, and the health of our natural world. GDP growth fails to account for social inequalities and neglects the many benefits of thriving nature and a healthy society – new indicators that measure these important aspects would help leaders to better value our societies’ and our planet’s wellbeing.

There are already promising first signs of a paradigm shift: last year, EU Member States supported calls for ‘the economy of wellbeing’, tentatively following in the footsteps of countries such as New-Zealand, Iceland, Scotland and Wales, which are already working on implementing a wellbeing economy by integrating alternative measures into their decision-making, budgetary processes and economic policies. Just last month, the European Commission recognised that the health crisis had ‘reignited the debate on what kind of economic growth is desirable, what actually matters for human wellbeing in a world of finite resources and on the need for new metrics to measure progress beyond GDP growth’.

Now, we must ensure that the EU goes beyond words on paper. With this report, WWF is calling for a new framework for measuring progress, built on a shared commitment across the EU to shift to a wellbeing economy. The UN Sustainable Development Goals (SDGs), already provide a comprehensive, integrated and universal framework that aims to leave no one behind and to achieve prosperity for people and planet. By stepping up its efforts to fully implement the SDGs, the EU now has an opportunity to achieve this shift and deliver on its promises of a green, just, and socially inclusive recovery.