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"As world leaders meet for the Rio+20 summit in Brazil"
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"As world leaders meet for the Rio+20 summit in Brazil"

Grant DuthieGross domestic product (GDP) as a measure of national progress is woefully inadequate. As Grant Duthie, 18, a Commonwealth Correspondent from Brisbane, reports, it fails to consider the planet’s ecological limits and long-term sustainability.

As world leaders meet for the Rio+20 summit in Brazil, UNEP executive director Achim Steiner has called on the world to begin its transition to “green growth”.

While this is an appropriate call given the finite resource limits of our world, it is however structurally unreachable with our current economic growth models.

After recently finishing a book by Sydney Morning Herald economics editor Ross Gittins, entitled the The Happy Economist, I am once again reminded of the structural instability of gross domestic product (GDP) as a measure of our societal wellbeing.

Gittens’ book provides an insightful exploration of how the study of economics departed from a measure of utility or happiness and optimal decisions to a relentless pursuit of growth. Describing this divergent study of psychology and economics, he uses David James’ quote describing economics as “the science of human behaviour that manages with scientific precision to avoid any understanding of humans.”

Fundamentally, nonsensical GDP attempts to account for our wellbeing and success by linking increasing wealth as a measure of our satisfaction. Yet prominent psychologist Bob Cummins from Deakin University points out an ostensible trend in his Australian Unity Wellbeing Index linking increasing wealth with diminishing marginal utility or declining satisfaction.

This is one of the many structural instabilities of GDP and has created a significant impetus for excess materialism and consumption as a way of improved societal wellbeing.

Where the fault line becomes even more frightening is when we begin to look at the resources required to meet consumption demand by more than four billion individuals in rising income countries like India and China.

The ecological nightmare is pervasive as our planet can only has a finite level of resources before our consumption and waste output damages our ecosystems and support structures.

The measurement of GDP fails to take in to consideration these ecological limits and the affect on long-term sustainability of economic growth.  The damage done by pollution or using up non-renewable resources is shown as improvements to our standards of living.

In addition to these effects, GDP also fails to measure the benefits of leisure to our workforce and society, rather viewing them as a loss to GDP and therefore our wellbeing. Current economic models also incorporate ‘defensive expenditure’ such as military, waste disposal and crime spending as improvements to our wellbeing.

Income and wealth distribution is vaguely accounted for in per capita measures and is rarely an accurate measure when you compare it to the Gini Coefficient of income equality. So, since the measure is so deceptive in its accuracy why then do international institutions continue to support it?

I would be inclined to put it down to the magnitude of GDP’s bias that economists and world leaders have little idea of how to effectively construct another measure. GDP also carries power; it allows the P-5 nations on the security council to sustain their world influence and domination.

Reform is important and perhaps the first necessary step at global environmental talks.

The first change needed is to acknowledge the validity of currently published United Nations sustainability indexes and to begin using triple bottom line reporting to assist in removing the bias in GDP figures.

Without incorporating appropriate limits into the calculation, I fear talks could carry on for decades without progress and, as many know, time is not on our side.

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About me:

“I’m currently studying Economics and Behavioural Science at Queensland University of Technology in Brisbane. Through my concern for the environment and international affairs I’ve had opportunities to work with Polar Bears International in Canada and UN Youth Australia.

“Both experiences have led to a newfound interest in understanding the role economics plays in evaluating environmental decisions, human behaviour and societal development.”

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Opinions expressed in this article are those of the author and do not necessarily represent the views of the Commonwealth Youth Programme. Articles are published in a spirit of dialogue, respect and understanding. If you disagree, why not submit a response?

To learn more about becoming a Commonwealth Correspondent please visit: http://www.yourcommonwealth.org/submit-articles/commonwealthcorrespondents/

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