Updated: December 30, 2014 12:00:22 am
The final moments of a dying year are always rife with prediction, and especially this year, when some interesting moments in the global economy, in both recovery and collapse, have occurred towards the end. Both the Russian rouble and oil prices have had a dramatic fall. India’s economy is set to grow at over 5 per cent next year, and China’s economy is now bigger than the US’s (according to the IMF). Both markets and planners are reviewing performances to make declarations for 2015 — all centred on “growth” — the rise and fall of national GDP.
A joint United Nations Environment Programme (UNEP) and UN University’s International Human Dimensions Programme on Global Environmental Change (UNU-IHDP) report released this month makes an interjection to these deliberations by revealing that GDP, in fact, does not account for most (82 per cent) of a nation’s productive base. It goes on to claim that when we add to GDP the real indicators of a country’s wealth — natural and human resources, and take into account climate change, oil price fluctuations, and total factor productivity — more than half the world can’t afford the path of development it is currently on.
In other words, more than half of our world can’t possibly sustain the growth it is currently experiencing. Getting rich is making us poorer. The Inclusive Wealth Report (IWR), which was first introduced at the Rio+20 conference, expanded to 140 countries for its 2014 edition. It studied the trajectories of these countries from 1992 to 2010, on both GDP and inclusive wealth (GDP + natural and human capital, including forest and subsoil resources, ecosystems, education, skills, and abilities). The gap is much larger than we imagined.
In that 19-year period, global GDP grew by 50 per cent, and inclusive wealth by only 6 per cent. Incidentally, significant progress was also made by these countries on the Human Development Index (135 of 140 countries made improvements in human development).
The seismic shift set to occur in 2015 has been in the making for a few years now: the shift of the UN’s agenda from the Millennium Development Goals to the Sustainable Development Goals, possibly indicating that sustainability will be the buzzword to watch out for in future. Sustainable development, put very simply, introduces another dimension to the discourse on growth and development — time. If a certain form of development can be pursued in the future, it is sustainable. Unlike ethical interventions, such as human development and national happiness indices, sustainability focuses on the durability of development rather than distribution and satisfaction. In this sense, it falls well within the utilitarian logic of anthropocentric development — focused on growth and prosperity. Sustainability, measured through indices like inclusive wealth, tries to ascertain not only whether we are growing now, but whether we can continue to do so in the long term. The report isn’t just a warning for the global economy, it offers policy advice. In the findings of the IWR, there is a formula for sustainability, and it lies in the following.
One, investments in education. Human capital, at 57 per cent, constitutes the biggest source of a country’s wealth, and has only grown 8 per cent between 1992 and 2010. We knew intuitively that investing in education was good for development, and now we have a number to demonstrate exactly how good. Education and skill improvement, the latter now a major thrust for countries like India under Prime Minister Narendra Modi’s initiative, enhance the abilities of an existing resource — human beings. It allows them to do more with existing resources, and therefore create more opportunities for the future. The global economy, in 2015, has to renew its commitment to education and skill enhancement to put itself back on the path of sustainability.
Two, innovation and creativity. Once again, the key to sustainability will be our ability to do more with less. An emphasis on innovation will unlock the potential for countries and businesses to use natural resources and infrastructure in more cost-effective ways, and possibly guarantee a longer future of prosperity.
Three, natural capital. Natural resources constitute 23 per cent of our wealth, and have performed more badly than the rest, with a decline of 30 per cent. Our paths of development are resource-heavy, often dependent on non-renewable resources. The conservation of forests and ecosystems is no longer a question of ethics, but possibly the survival of the Anthropocene itself.
Sustainable development will require a revision of our systems of national accounts, not in supplementary ways through happiness indices, but more fundamentally. GDP, which currently forms the core and focus of national accounts, is useful, but it tells us nothing about the future, and even less about wellbeing and opportunity. But it continues to be the way we govern our nations and the way we frame our political rhetoric, especially during the financial festivities of the New Year. A country needs accounting systems that can tell its governments about production and income through GDP, but also about the resource base that GDP comes from — human and natural capital, to give us a clean shot at planning the future with precision.
Indices like inclusive wealth are not about the ethics of wellbeing, but about a country’s opportunities. Strangely, the things they tell us that we need to take care of for the future, seem to also make present development more inclusive and equitable. It turns out that long-term sustainability needs investments in the same things the ethical schools of development have talked about for years — protecting the environment, combating climate change, investing in schools and skills, and enhancing capabilities. Surprisingly, “think of the children” and “think of the rain forests” are exactly the mottos that will sustain our GDPs and financial systems.
Investing in innovation and education will not only make countries more sustainable in the long term as they are, but give more people the opportunity to participate in development and prosperity. There are new resource wars at play in old battlefields, and young people everywhere want more from their futures than just more of the same. A new climate change agreement is due to be signed in December 2015 in Paris, and the UN General Assembly will set the new Sustainable Development Goals in September. The next year isn’t just another new year. It is an opportunity to change the way we think, the way we study economics and the ways we measure progress.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.