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How are we doing, really? - 08/09/2009

Coins lying on financial section of newspaper ©EC

EU seeks new tools for measuring economic performance that give more weight to social and environmental aspects of wellbeing.

After decades of measuring performance in terms of economic indicators like gross domestic product (GDP), the commission is planning a new approach to the way the EU evaluates economic progress. A concept that grew out of the Great Depression, GDP refers to the value of all goods and services produced or provided by a country in any given year. Although a good measure of production, it has serious shortcomings as a gauge of overall welfare.

The problem is that GDP encompasses all economic activities, even those that damage the environment and harm people. Wars and natural disasters, for example, end up being positive for the economy because of the growth spawned by reconstruction efforts.

Nor does GDP give any indication of how a nation’s wealth is distributed. In many countries with a relatively high national product, the gaps between rich and poor are disturbingly wide.

People are increasingly realising that quality of growth is as important as quantity. According to a recent survey, more than two thirds of Europeans believe governments should give more weight to social and environmental aspects of wellbeing. The question is how to measure these.

The commission intends to develop a comprehensive environmental index covering climate change, biodiversity, air pollution, water use, and waste. It also stresses the need for more accurate information on economic disparities. Efforts will be stepped up to improve the timeliness of data and to identify thresholds for key pollutants and renewable resources.

More on alternatives to GDP

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