JULY 2019 l PARlIAMENTARIAN 19realistic measure of a nation’s quality
of life. As a website claimed, “The
relationship between GDP and GPI
mimics the relationship between the
gross profit and net profit of a
compa ny.”
A website explains how the GPI
formula works. “GDP increases twice
when pollution is created – once upon
creation (as a side-effect of some
valuable process) and again when the
pollution is cleaned up. By contrast,
GPI counts the initial pollution, as a
loss rather than a gain, generally equal
to the amount it will cost to clean up
later plus cost of any negative impact
the pollution will have in the
meantime. Quantifying costs and
benefits of these environmental and
social externalities is indeed a difficult
task.” One of the biggest impacts of
economic growth, if it is positive, is
lower inequality, both economic and
social, within a nation or society.
However, GDP fails to capture the
effects of growing, and yawning, gaps
between the rich and poor in
practically every country. In the last
several decades, even in rich and
developed nations, most of the GDP
gains went to the top 1 per cent
earners, as the incomes of the
remaining 99 per cent stagnated. In
such a scenario, a high GDP, or
double-digit GDP growth rate, is
irrelevant.other institutions that serve the
various needs of the society; and
cultural traits that are both specific
and widespread.
Obviously, these cannot be
quantified, but they form an integral
and inherent part of a nation,
household, and individual’s wellbeing
and happiness.
This is why multilateral institutions
now think in terms of indicators that
can capture the state of the nation and
globe in a better manner, with all the
nuances. The UN HDI, for instance,
“includes measures of health, wealth,
and education”.
Hence, it is more broadly based
than the GDP, which covers only
economic activities, and that too
partly. The Happy Planet Index
captures a nation’s quality of life with
measures of “happiness, life
expectancy at birth, the degree of
inequality across society, and the
ecological footprint”.
Even the GDP formula was tweaked
into Genuine Progress Indicator
(GPI). Although this too focuses on
output, it includes both the additions
and subtractions. Hence, the “cost of
negative effects related to... crime,
environmental degradation, resource
depletion, and the costs of climate
change” are subtracted from the
overall value addition to the economy.
Thus, it provides a more accurate andthe United States.
Given such resource degradation,
coupled with the negative impact on
climate change and greenhouse effect,
we have destroyed the ecosystem’s
abilities to endure in the future.
Hence, GDP and sustainability have
to be thought of as interlinked and
enmeshed. If the former negatively
affects the latter, it “diminishes the
quality of life of the nation’s
households over time”. It reduces the
overall prosperity. The same will be
true of activities that create negative
values for a society – think of air and
other forms of pollution.
Another aspect that is grossly
overlooked when we look at a nation,
purely through a restricted economic
(market-related) lens, is social capital.
Built over centuries, even thousands
of years for certain communities, this
includes the formal and informal
networks between individuals and
societies; the democratic, liberal, and
We tend to think of the real
economy in terms of the market
economy – the goods and services that
are deliberately produced every year. But
let’s take a few steps back, and look around
us. As the article on WEF website stated,
“The real economy includes our natural
capital assets – all of the gifts from nature