dependent on the natural environment would have reduced the country’s
growth rate from an average of 7 per cent to only 4 per cent. However, there is
no easy way of undertaking environmental accounting. How should we value
the depletion of oil or fish stocks? How should we value the preservation of a
beautiful view or the preservation of unspoilt wilderness? Using GDP growth
as a measure of change also fails to consider the sustainability of that growth.
Sustainability has been considered either in general environmental terms (such
as energy-intensive growth closely linked to greenhouse gas emissions) or
more narrowly economic terms (such as the debt-fuelled growth of Mexico in
the 1970s that stalled in the 1980s when it became time to start repaying that
debt). GDP accounting makes no distinction between $1 spent on a hamburger
or $1 spent on medical care, environmental protection, education or invest-
ment in infrastructure.
GDP growth also tells us nothing about distribution: whether growth is
enriching a broad cross-section of the population or is limited to certain
classes,regions or urban areas. We noted in the Introduction that between 1973
and 2010 average incomes of 99 per cent of the US population actually fell; the
steady growth in GDP over these decades went to enriching the top 1 per cent
of the population. In the US the proportion of adult women in paid employ-
ment increased from 33 per cent in 1948 to 62 per cent in 1992. The average
number of hours worked in the US increased from 859 per year in 1950 to 931
in 1996. This indicates that much of the GDP growth in the US over these years
reflected more labour inputs (so less leisure) so we should be careful when
drawing conclusions about the likely welfare implications of GDP growth and
higher incomes. Measures of GDP growth do not distinguish between inten-
sive growth (based on longer hours and more working people using a greater
quantity of land and raw materials) and extensive growth (based on higher
productivity per worker or using environmental resources more sustainably). It
is difficult to estimate the size of the illegal or black economy, which has been
estimated at 50–60 per cent of the total in India and even 15 per cent in devel-
oped Italy.
A more encompassing idea of change than GDP growth is suggested by
Amartya Sen in Development as Freedom (1999); here development is defined
as the ‘process of expanding the real freedoms that people enjoy’. What is ulti-
mately important, according to Sen, is that people have the freedoms or valu-
able opportunities (he calls them capabilities) to lead the kind of lives they
want to, for example, being nourished, being able to travel, or taking part in
political discussions. Sen states that there is only an indirect and uncertain link
between GDP growth and freedom. For example, a woman in a patriarchal
society may find it harder to convert income into the ability to travel outside the
household or a sick person may require more income to live a normal life due
to the extra need for medical services. Capabilities should not be measured by
outcomes (number of apples consumed) but by the opportunity to choose
(between apples and oranges). This makes the concept difficult to operational-
ize. How do we measure and aggregate the benefits of the choice actually made
Thinking about Growth 27