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Going “beyond GDP”: the search for new ways of measuring the world

As long as the world is only measured by GDP, environmental disasters will remain useful events. But new prosperity indicators are now being developed to try and put that right.

The goal of sustainable development presents policy with a crucial problem: although pretty well everyone is now in agreement that the Earth’s resources are not inexhaustible, policy still has to be measured by Gross Domestic Product (GDP) alone, and doesn’t take account of sustainability. As a result, increased demand for domestic flights contributes to an increase in GDP in the same way as the removal of damage caused by natural disasters.

So not great preconditions for boosting sustainability policy. So what is closer than replacing GDP with more suitable indicators?

Abandoning traditional measuring methods 

In fact, as former EU Commissioner Franz Fischler explained in his speech at this year’s presentation of the Sustainability Awards, “we will probably – I would go so far as to say certainly – have to abandon the ways we have traditionally measured economic growth.” In a year when Karl Schwab, inventor of the Forum in Davos, has demanded that we have to answer the question of what comes after capitalism, this question is closely linked to how we can express and measure wealth, or hopefully even greater quality of life, in the future.”

We are already taking initial steps towards doing so. Former French President Nikolas Sarkozy, for example, has entrusted a commission of experts with the search for new measurement methods. One of those who has played a key role in the commission is Joseph E. Stiglitz, winner of the Nobel Prize for Economics. The European Commission has also published a report on the subject meaningfully entitled “Beyond GDP”. As Forum Alpbach President Franz Fischler has said, however, “All these papers are still only meant as proposals, as a final concept isn’t yet in place.”

Measuring Gross Domestic Happiness in Bhutan

Bhutan has already moved a step further down the road towards defining a new measurement method. The endeavour to increase “Gross Domestic Happiness” has even been fixed in the Constitution there. Amongst other things, the four pillars of Gross Domestic Happiness include supporting socially justified social and economic development, and protecting the environment. But can indicators of this kind really contribute anything to sustainable development?

“I think developing such an indicator is an extremely clever idea, because societies are systems, which cannot simply manage themselves,” says environmental historian Verena Winiwarter. “You can only manage if you have an overview of the ‘Actual state’. First you have to know this, and then define the ‘Target state’. Only when you have both of these can you describe the path from Actual to Target.”

It would be equally clever, however – if not cleverer – not to measure Gross Domestic Happiness, but to place the physical economy alongside the monetary economy, Verena Winiwarter believes. Such a system would pose the following core question: “How much nature do we consume? Numerous different indicators have been developed in recent years, including the ecological footprint.”

Marina Fischer-Kowalski, founder and manager of the Institute for Social Ecology at the University of Klagenfurt, also thinks developing alternative measurement methods is a good idea: “You certainly need to show that purchasing power is not the only thing that moves people, and that on the contrary, after you reach a certain level of income, increasing purchasing power is actually pretty meaningless for people’s well-being. And that’s been empirically proven.”

She points out, however, that the effectiveness of GDP in real life doesn’t limit its status as an indicator: “GDP does measure economic activity, and an increase in economic activity in one area triggers an increase in economic activity in others. As such, it’s part of a ‘feedback mechanism’ that keeps countless numbers of things moving, even if it may be completely idiotic, and in borderline cases describe nothing more than the increase in the consumption of washing powder and advertising of washing powder.”

Despite this, GDP is effective as a systematic mechanism – by contrast with an indicator of happiness, according to Marina Fischer-Kowalski: “An indicator of happiness does not show a systemic mechanism. When all the people are happy, that’s all well and good, but nothing happens as a result.”

What would be desirable would be to develop new measurement indicators once and for all. But we certainly shouldn’t be expecting any miracles of them just yet.