These countries are looking beyond GDP and economic growth

LONDON – For a small but growing network of countries, the measure of the world’s economic health is no longer fit for purpose.

Finland, Iceland, Scotland, Wales and New Zealand, which are predominantly led by women, are all members of the Welfare Economy Governments Partnership. The coalition, which is expected to expand in the coming months, aims to transform economies around the world to ensure shared prosperity for people and the planet by 2040.

This means abandoning the idea that percentage change in GDP is a good indicator of progress, and instead reframing economic policies to provide a quality of life for all people in harmony with the environment.

“The need for a new economic model has never been clearer,” Scottish First Minister Nicola Sturgeon told CNBC. I think that is why we are seeing such a growing interest in the welfare economics approach, both in Scotland and around the world.

Encouraging other policymakers to consider a welfare-centered economic approach, Sturgeon said: “Multiple global crises, such as the climate emergency, biodiversity loss and the cost of living crisis, are “raising fundamental questions about our value and our economies. he does. are actually for.”

Sturgeon said: “Building a welfare economy is a huge challenge for any country at any time, and the current crises we are facing make it even harder – but they also underline why this transformation needs to happen urgently. to give.” We have made some progress in the last five years, but we still have more to do.

Just in the past few months, New Zealand released its first national well-being report. The European Union recognized the need to change the economy towards welfare. and the World Health Organization launched an initiative that calls for well-being to be at the heart of economic recovery.

Australia, Canada and Costa Rica are among the countries that have been closely involved in recent months with welfare economics governments, and “post-growth” advocates believe it’s only a matter of time before more countries embrace the welfare movement. . A post-growth society is one that resists the demand for constant economic growth.

Dominic Stephens, the Treasury’s chief economic adviser in New Zealand, hailed the country’s first welfare report as a “landmark moment” and said it aims to give lawmakers a big picture of what life is like in the South Pacific nation. .

“We want to look beyond GDP to understand progress, but we don’t have a single measure of well-being — so we have to look at a range of indicators and evidence to understand progress in that broader sense,” Stephens told CNBC. .

“It helps us all understand where New Zealand is doing well, where we are lagging behind and how well-being is different for different people in our country.”

Among the findings released on November 24, the report shows a wide and growing gap between the well-being of older citizens and younger citizens, with older citizens doing better on a range of measures.

Treasury identified three priority areas that need improvement: mental health; Achievement; and the price and quality of housing.

Stephens said that while the report would not be the final word, it was now up to New Zealanders to decide how concerned they were about these issues and what steps needed to be taken to address them.

“We don’t have any tips in New Zealand on how to do a good welfare report,” Stephens said. Different countries have adopted different approaches.

“More countries trying different approaches to integrating welfare analysis into policy means more opportunities for New Zealand and other countries to learn from others’ experiences,” he added.

The gathering momentum of the transformation of the current economic system comes half a century after the publication of the groundbreaking report “Limits to Growth” by the Club of Rome think tank.

The 1972 book warned that the planet’s resources would not be able to support exponential rates of economic and population growth and would therefore collapse before the end of the century. By and large—and after the backlash to its dire predictions at the time—the world has followed the path the book’s authors predicted.

Academics and economists told CNBC that an ultimatum from top climate scientists on the dangers of more than 1.5 degrees Celsius of global warming — the crucial temperature threshold beyond which dangerous tipping points are more likely — underscores the need to end the world’s obsession with growth. emphasizes All expenses

“If they didn’t realize 50 years ago that we had to move already, I think it’s time now because we’re facing a multiple crisis,” said Sandrine Dixon-DeClio, president of the Club of Rome think tank. CNBC by phone.

The term “multiple crises” refers to crises that occur in several global systems and are intertwined in such a way that they cause more damage than the sum of those crises.

“Not only is our planet sick because of our continued growth scenarios because we’ve gone beyond the healthy use of natural resources, but our people are getting sicker and our young people are getting less and less money,” Dixon-DeClou said.

When asked if this meant she believed there was no alternative to a welfare strategy, Dixon-DeCloe replied: “Yes, absolutely. I often say that we need to move away from power, profit and patriarchy towards the people. , planet and prosperity to change course.”

US Senator Robert F. Kennedy once said that a country’s GDP measures everything “except what makes life worthwhile.”

Critics of GDP, which measures the total value of goods and services over a period of time, argue that the index is misleading because it measures the “good, the bad and the ugly” of economic activity and calls it all good.

For example, GDP does not take into account unpaid work and does not distinguish between economic activity that positively or negatively contributes to the health and well-being of people and the natural environment.

In Britain, Rishi Sunak, in his first speech as prime minister, said his predecessor Liz Truss was not wrong to want to improve economic growth in the country. “It’s a noble cause,” Sunak said outside Downing Street on October 25.

Three months earlier, opposition Labor leader Keir Starmer said Britain needed three things to fix its broken social contract. “Growth. Growth. And Growth.”

“I think it just shows the weakness of our imagination,” said Catherine Terbek, co-founder of the Prosperity Economics Alliance, a network of academics, businesses and social movements. “We can’t even imagine the economy as better than growth.” do.”

The best we can do is to attach some nice adjectives to growth—sustainable growth, green growth, inclusive growth, shared growth—but we’re hardly allowed to entertain the prospect that the growing economy is a 20th-century recipe. do.” he added.

“High-income countries have got enough overall, but there are deep, deep inequalities among the richest countries. So, what they have to do is figure out how to share those resources and use them,” Terbek said. cherish.”

“I use the phrase that they have to recognize that they have come in. The work of growth is done and they have to go now to the second project which is about their homesteading.”

Trebek described welfare economics as a “picnic term” that encompasses movements such as “degrowth,” “doughnut” economics, or circular and regenerative models rather than an alternative policy.

“I think there is a deep moral obligation [on high-income countries] Because they take up more than their ecological fair share, Trebek said, which implies that countries around the world that don’t have enough to meet the basic material needs of their citizens will effectively stay there.

“It’s really about how do we live on this finite planet?

The effort to look beyond economic growth comes at a time when calls for an end to fossil fuel production have grown worldwide.

“Essentially, by committing to growth, you commit to using more energy and materials, which in turn has environmental impacts — and makes decarbonization harder,” Julia Steinberger, an environmental economist at the University of Lausanne, told CNBC by phone.

What you have to do to decarbonize is stop using all fossil fuels and replace energy demand with renewable or low carbon or zero energy sources, and that’s harder to do. [and] “If we have growing energy demand, it will take longer,” Steinberger said.

The South Pacific island nation of Tuvalu last month became the first country to use the annual UN climate summit to push for a fossil fuel ban treaty. The European Parliament, the Vatican and the WHO have all supported the proposal.

But only a handful of small countries have endorsed the initiative to date, and the fossil fuel industry has typically sought to emphasize the importance of energy security in the planned transition to renewables.

The burning of fossil fuels – such as coal, oil and gas – is the main cause of the climate emergency.

UN Secretary-General Antonio Guterres also recently joined a group of voices calling for the removal of GDP as the world’s main indicator of economic growth and instead pushing policymakers to shift towards a circular economy.

It refers to an economic system based on the reuse and repair of materials to extend the life cycle of products, moving away from the current global model of “take, make, throw away”.

“We must change course now and end our senseless and suicidal war against nature,” Guterres told a major international environmental meeting in early June.

“We must place real value on the environment and move beyond gross domestic product as a measure of human progress and well-being,” Guterres said. “Let’s not forget that when we destroy a forest, we create GDP. When we overfish, we create GDP. GDP is not a way to measure wealth in the current world.”