Towards Sustainable Development: Calculating the Real Economy

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In last week’s edition “Beyond GDP: The Making of a Sustainable Economy”, we mentioned that the application of GDP for the purpose of maximising and measuring economic performance is incompatible with the concept of Sustainable Development, which takes into consideration the real economy. The real economy is the overall societal well-being of the vast majority of people in a country. It includes the natural capital assets – all of the gifts from nature that we do not have to produce, which provide ecosystem services such as climate control, water supply, storm protection, pollination and recreation (Australian National University, 2014). These services are estimated to contribute significantly to the wellbeing of human beings.

Unfortunately, because GDP has become ‘a one-sided’ measure of progress, the true costs of the more corrosive outcomes of growth are constantly hidden. Social costs such as the cost of inequality is often neglected within contemporary economic models. Hence, despite higher incomes from economic growth, people remain less happy. For instance, even though the Annual GDP Growth Rate in Nigeria reached an all-time high of 19.17 percent in 2004 against the average 3.99 percent from 1982 until 2016, it has yielded minimal impact on the socio-economic wellbeing of Nigerians. This is also a common theme in most developed nations, where growth-fuelled capitalism is now driving unprecedented levels of stress, debt, insecurity, unhappiness and mental illness, whilst at the same time destroying the very things that actually do increase human wellbeing such as communities, family life, neighbourhoods and relationships.

Other developing nations such as India and Brazil are not far behind in the same calamitous path of materialistic addiction. According to the latest World Bank figures, India and Brazil are among top 10 biggest economies in the world yet the percentages of their population living below poverty line are 29.8 and 21.4 respectively. This is beyond the poverty rate of Switzerland and France, which stand at 7.6 and 7.9 respectively, even though their annual GDP figures are lower than those of India and Brazil.

A sustainable society therefore focuses on the current and future wellbeing of its citizens and the environment and not the materialistic addiction of GDP. It assures its citizens equality, freedom and healthy standards of living.

Faced with this economic complexity, now is the time for a decisive action towards a ‘big shift’ to a people and climate oriented development/economic growth in Nigeria. The sustainable development approach is the answer to a more inclusive and collaborative growth that is capable of ending extreme poverty, fight inequality and injustice, and tackle climate change in Nigeria, as well as in other developing nations.

Consequently, the move towards sustainable development in Nigeria may not be to replace the current economic measuring tool – the GDP. Instead, the country needs to adopt a dashboard of indicators that deliver:

  • A more inclusive and proactive analysis of true Nigerian economic performance that calculate consequences of all economic activities affecting the sustainability of the society and natural capital assets, but are not being reflected in the current market prices;
  • An adjusted national accounting system with current and future wellbeing indicators that report on wealth distribution, human health, education level, quality of governance, and the level of political participation.

The wellbeing of people will improve if Nigeria is ready to embrace a different model; a model centred on the indicators described above. Now is time for a development trajectory that measures the real economy through the following indices, all together:

  • The Human Development Index (HDI) is the work of the United Nations Human Development Report created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. It calculates an annual HDI that ranks the world’s countries on their achievements in three main aspects of human development: a long and healthy life (life expectancy at birth), being knowledgeable (as measured by literacy rates and school and college enrolments) and having a decent standard of living (as measured by GDP per capita based on purchasing power parity.)
  • The Gross National Happiness (GNH) Indicator emerged in 1972 from the former King of Bhutan as a development philosophy as well as an index, which consider the ultimate goal of every human being: happiness. This development index assumes that sustainable development should take a holistic approach towards progress and give equal importance to non-economic aspects of wellbeing. Though a small and poor country, but this has guided Bhutan’s development and policy formation for a balanced development trajectory in which equitable socio-economic development is integrated with environmental conservation, cultural promotion and good governance. The GNH index includes nine domains of progress: health, time useeducationcultural resilienceliving standardsecological diversitygood governancecommunity vitality, and psychological wellbeing.
  • The Inclusive Wealth Index (IWH) Indicator measures countries’ wealth in terms of progress, wellbeing and long-term sustainability. In this, it measures a nation’s capacity to create and maintain human wellbeing over time.

Whatever decision Nigeria has to make henceforth, there is need to put in consideration the issue of intergenerational equity: the idea that resources – whether economic, environmental or social, should be utilised and distributed fairly across generations. Therefore, no single generation should bear an undue burden. This is however not only about leaving a clean, healthy planet for future generations, but also meeting the medical, financial and social needs of an entire population, hence, a bold move to put the country into ascendency towards achieving the UN Sustainable Development Goals by the year 2030.

References:

 

  1. Two chapters of Sustainable Development OECD
  2. Sustainable Development. United Nations http://www.un.org/en/ga/president/65/issues/sustdev.shtml
  3. Sustainable Development Goals: All You Need to Know. May 13, 2015 UNDP http://www.pg.undp.org/content/papua_new_guinea/en/home/presscenter/pressreleases/2015/05/13/sustainable-development-goals-all-you-need-to-know.html
  4. https://www.giz.de/en/worldwide/32002.html
  5. Gross Domestic Product (GDP)http://www.investopedia.com/terms/g/gdp.asp#ixzz4gUBrINSo
  6. http://www.economicsonline.co.uk/Managing_the_economy/Sustainable_growth.html
  7. Sustainable Development: Critical Issues
  8. http://study.com/academy/lesson/what-is-sustainable-economic-growth-definition-lesson-quiz.html
  9. http://www.economicsonline.co.uk/Managing_the_economy/Sustainable_growth.html
  10. http://www.enviropaedia.com/topic/default.php?topic_id=344
  11. http://www.sustainable-environment.org.uk/Indicators/Economy.php
  12. http://treadsoftly.net/sustainable-development-goals/sustainable-development-and-gdp/
  13. https://www.thesolutionsjournal.com/article/sustainable-development-versus-un-economic-growth/
  14. http://www.tradingeconomics.com/nigeria/gdp-growth-annual
  15. https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017/
  16. https://www.indexmundi.com/g/r.aspx?v=69
  17. http://gawker.com/the-real-economy-vs-the-wall-street-economy-511440995
  18. https://crawford.anu.edu.au/news-events/news/5096/how-worlds-economic-growth-un-economic
  19. http://www.un.org/esa/socdev/ageing/documents/NOTEONHAPPINESSFINALCLEAN.pdf

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