BRUSSELS, Nov. 19 (Xinhua) -- Gross domestic product (GDP) is no longer sufficient to measure progress, true wealth and the well-being of nations, the European Union (EU) led the call at an international conference on Monday.
Moving towards a low-carbon economy, preserving biodiversity, promoting resource efficiency and achieving social cohesion are today as important as economic growth, but most economic indicators used today, such as GDP, do not fully address these issues, the European Commission said in a statement to the Beyond GDP conference, which opened here on Monday.
With over 600 participants from the economic, environmental and social sectors, the conference is designed to move towards a better appreciation of what progress, wealth and well-being actually are, decide how they should be measured, and highlight the benefits of integrating them into decision-making.
"Major negative effects of globalization such as climate change pose new risks to our entire economies. That is why new indicators of wealth are needed," said European Parliament President Hans-Gert Poettering.
GDP, the most frequently used indicator of market activity, measures the total final market value of all goods and services produced within a country during a given period.
Created in the wake of the great depression and the subsequent second world war as a means of providing decision-makers with a measure of economic performance and activity, the indicator alone can no longer reflect all facets and needs of modern society.
Indeed a growing GDP can mask substantial losses in wealth and well-being. A country could, for example, cut down all its forests or send children to work instead of school and this would have a positive effect on GDP or a hurricane killing thousands and wreaking widespread destruction could prove beneficial to GDP due to the ensuing reconstruction efforts.
"Clearly, GDP is important and most of us want to see economic growth, but there has to be more to a nation's well-being than just its economic prosperity," said Anders Wijkman, a keynote speaker from the European Parliament, "The time has come to look at other indicators which might tell us what is going in society, such as the environment."
Over the last two decades a number of alternative indicators have been designed to complement GDP in measuring progress and the health of the economy. They introduce aspects not covered by GDP such as the long-term accumulation of wealth, the levels of life expectancy, literacy, and education and the negative impact of pollution and resource degradation.
However, those indicators are neither homogeneous nor is their use widespread.
The European Union is now developing an indicator that would measure environmental progress and also use integrated accounting and other sub-indicators to improve policy-making. A preliminary version is due to be operational by 2009.
