Business Matters | Is GDP the right way to measure a nation’s progress?

In this episode of Business Matters, we discuss whether GDP is the right way to measure a nation’s progress and wealth

UN Secretary-General Antonio Guterres recently said that GDP is not the most accurate way to measure a nation’s progress and wealth. 

In his speech to mark World Environment Day, he urged G20 countries to dismantle their coal infrastructure. He added that to rescue the global environment – and humanity’s future -- we must transform the accounting systems that reward pollution and waste. 

We must place true value on the environment and go beyond Gross Domestic Product as a measure of human progress and well-being. Let us not forget that when we destroy a forest, we are creating GDP. When we overfish, we are creating GDP. GDP is not a way to measure richness in the present situation in the world. 

Is this approach at all feasible? What do economists think of this?

Dr Biswajit Dhar, former professor of economics at the JNU and a former member of the National Biodiversity Authority, says Mr. Guterres has ‘slavishly’ reproduced the advanced country narrative, which essentially shifts the burden of rectifying the environmental degradation on the developing countries, which is unfair on at least three counts.   

First, developing countries are being asked to bear the burden of addressing a problem that they have not caused. This is a direct consequence of abandoning the principles of “common but differentiated responsibilities” and “polluter pays”. 

The latter principle needs an honest admission from advanced countries about their role in occupying the carbon space since the industrial revolution, which has now left little space for the developing countries to pursue their developmental aspirations.