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In August 2009, the European Union released the Communication ‘GDP and beyond: Measuring progress in a changing world’, which outlines the need to develop a comprehensive environmental index to complement the current measure of economic activity – the Gross Domestic Product (GDP). A pilot version of this index is due to be presented in 2010.

What has long been criticized in GDP is that it treats environmental damages, and the actions to recover from them, as positive: the job they create, the flow of money they cause, directly and indirectly, are seen as contribution to wealth. No thinking is given to the series of whatifs involved: what if...the damage had not occurred in the first instance, what would have been the overall consequences on the quality of life in the area? What if...the community had been given the chance to use that resource - air, soil, water - or else in a truly positive way, how many jobs and how much wealth would have been created? What if....?

Environmental indexing has existed for quite a few years now, but GDP is yet to take them into attention, just as any other index based on wellbeing rather than wealth.

A review of GDP calculation is needed today more than ever, with the current financial crisis: the number of stimulus packages established in many different countries calls for Governments to take into account social and environmental indicators if they want to introduce packages which are really fair to all groups in a society and do not place environment at danger (how about sustainability, then?).

Simply giving out money to enterprises and banks is not going to help: in the long view, it might as well turn out to have negative impacts on social and environmental indicators.

An example could be Italy's new regulation on housing: it allows for enlargement of existing buildings up to 20% of their current volume. There is a number of rules limiting its application, but there is a real danger it will cause a further expansion of urbanization at the cost of the green environment.

The package is justified by the Government with the need to move the economy: they think families - the plan is limited to families - will invest their money in enlarging their homes, and that will produce wealth and jobs (the question is: which money could families invest, if they are already tied in their expenses by the current economic crisis?).

If the plan gets a good answer, and families start investing, then we will end up with more built-up areas in cities and a lesser green environment. GDP, though, will record a plus in the production of wealth. No matter the lower quality of life in the cities.

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Comment by Roger Thomas on October 22, 2011 at 16:10

In 2002 DEFRA recommended me to the UK Cabinet Office to advise on the the sustainable development aspects of Regulatory Impact Assessment, the basis for all UK legislation. Please find here a post from one of my blogs of part of my submission. It related to not just using economic factors as a fixed basis in an assessment. As long as ecological and social factors are maximised it would be permissible for economic factors and hence contribution to GDP to fall. It uses examples of preventing flooding in one part as at the time their were an alternative set of models which predicted accurately all UK, european and global flood events we have now and are seeing.


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