Download GDP: Is it a reliable indicator for sustainable development?

Sustainable Development
INDICATORS
SD: Indicators
The elaboration of a suitable system of indicators
for sustainable development is one of the major
challenges facing contemporary science. The very
interdisciplinary nature of the issue, which is
preconditioned by the intricate and highly
dynamic system of inter-relations and interdependencies between the socioeconomic
system and the natural environment, renders the
solution to the problem of indicator elaboration
exceedingly difficult.
SD: Indicators
• The individual indicators or systems of indicators that
have been used thus far are the product of two
relatively autonomous approaches.
• The first approach is based on the notion that
sustainable development can be measured and
assessed by using several subsystems of indicators
reflecting sustainable development’s various aspects—
environmental, social, economic, institutional, and so
on. Such is the approach of the United Nations
Commission on Sustainable Development (UNCSD) and
of the much-respected International Institute for
Sustainable Development (IISD) in Canada.
SD: Indicators
• The second approach puts its stakes on some “magical”
indicator of a maximally-high degree of aggregation
designed to reflect the entire range of indicators, covering
the various aspects of sustainable development.
• It is natural to assume that the implementation of the
second approach is considerably more difficult from a
methodological point of view because it means
characterizing numerous and varied direct links and
feedbacks between indicators from various subsystems.
Often, comparing these indicators along the lines of a
certain common trait (monetary, physical, extent of change,
and so on) contains too many conditionalities or is virtually
impossible at this stage altogether.
SD: Indicators
• Are these two approaches mutually exclusive? Arriving at
an integral and highly aggregated indicator is impossible
without simulating an indicator system and corresponding
subsystems grouped according to their congruity with the
various characteristics of sustainable development. The
issue we are focusing on is
• (1) whether eliciting a sufficiently reliable integral indicator
that could encompass and reflect the entire specificity and
variety underlying sustainable development is possible in
principle and
• (2) whether the sum of relatively independent indicators,
grouped in individual subsystems, could serve as a basis for
the solving the methodological problem outlined above.
UN: SD Indicators
• In 1997, at the 19th Special Session of the UN General
Assembly, the UNCSD tabled a proposal for the elaboration
of a system of 134 indicators of sustainable development
grouped by the four relevant dimensions: social, economic,
environmental, and institutional. The UN General Assembly
endorsed the proposal and gave its approval for the system
of indicators to be tested in twenty UN member countries.
The experience from the tests and the results from the
comparative analysis indicated the need for further
improvement of the systematization and formulation of
some of the indicators. This brought about a decrease from
134 to 58 indicators with the purposes of avoiding double
measurements and simplifying comparisons as much as
possible.
UN Indicators: ECONOMIC
• A. Economic Structure: GDP per capita, investment
share in GDP, balance of trade in goods and services,
debt-to-GNP ratio, total Official Development
Assistance (ODA) received or given as a percentage of
GDP
• B. Consumption and Production Patterns: intensity of
material use, annual energy consumption per capita,
share of renewable energy resource consumption,
intensity of energy use, industrial and municipal solid
waste generation, hazardous waste generation,
radioactive waste generation, waste recycling and
reuse, distance traveled per capita by mode of
transport
UN Indicators: Environmental
• A. Atmosphere: greenhouse gas emissions, ozone-depleting
substance consumption, ambient concentration of air pollutants in
urban areas
• B. Land: arable and permanent crop land area, fertilizer use,
agricultural pesticide use, forest area as a percent of land area,
wood harvesting intensity, land affected by desertification, area of
urban formal and informal settlements
• C. Oceans, Seas, and Coasts: algae concentration in coastal waters,
percentage of total population living in coastal areas, annual catch
by major species
• D. Fresh Water: annual ground and surface water withdrawal as a
percentage of total available water, BOD in water bodies,
concentration of fecal coliform in freshwater
UN Indicators: Social
• A. Equity: percentage of population living below poverty line, Gini Index of
Income Inequality, unemployment rate, ratio of average female wage to
average male wage
• B. Health: nutritional status of children, mortality rate of children less
than five years old, life expectancy at birth, percentage of population with
adequate sewage disposal facilities, population with access to safe
drinking water, percent of population with access to primary healthcare
facilities, immunization against infectious childhood diseases,
contraceptive prevalence rate
• C. Education: percentage of children reaching grade five of primary
education, adult secondary education achievement level, adult literacy
rate
• D. Housing: floor area per person
• E. Security: number of recorded crimes per 100,000 population
• F. Population: population growth rate, population of urban formal and
informal settlements
UN Indicators: Institutional
• A.
Institutional
Framework:
national
sustainable development strategy, ratified
global agreement implementation
• B. Institutional Capacity: number of Internet
subscribers per 1000 inhabitants, main
telephone lines per 1000 inhabitants, research
and development expenditure as a percentage
of GDP, economic and human loss from
natural
UN Indicators: downsides
Naturally, countries with larger volumes of industrial
output, and that export their products to the
international market and thus meet certain demand,
will record higher levels of greenhouse gas emissions
if all other conditions of the compared countries
remain equal. In the first years of the transition to a
market economy, the Eastern European countries—
Russia included—marked a considerable decline in
their GDP and most notably in their industrial
output. This had a “positive” impact on the
environment because the manufacturing facilities
that used to pollute the environment had been
closed down or only partially used. An important
question to ask, however, is, Are lower greenhouse
gas emission indicators under such circumstances a
suitable sign for sustainable development?
UN Indicators: downsides
• The “debt-to-GNP ratio” and “trade balance” indicators on their
own, are also incapable of giving any ideas about sustainability or
lack of sustainability. Countries with equal debt-to-GDP (or GNP)
ratios are in different economic situations depending on the
capacity and viability of their economies.
UN Indicators: downsides
• The
“energy
consumption”
indicator
(encompassing renewable and non-renewable
energy consumption) is far too general, as well. In
its essence, this indicator expresses an absolute
value that is not related to the efficiency of the
economy. In principle, it is possible to see a
scenario whereby the declining energy
consumption per capita of the population is a
sign of lacking sustainability and a shrinking living
standard, should this result from rising energy
prices rather than from growing energy efficiency.
Human Development Index
HDI (UNDP)
• This index is based on three relatively
independent components: (1) level of education,
(2) per capita GDP, and (3) life expectancy.
• Each of the components has a sub-index of its
own with an equal weight in the formation of the
composite index. In other words, the sub-indices
are equitable.
• In my opinion, both quantitatively and
qualitatively, the GDP per capita index directly or
indirectly reflects the other two indices or is
rather strongly influenced by them.
HDI Report 2010
http://hdr.undp.org/en/statistics/
• Very High DI: Norway, Australia, New Zealand, United
States, Ireland, Liechtenstein , Netherlands, Canada,
Sweden, Germany, Japan, Korea (Republic of),
Switzerland, France, Israel
• High HDI: Bahamas, Lithuania, Chile, Argentina ,Kuwait
Bulgaria No.58, Montenegro 49, Romania 50, Lybia 53
• Medium HDI: Fiji, Turkmenistan, Dominican Republic ,
China, El Salvador
• Low HDI: Burkina Faso, Liberia, Chad, Guinea-Bissau,
Mozambique , Burundi, Niger, Congo (Democratic
Republic of the), Zimbabwe
• Bulgaria No.
Index of Sustainable Economic Welfare
ISEW
Developed by Serafy et al. (1989); Daly (1989) has expanded
an index of a sufficiently high degree of aggregation:
ISEW = Cadj + P + G + W – D – E – N
where Cadj is consumer spending adjusted for income
inequality, P is non-defensive public expenditures, G is
capital growth and net change in international position, W
is non-monetarized contributions to welfare, D is the
defensive private expenditures, E is the cost of
environmental degradation, and N is the value of
depreciation of the environmental capital base.
• ISEW is a useful step forward in the effort to find
appropriate ways of aggregating indices from various
subsystems by bringing them down to comparable
monetary values.
The RioJo Dashboard System
• In 2001 the Consultative Group on Sustainable
Development Indicators (CGSDI), with the International
Institute for Sustainable Development (IISD),
elaborated and presented before the UNCSD the
Dashboard (Appendix 1), which is a system of indices
covering all aspects of sustainable development that
have been aggregated in a Sustainable Development
Index (SDI). The elaboration and adoption of this
approach by the UNCSD took place in connection with
the preparation of the World Summit for Sustainable
Development (WSSD) held in Johannesburg in 2002
and the presentation of a report on the comparative
analysis for the period 1990–2000.
The RioJo Dashboard System
• The assessments and conclusions in the report have been made in
compliance with the Millennium Development Goals (MDG).2
Countries and regions implemented this Dashboard system of
indicators to show the diverse nature of sustainable development,
on the one hand, and to assess the policies pursued by individual
countries or regional communities, on the other. This highly
aggregated indicator of sustainable development is made of three
relatively independent subindicator clusters, which reflect the
situations of three spheres, which include
• Environment—quality of water, air, and soil and levels of toxic
waste;
• Economy—employment, investments, productivity, income
distribution, competitiveness, inflation, and efficiency of material
and energy use;
• Society—crime rate, health, poverty, education, governance,
military spending, and international cooperation.
The RioJo Dashboard System
• As the suggested system of linked clusters indicates, each
cluster is represented by an index, aggregating the
indicators included in the respective sphere
(environmental, economic, and social). The three cluster
indices are aggregated again into an overall Sustainable
Development Index (SDI). The indicators themselves are
also represented in an index form. The environmentrelated index, then, is based on the Environmental
Pressure Index (EPI) and the Ecological Footprint Index
(EFI),3 and the economy-related index is based on the
GDP and the Index of Economic Performance (IEP). The
Consultative Group on Sustainable Development at the
IISD thinks that the highly aggregated index they
suggested should be able to reflect the stock, flow, and
related interactions and management decisions.
The RioJo Dashboard System
In essence, the third cluster concerning the social sphere is underdeveloped, although some possible indicators such as “happiness”
and “fulfilment of the human potential,” have been put forward.
The question about how so many subjective assessments will be
measured and will fit into the overall index has remained
unanswered.
Ecological Footprint of GDP
• The GDP carries abundant useful information about its
ecological footprint if the output value is compared with the
physical dimension (total and per unit) of the used input. The
concept of ecological footprint was first introduced by Drs. M.
Wackernagel and W. Reese in 1996. The energy and raw
material consumption for production of a unit of GDP is one of
the leading indicators for GDP’s spin-off effect, measured as an
ecological footprint. Given that all other conditions are equal,
the countries registering the lowest level of consumption per
unit of GDP are among those with the highest industrial
development and have the highest standard of living and high
HDI.
• The Eastern European countries, for instance, register from five
to eight times more electricity consumption per end-product
unit than do the developed countries. Factor analysis shows
that this is because of two main factors: lower technological
level and under-developed market incentives.
Ecological Footprint
• In my opinion, the input-output model of W. Leontief (1936, 1966),
Nobel Laureate in Economics, and its concrete orientation to the
impact of the material and energy flow on the environment are
mandatory instruments in the measurement of sustainability.
Nowadays, this approach to measuring physical flows by intensity,
direction, and effect on the economic process and the environment
finds an increasingly wide application because it operates with
specific, objective, and verifiable data, which gives reliable
information about the ecological footprint of GDP production. The
German scientist Schmidt-Bleek (1998) has suggested a differentiated
approach that measures both the quantity and type of material
resources that go into the production of a product unit (or a service
unit) and the waste emissions from the production of a product unit
(or a service unit). Two interrelated measures have been proposed by
Schmidt-Bleek: the Material Input per Service unit indices (MIPS) and
the “Ecological Rucksack” unit.
Ecological Footprint
• As an alternative approach, Bailey et al. (2000) divide the
domestic supply of raw materials into scrap and newly
extracted resources. This is an important differentiation as far
as the use of nonrenewable resources is concerned. This
model measures the ecological footprint through an inputoutput model which shows the material flows in industrial
systems. This method has enormous potential in studying the
relationship between economic activity and the environment.
The authors of these methods have succeeded in including
other factors such as the international division of labor and
the share of natural resources used as factors of production—
which are either imported or obtained by the domestic
extracting industry—in their analyses.
A GDP Matrix: An Attempt for Systematic Approach
Gechev, R. (2005) Sustainable Development: Economic Aspects. University of Indianapolis
Press, pp.52-55
• The proposed matrix contains indicators that are connected
with the GDP in a direct, indirect, or relative way. As indicated
earlier, the indicators are expressed in an absolute or dynamic
form (in percentage terms) and as GDP derivative indicators,
which reflect the interaction between the economic sphere
and the other three dimensions of sustainable development.
The comparative analysis of the stated indicators for an
individual country, for a group of countries, and especially at
an international level would make it possible to assess with a
sufficient degree of accuracy the state and trends of
development in compliance with the goals and criteria of
sustainable development.
A GDP Matrix: An Attempt for Systematic Approach
Gechev, R. (2005) Sustainable Development: Economic Aspects. University of Indianapolis
Press, pp.52-55
• In my opinion, the most useful tool for assessing the
ecological footprint of GDP production would
indicate the energy and material intensity per unit of
the GDP disaggregated by sectors, industrial
branches, and types of production. Undoubtedly, the
countries registering the lowest material and energy
costs per unit of output are those enjoying the
highest living standards. They also possess the
biggest real and potential possibilities for
maintaining, restoring, or maintaining and restoring
the environment.
GDP: Is it a reliable indicator for sustainable
development?
• The claim that the GDP is a poor and even misleading indicator
of sustainable development is frequently encountered in the
specialized literature devoted to problems of sustainable
development. This argument does not seem to consider the
fact that the GDP indicator has not been created to measure
sustainability. It is highly illogical to define the GDP as a
“devilish” or “misleading” indicator, although such
qualifications can still be heard or read. There is little surprise
in the fact that we cannot measure atmospheric pressure with
a thermometer. The indicator in question works perfectly well
for the job it was created to do. To a large extent, the model for
calculating the GDP has been made universal; in other words, it
is one of the most reliable indicators for the purpose of
performing international comparisons.
GDP: Is it a reliable indicator for sustainable
development?
• Besides, an available, accessible, and reliable database for
each country and region exists, and GDP data compiled
therein encompasses a sufficiently long period of time for
trend analyses. Having been disaggregated in an
appropriate and targeted way, the GDP and its relative
derivatives can serve as a basis for performing a precise
assessment of sustainable development. The advantage of
this indicator is that it directly or indirectly reflects the
environmental, social, and institutional aspects of
sustainable development. The problem, then, is not
whether, but rather how, the system of disaggregated
indicators should be employed. My firm belief is that the
GDP is not a misleading indicator but has frequently been
misused.
GDP: Is it a reliable indicator for
sustainable development?
• If direct and indirect links exist between the
environment and the processes of manufacturing and
consumption, trying to find the complex of physical and
monetary GDP characteristics related to them is more
than logical. Neither the links nor the physical and
monetary GDP characteristics indicate the exact state of
the natural environment but give an adequate idea
about the nature of the processes of interaction taking
place, including the interactions from the sustainable
development point of view.
GDP: Is it a reliable indicator for
sustainable development?
• Which arguments support this thesis? All experts agree that
without economic growth, no social and economic
development is possible. The development of technologies,
social relations, the quality of life, and so on, is connected
precisely with economic growth. One of the preconditions for
the rise in the standard of living is the increase in the
production of capital and consumer goods and services. In
fact, the expanded production of capital goods and services is
indispensable for the increased output of consumer goods
and services. For people to consume more, more should be
manufactured—what should be maintained is the growth of
production. Because of this dependency, the level to which
the social sphere is developed, as an important aspect of
sustainable development, has a close positive relationship
with economic growth.