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BW Businessworld

New Index Shows Lower Growth For Major Economies

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Some large economies show significantly lower growth when natural assets such as forests and water are factored into growth indicators, an index showed on Sunday, a few days before an international sustainability summit starts in Rio de Janeiro.

The Inclusive Wealth Index was unveiled by the United Nations University's International Human Dimensions Programme on Global Environmental Change (UNU-IHDP) and the United Nations Environment Programme (UNEP).

Scientists and environment groups have been pressuring governments to include the value of their countries' natural resources - and use or loss of them - into future measurements of economic activity to show their true future growth prospects.

The idea of an expanded indicator known as GDP+ to include GDP and natural capital will be on the agenda of the Rio+20 summit from June 20 to June 22, when environment ministers and heads of state from around 200 countries will try to define sustainable development goals.

The index shows the "inclusive wealth" of 20 nations, taking into account manufactured, human and natural capital like forests, fisheries and fossil fuels, instead of relying only on gross domestic product (GDP) as a growth indicator.

The index assessed Australia, Brazil, Canada, Chile, China, Colombia, Ecuador, France, Germany, India, Japan, Kenya, Nigeria, Norway, Russia, Saudi Arabia, South Africa, United States, Britain and Venezuela, from 1990 to 2008.

Together, these countries accounted for almost three-quarters of global GDP over the 19-year period.

The index showed that 19 out of the 20 countries experienced a decline in natural capital. Six nations also saw a decline in their overall inclusive wealth, putting them on an unsustainable track, UNEP said.

"Rio+20 is an opportunity to call time on Gross Domestic Product as a measure of prosperity in the 21st century, and as a barometer of an inclusive green economy transition," UN Under-Secretary General and UNEP Executive Director Achim Steiner said in a statement.

"It is far too silent on major measures of human well-being, namely many social issues and the state of a nation's natural resources," he added.

The index showed that even though China, the United States, Brazil and South Africa experienced GDP growth, their natural capital was significantly depleted.

When measured solely by GDP, the economies of China, the United States, Brazil and South Africa grew by 422 per cent, 37 per cent, 31 per cent and 24 per cent respectively between 1990 and 2008.

When their performance was assessed by the IWI, China's economy grew by 45 per cent, the United States by 13 per cent, Brazil by 18 per cent and South Africa decreased by 1 per cent, mainly due to the depletion of natural resources, UNEP and UNU-IHDP said in a statement.

Six nations - Russia, Venezuela, Saudi Arabia, Colombia, South Africa and Nigeria - experienced negative growth under the IWI, whereas it was positive under GDP measurements.

Commenting on the report, John Sulston, chair of the Royal Society working group on population and Nobel Prize-winning scientist, said traditional measurements of wealth do not take into account the state of the world around us and the inclusive wealth index was a way of correcting this deficiency.

"Applying the IWI to a sample of 20 countries reveals some that are considered good economic performers are actually in the environmental red, borrowing natural resources that they just can't pay back," he added.