In 1968 US Presidential candidate Robert Kennedy said about GDP that “it measures everything in short, except that which makes life worthwhile”.
The neoclassical economics faced its major challenges with the rise of global problems such as overpopulation, scarcity of resources, pollution, loss of biodiversity on land and water and climate change. It became obvious that mainstream economics based on concepts of free market, production efficiency and growth, fails to account for environmental degradation and ecological crisis. Natural resources are being depleted and treated as infinite, and the planet is assumed to stretch to support our growth . The cost of losing natural capital and the social costs related to human health and well-being are not being calculated in traditional economic account. Societies driven by industrial and technological advances of developed countries follow the same economic model over and over again. Many of those developing countries built their entire economic system on exports and trading their natural resources, exploiting them at unprecedented rates, others turned to unsustainable tourism devastating their countries. China achieved high level of economic growth in considerably short period of time, driving the global demand for cheap competitive products almost in every sector of its economy. The story would be a successful one if it didn’t cost China something that is impossible to buy – clean air. The economic miracle of this country soon turned into a tragedy for all its citizens. Recently China emerged as a global climate leader in its efforts to reverse negative environmental impact. Many countries in South Asia became victims of environmental abuse, when demand for palm oil grew higher worldwide, pushing production and causing massive deforestation and damage of ecosystem . Other countries like Thailand suffer from unlimited growth of tourism that destroys biodiversity. Uzbekistan in Central Asia has been exploited as a cotton base for many years, which resulted in desiccation of the Aral Sea and ecological collapse in Karakalpakstan region.
There is a serious flaw in the economic system that uses human and natural capital as units of input and economic growth as an output. What it does not measure as an output is quality of life and happiness, neither the purpose of growth.
While GDP is still used as a main indicator of nation’s prosperity, it raises the question: Does economic growth lead to happiness?
It does, I believe, if it serves the purpose of helping people to come out of poverty, improving their life quality, their health and education, providing food security to growing population, if part of the growth is invested back in natural capital from which it’s derived, allowing recovery of biotic resources and ecosystem funds.
On individual level it gives financial freedom that people seek to maintain their lifestyles, build confidence in the future. But for those, who see happiness as uncompromising accumulation of material wealth, it often becomes frustrating realization that money does not change the way they feel. When we buy things we experience “happiness momentum”. That moment never lasts, happiness from consuming is ephemeral.
If people stop thinking in silos and circles, and instead open up to opportunities to connect, learn and share knowledge, enrich their life with new experiences, create values and master the art of giving, the connotation of happiness will probably start to change too.
Each nation has a right for prosperity and growth, but it also has obligation to provide this right for future generations and responsibility to learn and choose how to grow without harming the planet.
This is where sustainable development comes to replace economic growth.