Rio – The world’s fixation on economic growth ignores a rapid and largely irreversible depletion of natural resources that will seriously harm future generations, according to a report which unveiled a new indicator aimed at encouraging sustainability – the Inclusive Wealth Index (IWI).
The IWI, which looks beyond the traditional economic and development yardsticks of Gross Domestic Product (GDP) and the Human Development Index (HDI) to include a full range of assets such as manufactured, human and natural capital, shows governments the true state of their nation’s wealth and the sustainability of its growth.
The indicator was unveiled in the Inclusive Wealth Report 2012 (IWR), a joint initiative launched at Rio+20 by the United Nations University’s International Human Dimensions Programme on Global Environmental Change (UNU-IHDP) and the United Nations Environment Programme (UNEP). The report looked at changes in inclusive wealth in 20 countries, which together account for almost three quarters of global GDP, from 1990 to 2008.
Despite registering GDP growth, China, the United States, South Africa and Brazil were shown to have significantly depleted their natural capital base, the sum of a set of renewable and non-renewable resources such as fossil fuels, forests and fisheries.
Over the period assessed, natural resources per-capita declined by 33 per cent in South Africa, 25 per cent in Brazil, 20 per cent in the United States, and 17 per cent in China. Of all the 20 nations surveyed, only Japan did not see a fall in natural capital, due to an increase in forest cover.
If measured by GDP, the most common indicator for economic production, the economies in 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.
However, when their performance is assessed by the IWI, the Chinese and Brazilian economies only increased by 45 per cent and 18 per cent. The United States’ grew by just 13 per cent, while South Africa’s actually decreased by 1 per cent.
The report focuses on the sustainability of current resource bases, and does not analyze the rest of the 19th and 20th centuries, when many developed countries following an accelerated growth path may have depleted natural capital.
“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 – 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,” said UN Under-Secretary General and UNEP Executive Director Achim Steiner. “IWI is among a range of potential replacements which world leaders can consider as a way of bringing great precision to assessing wealth generation in order to realize sustainable development and eradicate poverty,” he added.
Wealth accounting, the concept behind the IWI, draws up a balance sheet for nations and shows countries where their wealth lies. By taking into account a wide array of capital assets a nation has at its disposal to secure society’s well-being, it presents a more comprehensive picture and informs policy makers on the importance of maintaining their nation’s capital base for future generations.
“The IWR stands for a crucial first step in changing the global economic paradigm by forcing us to reassess our needs and goals as a society,” said Professor Anantha Duraiappah, Report Director of the IWR and Executive Director at UNU-IHDP. “It offers a rigorous framework for dialogue with multiple constituencies representing the environmental, social and economic fields.”
The importance of keeping an eye on the full range of a country’s capital assets becomes particularly evident when population growth is factored in.
When population change is included to look at the IWI on a per-capita basis, almost all countries analyzed experienced significantly lower growth. This negative trend is likely to continue for countries that currently show high population growth, like India, Nigeria and Saudi Arabia, if no measures are taken to increase the capital base or slow down population growth.
The IWR presents the inclusive wealth of 20 nations: Australia, Brazil, Canada, Chile, China, Colombia, Ecuador, France, Germany, India, Japan, Kenya, Nigeria, Norway, the Russian Federation, Saudi Arabia, South Africa, USA, United Kingdom and Venezuela.
The countries selected represent 56% of world population and 72% of world GDP, including high, middle and low-income economies on all continents. A few countries were chosen based on the hypothesis that natural capital is particularly important to their productive base – as in the case of oil in Ecuador, Nigeria, Norway, Saudi Arabia and Venezuela; minerals in countries such as Chile; and forests in Brazil.