Growth in incomes fails to offset the feelworse factor
Sunday 03 October 1993
According to the Index of Sustainable Economic Welfare (ISEW), to be published later this year, the main reason for the decline has been the growing disparity in income between rich and poor. Environmental degradation and the backwash of consumerism - litter, for example - have also played a part.
The index, compiled by the New Economics Foundation (NEF), a green economics think-tank, is an alternative to economic measures of progress such as gross national product (GNP). It charts trends in a wide range of indicators, from spending on health and education to pollution, noise, the costs of commuting, loss of farmland, urbanisation and depletion of natural resources.
It is based on a model devised by two American academics, Herman Daly and John Cobb, who measured the performance of the US economy from 1950 to 1986 against more than 20 indicators, many of them non-economic. Daly and Cobb's index of sustainable economic welfare found that national welfare peaked in 1979 but declined during the early Eighties, despite the continuing rise in GNP.
The US study found that reductions in the cost of car accidents and air pollution, for example, had been offset by 'growing income inequality, the exhaustion of resources and the failure to invest adequately to sustain the economy in the future', notably in areas such as energy.
Ed Mayo, director of the NEF, said the findings indicated that society was chasing a notion of economic growth which had less and less to do with human welfare or environmental sustainability.
'The psychological grip of GNP is immense. It is the central determinant of government policy and media interest. One small check in GNP and we are in recession. What the index shows is that at a time when we thought the economy was growing, it was in fact going backwards. I think the implications of that are huge.'
The research suggests that, from 1950 to 1977, sustainable economic welfare was broadly in line with GNP. Up to 1963 it lagged slightly behind - suggesting a small relative decline in quality of life. From 1964 to 1977, however, welfare grew marginally faster than money incomes - quality of life thus improved.
From 1977 to 1990, however, GNP per person increased by 30 per cent but welfare has fallen, by at least 4 per cent: for the first time since the war, a large gap has opened between GNP and quality of life.
However, Dr Tim Jackson, a co-author of the British ISEW, acknowledged that conventional economists would be sceptical, and said there was 'almost infinite arguability' about issues such as the economic costs of environmental damage.
Dr Jackson said the changes in quality of life would have been more obvious to someone living in big cities or very rural areas. People in the inner city would have noticed increased litter and worsening incomes, country dwellers the 'loss of pristineness', air and water pollution.
By contrast, people in the top 2-3 per cent of income groups, living in small towns and semi-rural areas, particularly in the Home Counties, had probably been 'cushioned' from the deterioration and might not have noticed it.
The Independent on Sunday plans to publish regular updates on the index of sustainable economic welfare.
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