by Julia Tscherrig and Carlos João Parreira, SDG Lab
Growth at what cost?
Our prioritization of economic growth at the expense of both human and planetary well-being has brought us to a crucial crossroads, constituting a real risk to life on earth as we know it. Gross Domestic Product (GDP) is the embodiment of the homo economicus and an outdated narrative that unlimited, unquestioned economic growth is the only solution to ensure prosperity, universal well-being, and the eradication of poverty. However, this quest for GDP growth inevitably leads to an increase in the use of resources. It is this ever-increasing resource use that plays a significant role in rising emissions of climate-warming greenhouse gases, mainly from fossil fuels and industry. This link is underlined by research showing that rich industrialized countries with robust GDP figures bear the primary responsibility for the greenhouse gases that caused a 1.611°C temperature rise since 1850.
The International Monetary Fund (IMF) recently reported that subsidies for greenhouse gas-producing fossil fuels reached a record USD 7 trillion in 2022, equivalent to 7.1% of global GDP. This figure is nearly two thirds of the 10.9% spent on health care, and significantly exceeds the global expenditure on education, which stands at approximately 4.3%. A reevaluation of our priorities is overdue.
This gross neglect of environmental concerns also has an impact on the economy. A recent survey of more than 700 climate economists estimates that climate change will inflict economic damages of USD 1.7 trillion annually by 2025. This cost is expected to escalate to USD 30 trillion per year by 2075, making up approximately 5% of the anticipated global GDP. The irony is inescapable: our unrelenting drive toward GDP growth, a measure once heralded as the key to human prosperity, now stands as a central catalyst for the climate crisis and biodiversity loss threatening our very economic foundations. This underlines the imperative that all three pillars of sustainable development - environmental, social, and economic - must go hand in hand, in balance and on an equal footing.
Beyond GDP towards holistic well-being
GDP serves as the primary measure of a nation's progress, although it is a one-dimensional metric that fails to capture the complexity of economic activities and excludes vital aspects of planetary and human well-being, such as social welfare, unpaid care work, environmental integrity, and the sustainability of growth itself. It is also based on the assumption that humans act rationally (homo economicus), whereas this assumption does not consider the true nature of human beings, which is influenced by emotions. Treating GDP not only as a tool and indicator, but as an end, risks overlooking long-term sustainability and human rights concerns, and its limited benefits for a particular stratum of society. Furthermore, basing our decisions on a measurement system that does not take into account the needs, rights, and interests of future generations to address current challenges perpetuates short-termism and threatens not only long-term sustainability and intergenerational equity, but the very survival of humanity and life an earth. A recalibration is needed. One that moves us from the narrow and unsustainable mission of tracking GDP growth to a broader set of metrics that consider environmental, social, and governance factors.
Realizing the aspiration of sustainable development as stated in the Brundtland Report of 1987, of meeting the needs of the present without compromising the ability of future generations to meet their own needs, requires us to broaden our focus beyond immediate economic gain to embrace a broader ethical and temporal horizon. As long as GDP remains the gold standard, the impacts of climate change will continue to increase, and future generations will not have their sources to meet their needs and ensure a healthy planet.
In exploring alternatives to the GDP indicator, we can gain valuable insights from models that incorporate a more nuanced set of considerations that better reflect the aspirations of a sustainable society. By acknowledging more holistic indicators, we do not simply speak of the importance of meeting the needs and rights of future generations, but making a tangible commitment to a sustainable path that honors the ideals of intergenerational equity.
The UN Secretary-General’s 2023 policy brief on “Valuing What Counts: Framework to Progress Beyond Gross Domestic Product” includes proposals to develop a universal and comprehensive measurement of progress and sustainable development to complement GDP. One such attempt is the Human Development Index, published annually by the United Nations Development Programme (UNDP). It emphasizes human-centered dimensions such as living a long and healthy life, education levels, and living standards, and is proving to be a useful mechanism to compare policy and development outcomes in countries with similar economic circumstances. However, it falls short of addressing inequalities, poverty, and human security, among others. The UN Secretary’s policy brief also refers to measures of environmental degradation, and measures of inclusive wealth by the United Nations Environment Programme (UNEP) and the World Bank.
Bhutan’s Gross National Happiness, which prioritizes the happiness of its people over GDP, has been pivotal in decreasing poverty levels while improving its environmental and social indicators in the last decades. Despite embracing an alternative indicator as its measure of success, Bhutan has been able to achieve an average annual growth of 7.5% since the 1980s, become the only carbon-negative country in the world, and is next in line to graduate away from being categorized as a Least Developed Country (LDC) in December of this year. Nevertheless, one must acknowledge that the challenges of a nation with a smaller geographical footprint such as Bhutan can be vastly different from other countries.
Other aggregate indicators need to be further explored, particularly the inclusion of Indigenous knowledge systems and values (such as the Seventh Generation Principle), and the voices, solutions, and perspectives of feminist and decolonial thinkers from the Global South in such indicators. The development of context-specific and holistic indicators will be crucial. The success of alternative indicators will largely depend on whether the power dynamics in financial institutions are challenged to bring about meaningful change.
From green growth to beyond growth
Many countries have an interest in maintaining the GDP measurement system and its narrative. In the face of the triple planetary crisis, governments have in recent years sought to secure prosperity and allow future economic growth without end by trying to decouple GDP from environmental pressures. This approach is known as green or sustainable growth.Nonetheless, decoupling has had too little impact because it is neither absolute, nor radical, far-reaching, or permanent enough, but rather relative, temporary and/or local. Globally, most countries continue to experience economic growth with higher energy consumption and therefore higher emissions.
Retrofitting industries, investing in clean energy, and promoting circular economic models are useful and necessary. However, it cannot – and is not expected to soon – reduce resource use by nearly enough to stop the catastrophic consequences of the climate crisis and meet the commitments of the Paris Agreement. It is therefore clear that green or sustainable growth cannot be an end goal for the Global North, but rather a step in a transitional phase. However, it could be an intermediate objective for developing and least developed countries, and ideally be supported (financially) by developed states to strengthen their economies in a green, sustainable, and inclusive way. This would acknowledge that climate change mitigation and adaptation is a challenge that needs to be addressed by all countries as part of the global commons, while recognizing that responsibilities differ.
The goal for developed countries should be a systemic shift towards prioritizing human and planetary well-being overthe relentless pursuit of economic expansion. This is precisely what a beyond growth economy would entail: moving away from a focus on growth as an end, and instead focusing on redesigning economic systems in a way that is value-based and considers environmental and social goals, including by shifting towards regenerative systems. A beyond growth perspective recognizes that the impact of growth on society and the environment depends on what is growing or shrinking, rather than assuming automatic benefits or harm. Given the current state of our Earth, it is evident that reduced levels of production and consumption are necessary to conserve natural resources and minimize environmental degradation. It is about radically redefining societal values in line with a more holistic and intergenerational view of human well-being, such as for example the introduction of a universal basic income. By moving away from the idea that economic growth is good for everyone and will redress structural injustices and inequalities everywhere, we can focus on building economies that promote well-being, equity, and resilience, and ensure that business models are guided by sustainability and human rights while spurring innovation and advancement.
A transformative path towards long-term sustainability
In the face of escalating climate challenges, it is imperative to move away from the dominant growth paradigm centered on GDP. GDP is not a proxy for holistic progress. The notion that reaching a sufficiently high level of GDP will trigger a tipping point in emissions reductions has been shown to be a fallacy. It is essential to shift the starting point of our efforts towards climate action, and to assess the compatibility of economic growth with this imperative, rather than the other way around. Joseph Stiglitz’s wise advice resonates: “What we measure affects what we do, and if we measure the wrong thing, we will do the wrong thing.” Relying upon a metric that does not consider critical aspects of planetary and human wellbeing is not sustainable and will continue to result in short-sighted decisions.
The current economic system is a belief system, and as such, it can be deconstructed and reimagined, rather than being immutable and absolute. Embracing a beyond growth approach means that we are working towards making social and environmental well-being less reliant on continuous economic growth. This acknowledges that the decisions we make today not only affect our current world but also shape the legacy we leave for future generations. This deliberate change towards beyond growth requires an active role for governments and the private sector, including by creating the conditions for slowing down by design, not by disaster. The integration of forward-looking policies, such as Japan’s Future Design movement, or the institutionalization of Future Generations Commissioners, such as in Wales, is key to developing a deeper awareness of our extractive footprint over time, and to the mainstreaming of sustainable, more regenerative practices, both in both public policy and business. Together, we can chart a course that not only respects our environmental commitments, but also ensures long-term sustainability, and the wellbeing, rights, and prosperity of present and future generations. Our political choices and economic behavior will shape the opportunities, challenges, and quality of life for generations to come – so let’s be good stewards for our children and future generations. To do this, we need to build an economy that works in our favor, not against us.