We already knew that GDP has always been a poor indicator of quality of air, water, health, leisure or the ever elusive happiness. It measures the goods and services produced in a country in a specific period of time but assumes that the inputs to make those are “free” or the natural capital is endless and can be used infinitely.
But now UNEP (United Nations Environment Program) in a joint initiative with IHDP ( The International Human Dimensions Programme on Global Environmental Change (IHDP) in collaboration with the UN-Water Decade Programme on Capacity Development (UNW-DPC) and the Natural Capital Project, at Rio+20 summit, have come out with alternative called the Inclusive Wealth Index that factors in the additional natural capital that is needed in the economic growth of a country.
“It’s called the Inclusive Wealth Report (IWR) 2012 and features an index that measures the wealth of nations by looking into a country’s capital assets, including manufactured, human and natural capital, and its corresponding values: the Inclusive Wealth Index (IWI). Results show changes in inclusive wealth from 1990 to 2008, and include a long-term comparison to GDP for an initial group of 20 countries worldwide, which represent 72% of the world GDP and 56% of the global population.”
In simple terms, it means that even though the GDP and wealth of India and Brazil have increased, their natural capital has reduced considerably. Well, the Inclusive Wealth Report will make economics more inclusive of this free capital inputs.
“Most importantly, the IWI takes a more holistic approach to calculating a country’s wealth. Twenty countries were assessed in the IWR 2012 over a period of 19 years (1990-2008). Together they represent 56 percent of the world population and 72 percent of world GDP, and include high, middle, and low-income economies on all continents. Countries were selected for their variety of geographical, social, economic, and ecological characteristics”
“The IWR 2012 is the first of a series of reports that will be published every two years to monitor the well-being and sustainability of countries. Each edition will focus on a specific theme. Whereas the focus of the IWR 2012 is on natural capital, the IWR 2014 will be primarily focused on social capital”
This is a freely available report and can be downloaded here