Friday 30 July 2010

Good GDP, Bad GDP

It is clear that the underlying problem affecting Wales' potential viability is the under-performance of the Welsh economy, and that to address that, we need to improve the level of GDP per head. But not all GDP is 'good' GDP; there are good ways and bad ways of increasing Wales' GDP, and chasing growth per se will not necessarily provide a sustainable long term economy for our country.

As an example, I'm sure that the oil spill in the Gulf of Mexico has led to an increase in GDP in some areas, as people have been employed in clean-up operations, in extra drilling operations to set up a relief well, and in manufacturing a 'cap' for the well head. Similarly, a major nuclear accident would boost GDP in managing the clean-up after the event. But I don't think anyone would seriously suggest that an oil spill or a nuclear accident would be good things for Wales.

It's even more subtle than that. When people think of creating wealth, they often think in terms of boosting manufacturing industry, and indeed, the front page of today's Western Mail draws attention to the slump in manufacturing in Wales. There's a problem with manufacturing though – making stuff almost invariably requires raw materials, as well as using environmental resources, and in the developed world, we are already using more than our share of both of those.

That doesn't mean that we don't need manufacturing, or that we should simply depend on other people doing the manufacturing, of course. The raw material cost and the environmental cost is still down to the ultimate consumer rather than the manufacturer; we don't escape those costs by simply 'exporting' manufacturing to India or China.

But we cannot continue to seek economic growth based primarily on an unfair share of the usage of finite resources, and there is no evidence to suggest that increasing efficiencies in the use of resources will square that circle.

'Good' GDP is GDP which requires no extra use of raw materials or environmental resources, or which involves investment in restoring the earth's environmental systems. It's likely to be more service based, more labour intensive and less profitable in the traditional sense.

Are we ready to embrace that sort of future, and accept that it means building a different type of economy?


Anonymous said...

Very good points John. A different sort of economy and a different sort of society. We are on the crazy chase of growth at all costs and ever increasing levels of consumption of raw materials and energy... that too has to stop. We have to ask for less and expect less as individuals, families, communities and as a nation too. But less doesn't have to mean worse, especially in terms of quality of life and environment. These things occupy our thoughts in rural Wales quite a lot.

Unknown said...

I rather like the king of Bhutan's formulation of the GNH indicator - Gross National Happiness as a more useful indication of a country's success.