Foreign minister: GDP should measure sustainability

December 15, 2011 - 12:24

Denmark joining international trend to find new way to measure economic output that takes economic costs of activities

While logging might contribute to GDP, any damage it does to the environment does not detract from national wealth calculations (Photo: Colourbox)

Denmark may change the way it measures national wealth after the foreign minister, Villy Søvndal, expressed concern that using gross domestic product (GDP) flawed since it does not account for environmental and social costs.

“If you seriously want to move toward sustainability, you also need to create a new understanding of growth,” Søvndal told Politiken newspaper.

GDP measures the total value of a country's output of goods and services. So while Denmark’s wealth is currently bolstered by the value of its shipping and oil production, in the future the environmental impacts of such activities might detract from overall wealth.

Denmark is not alone in wanting to find new ways to assess its economic growth. In 2008 the French government established a committee headed by the renowned American economist Joseph Stiglitz, to “identify the limits of GDP as an indicator of economic performance and social progress”.

And according to Ove K. Pedersen, professor of international economics and politics at Copenhagen Business School, the interest in creating a new model of GDP has gathered international momentum.

“What’s really driving this movement is the fact that it’s not only Europe looking at this,” Pedersen told Politiken. “South Korea is working on a model of ‘qualitative growth’ and even China wants to incorporate environmental costs.”

But while these models are still being debated, Bhutan is the only country to have entirely given up on using GDP.

Since 2007 it has used a Gross National Happiness index to measure the success and wellbeing of their country, instead of GDP.