First Off, What is GDP?
Even if you have never studied economics, chances are you’ve come across the term GDP before. GDP, which stands for Gross Domestic Product measures a national economy’s total during a set period (Kramer). It’s also the world’s most used economic performance system. Economists use GDP to monitor the overall robustness or “health” of the economy. Akin to how a doctor would use a stethoscope to check up on their patients, governments can employ GDP to evaluate the progression of an economy. The lens of GDP and focus on economic growth often results in heavy industrialization and production. However, modern economists argue that GDP is flawed because it dismisses a critical component of our world: the environment.
In a race to improve GDP, many nations industrialize rapidly. Activities such as manufacturing, construction, financial services, and mining are some of the prominent contributors to GDP. This in turn produces hefty loads of greenhouse gasses. Industrialization colludes with destroying natural habitats, making way for factories and urban development. Such ambitious industrialization can help the economy boom. However, it often suffocates the prospect for natural ecosystems to flourish.
A case for Gross Ecosystem Product (GEP)
As global temperatures continue their climb, focusing on the environmental issues resulting from economic activities may become even more critical in economic development. In response, scientists and economists have begun to create a new measure: GEP, which stands for Gross Economic Product. The logistics of mathematical GEP measurement is still in its infancy, but many scientists and economists are working to solidify the formulas. GEP essentially monetizes—or places a dollar value—on the composers and functions of the ecosystem. This involves everything from small worker bees to the water content in major glaciers. GEP identifies the monetary value of environmental aspects vital to human and natural well-being such as clean water, soil quality, agricultural production, and even components that contribute to psychological needs such as cultural landscapes (“Gross Environment Product”).
GEP can also be thought of as an inverse of GDP. GDP focuses on the outputs, which place monetary values on the products and revenue an economy produces. On the other hand, GEP is centered on the input of the economic equation. GEP is similar to the pre-existing System of Environmental-Economic Accounting (SEEA), managed by the United Nations. The SEEA integrates economic, environmental, and social data to create an adaptable framework to help nations enhance their economy while protecting their natural ecosystems (United Nations). When a fully mature measure for GEP is developed, it can greatly benefit organizations such as SEEA.
There are many cross-sections where GDP and GEP can conglomerate into a more efficient and sustainable economy. Sectors such as agriculture, forestry, fishing, recreation, and hydropower rely on the natural resources of an area. By measuring an area’s current GEP and GEP growth potential, stakeholders can make the most effective choices for the region. For instance, if a coast boasts rich marine life and a traditional fishing economy, why destroy its habitat to construct a clothing factory? Considering GEP is not simply a counting method for Earth lovers. It’s a practical way to maximize the potential and gifts nature has already provided in an area. GEP can make the most of the natural resources while preserving natural biodiversity (Onakuse).
The Challenges on the Road to GEP
Official adoption of GEP will undoubtedly take immense effort as nations undertake international negotiations, practical applications, and standardization procedures. Looking back to the GDP adoption, it took one decade from Simon Kuznet’s initial development to its adoption in the United States. On a global scale, the collective formal usage of GDP took much longer. Climate change is changing the world and economy as sea levels rise, warmer temperatures climb, and natural disasters persist. The global economy may quake alongside the tremors of environmental degradation. Many economists and environmental workers believe that as the world moves into unprecedented transformations, adopting unexplored approaches may be the only way to move forward (Cho).
Works Cited
Cho, Renée. "How Climate Change Impacts the Economy." State of the Planet, 20 June 2019, news.climate.columbia.edu/2019/06/20/climate-change-economy-impacts/. Accessed 18 July 2024.
"Gross Environment Product." IASGYAN, 21 July 202, www.iasgyan.in/daily-current-affairs/gross-environment-product. Accessed 18 July 2024.
Kramer, Leslie. "What Is GDP and Why Is It So Important to Economists and Investors?" Investopedia, 3 June 2024, www.investopedia.com/ask/answers/what-is-gdp-why-its-important-to-economists-investors/. Accessed 18 July 2024.
Onakuse, Stephen. "GDP ignores the environment: why it's time for a more sustainable growth metric." The Conversation, 13 Dec. 2021, theconversation.com/gdp-ignores-the-environment-why-its-time-for-a-more-sustainable-growth-metric-170820. Accessed 18 July 2024.
United Nations. "System of Environmental Economic Accounting." United Nations, seea.un.org/. Accessed 18 July 2024.
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