Economic Growth as a Measure
Economic growth is supposed to be a measure of a nation's 'standard
of living'. It is measured by changes in gross national product
(GNP). If the GNP rises&emdash;that is, if more goods and services
are produced over a given period&emdash;it is assumed that everyone
is better off. If the GNP goes down, even over a short period
of time, economists say there is a recession and critics say the
government is not managing the economy properly. The GNP of a
country divided by the number of people in the country gives an
average figure for the standard of living of the population as
GNP was first introduced as a measurement device in 1942 following
the Great Depression, when economists and policy-makers wanted
to find out more about the relationship between the economy, business
cycles and employment. Those who favoured this measure were not,
at the time, concerned about environmental problems or scarcity
of natural resources; consequently, they saw no reason to incorporate
measures of natural resource use or environmental degradation.
GNP is still widely used as a measure of how well an economy
is performing. It is widely accepted as the standard measure of
economic success by economists, politicians and the general public
in Australia and elsewhere. It is used by individual nations and
by the World Bank and the International Monetary Fund (see part
4) as a basis for their policies. They all define successful economic
development as a satisfactory rate of increase of GNP per person.
In its 1990 discussion paper on ecologically sustainable development,
the Commonwealth government says that it takes a broad definition
of 'standard of living'&emdash;broad enough to include income
levels, consumption of goods and services, protection of the environment,
social justice and personal freedoms. However, like governments
of other nations, it measures the standard of living and economic
growth by changes in both GDP and GNP per person.
Source: Sharon Beder, The Nature of Sustainable Development
2nd ed. Scribe, Newham, 1996, p.35.
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