GDP and Beyond: Towards New Measures of Sustainability Based on Catholic Social Thought

1. GDP and Beyond: Towards New Measures of Sustainability Based on Catholic Social Thought Ricardo Aguado JabierMartínez Economics Department. Deusto Business School (Bilbao campus) University of Deusto IAJBS 2011 World Forum. Lima (Perú), July 2011

2. Outline • Introduction • Main Objectives • Catholic Social Thought, GDP per capita and sustainability • GDP and complementary indicators • Methodology • Results • Conclusions

3. Introduction • GDP is currently the main indicator to measure the success and the evolution of a given economy • The generally accepted idea behind this kind of comparison is that bigger GDPs per capita mean higher levels of development, wellbeing and economic progress BUT… • GDP is a poor instrument to measure social wellbeing, because it ignores wealth distribution and variation, environmental damage, the quality of social relationships, health and economic and personal security (Martínez and Santacoloma, 2005), Fleaurbay (2009) and Catholic Social Thought

4. Introduction • Along with wellbeing, the concept of sustainability has also been linked to GDP in recent years • sustainable development as “development that meets the needs of the present generations without compromising the ability of the future generations to meet their own needs” (WCED, 1987) • 3 reinforcing pillars of sustainable development: economic development, social development and environmental protection (UN, 2005) • Millennium Development Goals (UN, 2010) • Catholic Social Thought (Papal encyclicals)

5. Main Objectives • The main objective of this paper is to analyze the suitability of using GDP as a proper indicator for sustainability in a given national economy, identifying the main features that a proper measure of sustainability (composed by a set of indicators) should incorporate according to economic literature and Catholic Social Thought • A second and final objective is to measure the efficiency of a given economy in terms of achieving sustainable development, taking into account the 3 dimensions of sustainability (social, environmental and economic), building a taxonomy of national economies.

6. Catholic Social Thought, GDP per capita and sustainability • Catholic Social Thought (CST): • economic and social development • taking into account environmental sustainability • CST and the 3 dimensions of sustainability: • RerumNovarum (Leo XIII) (1891): poverty of the masses • Quadragesimo Anno (Pius XI)(1931) • Pacem in terris(John XXIII)(1963): peaceas the base of any kind of social, economic or political system • Populorumprogressio(Paul VI) (1967) • Laborensexercens, Sollicitudoreisocialis and Centessimusannus(John Paul II) (1981, 1987, 1991): the promotion of justice

7. Catholic Social Thought, GDP per capita and sustainability • Caritas in Veritate(Benedict XVI)(2009): integral human development. • Human development, inequality, poverty, justice and economic development. • Long term sustainability introduced in the economic, social, political, cultural and environmental fields • Multidimensional idea of sustainability: • Canadian Conference of Catholic Bishops • Catholic Social Teaching • Society of Jesus • CG 34: Global village. Economic, social, cultural and environmental sustainability • CG 35: Globalization in solidarity, globalization without marginalization

8. Catholic Social Thought, GDP per capita and sustainability • The concept of sustainability is pointing out that our planet has physical limits to support human activity • Sustainability requires the consideration of social wellbeing from an intergenerational perspective, considering present and future generations • Current wellbeing is based on economic resources, such as income, and also on non-economic aspects, such as the social, natural and political environments • Sustainability is linked to the maintenance of a given level of current wellbeing over time. And this depends on whether the stocks of capital that matter for people´s life (natural, physical, human and social capital) are passed on to future generations (CMEPSP, 2009).

9. Catholic Social Thought, GDP per capita and sustainability • An indicator for sustainability should reflect the quantity and quality of that stock and its fluctuations. • A sustainable economy requires the conservation (or the increase) of that stock. • GDP per capita cannot be a measure of sustainability because it may increase while the stock of capital is decreasing. • This situation could put in danger future economic growth and future wellbeing. • Global dimension of sustainability (CMEPSP, 2009)

10. GDP and complementary indicators • Economic development, social wellbeing and all dimensions of sustainability (mainly economic, social and environmental) are connected • Weaknesses of GDP as a sustainability measure: • It does not take into account inter-generational relations • It does not consider wealth distribution and social marginalization • It does not measure the remaining stock of minerals and raw materials • It does not take into account the environmental damage caused by economic growth • GDP should be complemented with other indicators that could give information about all relevant dimensions of sustainability not considered by GDP

11. GDP and complementary indicators

12. Methodology

13. Methodology • Our objective will be to measure the efficiency of a given economy in terms of achieving sustainable development • Data Envelopment analysis

14. Methodology Efficiency Models

15. Results

16. Results

17. Results Clusters’ characterization

18. Results

19. Conclusions (I) • Sustainability has 3 major dimensions (economic, social and environmental), and GDP is not taking into account the last two ones • In the second part of the paper we select input and output indicators for the three dimensions of sustainability and we measure the efficiency of 29 OECD countries in achieving sustainable development using five different DEA models • In cluster 5 we have the leading countries in terms of environmental care and equality, whereas in cluster 3 we have countries with very weak positions in both dimensions. Clusters 1,2, and 4 are in intermediate positions • These results show that it is possible to achieve at the same time environmental care and social equality: it is not necessary to choose between them

20. Conclusions (II) • Catholic Social Thought is in line with a comprehensive understanding of sustainability, acknowledging the three aforementioned dimensions of sustainability: social, environmental and economic • GC34, GC35 and the Papal encyclicals analyzed in this paper demand a fair distribution of wealth at the global level, a global governance over environmental issues and economic growth in order to ameliorate the situation of poor persons • CST principles (and many economists) are asking for a fully sustainable development: economic growth that takes care of the people and of the environment, so that future generations would live in a more just, prosperous and greener world