Look at 'real wealth' and you'll see we're getting poorer

Dan Box
Politicians talk a good green economy, but when it comes down to it, they're still only interested in seeing the GDP figures tick upwards...

When David Cameron launches his bid for Number 10 promising to put Britain 'under new economic management', you know he is talking about wealth.

Wealth drives us. Making it, spending it (we slapped over £4 billion of it onto the plastic in just 12 days over Christmas), feeling guilty about it. Dave himself drives a hybrid Lexus GS 450h, the car that says 'I'm wealthy and I care'.

Growing our national wealth, measured as Gross Domestic Product, is what gets politicians excited and this is what Dave is aiming for when he says 'this country is back open for business'. You may quibble with how he plans to get there - cutting the tax paid by big corporations – but not the destination itself. Dave wants to make Britain rich! I'm British! Hell, yeah!

There is, of course, a nagging doubt. Maybe a country's GDP can grow, but its people actually become worse off. In fact, people have already come up with other indices to measure just this; some of them silly, like Gross National Happiness, others more serious, like the UN Human Development Index, which measures advances in education and health.

But then, says Dave, 'a strong economy gives us the foundation for a better life'. Increasing your material capital (GDP) will lead to an increase in human capital, measured in, say, hospitals and schools.

Except, what if this doesn't actually add up? In a paper published by the Royal Society this month, Cambridge economist Partha Dasgupta argues it does not. Real 'wealth', writes Professor Dasgupta, is a measure of three things; material capital, human capital and natural capital – forests, ecosystems, atmospheric quality and so on. And he says, the first two can go up while the latter falls.

Governments historically have failed to notice this because, Dasgupta says, 'accounting for nature, if it comes into the calculus at all, is usually an afterthought to the real business of "doing economics"'.

Instead, he offers a new set of accounts for a range of countries across Africa and Asia. In all outside sub-Saharan Africa, he finds, GDP per person has increased. Every country has made progress as measured by the UN Human Development Index. Yet in almost all, real 'wealth' per person has fallen as the natural environment has suffered. 'In consequence ... in year 2000 the average Pakistani was a lot poorer than in 1970'.
Dave does talk about the green economy. It remains to be seen if he knows what it means.

It was the best of times, it was the worst of times

To return to a figure quoted above, British people spent over £4 billion on their credit and debit cards during 12 days over Christmas. It's an eye-wateringly, stupidly large amount of money. I've looked at it a number of times and still can't understand it.

But if you care about the health of the UK economy, it's great news. People are buying, businesses are selling, everybody's happy. In fact, the FTSE 100 index of Britain's leading public companies finished the year up, and up 22 per cent over the year as a whole, its best performance since Labour took over in 1997.

The truth is, even that little fillip couldn't disguise what has been an absolute shocker of a decade for UK plc. Bookended by two recessions (remember the 2000 dot-com crash?), the FTSE has fallen 35 per cent in real terms since its peak on December 31, 1999. It's a similar story in the US. One last splurge to see out the year can't disguise a deeper trend. The world is changing.

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