Soubbotina Tatyana P. Beyond Economic Growth. An Introduction To Sustainable Development. Second Edition. 2004. P. 7-8

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INTRODUCTION TO SUSTAINABLE DEVELOPMENT (4 hours)

1. The notion of sustainable development.
2. The emergence and evolution of the concept of sustainable development.
3. The dimensions of sustainable development.
4. Principles of sustainable development.
5. Strategies of sustainable development.
6. Sustainable development goals.
1. The notion of sustainable development.

The problems to be faced by humanity in the 21st century cannot be solved by traditional
means and practices. In these circumstances, sustainability is a call to action.
Let’s take a look to the notion of development. What development means in general and what
it means for different countries, historical periods, and nations and so on.
Merriam Webster: The act or process of growing or causing something to grow or become
larger or more advanced.
The act or process of creating something over a period of time.
The state of being created or made more advanced.
Recent United Nations documents emphasize “human development,” measured by life
expectancy, adult literacy, access to all three levels of education, as well as people’s average income,
which is a necessary condition of their freedom of choice. In a broader sense the notion of human
development incorporates all aspects of individuals’ well-being, from their health status to their
economic and political freedom.1
It is true that economic growth, by increasing a nation’s total wealth, also enhances its
potential for reducing poverty and solving other social problems. But history offers a number of
examples where economic growth was not followed by similar progress in human development.
Instead growth was achieved at the cost of greater inequality, higher unemployment, weakened
democracy, loss of cultural identity, or overconsumption of natural resources needed by future
generations. As the links between economic growth and social and environmental issues are better
1
Soubbotina Tatyana P. Beyond Economic Growth. An Introduction to Sustainable Development. Second Edition. 2004.
p. 7-8. https://www.gfdrr.org/sites/default/files/publication/Beyond%20Economic%20Growth_0.pdf
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understood, experts including economists tend to agree that this kind of growth is inevitably
unsustainable—that is, it cannot continue along the same lines for long. First, if environmental and
social/human losses resulting from economic growth turn out to be higher than economic benefits
(additional incomes earned by the majority of the population), the overall result for people’s
wellbeing becomes negative. Thus such economic growth becomes difficult to sustain politically.
Second, economic growth itself inevitably depends on its natural and social/human conditions. To be
sustainable, it must rely on a certain amount of natural resources and services provided by nature,
such as pollution absorption and resource regeneration. Moreover, economic growth must be
constantly nourished by the fruits of human development, such as higher qualified workers capable of
technological and managerial innovations along with opportunities for their efficient use: more and
better jobs, better conditions for new businesses to grow, and greater democracy at all levels of
decisionmaking. Conversely, slow human development can put an end to fast economic growth.
According to the Human Development Report 1996, “during 1960–1992 not a single country
succeeded in moving from lopsided development with slow human development and rapid growth to
a virtuous circle in which human development and growth can become mutually reinforcing.” Since
slower human development has invariably been followed by slower economic growth, this growth
pattern was labeled a “dead end.”2
Sustainable development is a term widely used by politicians all over the world, even though
the notion is still rather new and lacks a uniform interpretation. Important as it is, the concept of
sustainable development is still being developed and the definition of the term is constantly being
revised, extended, and refined.3
Over the years, sustainable development has been defined in different ways. However, the
most widely quoted definition is from the Brundtland Report, where “Sustainable development is
development that meets the needs of the present without compromising the ability of future
generations to meet their own needs. It contains within it two key concepts; (a) the concept of needs,
in particular the essential needs of the world's poor, to which overriding priority should be given; and
(b) the idea of limitations imposed by the state of technology and social organization on the
environment's ability to meet present and future needs”.
Overall development of humanity over the last decades has led to the increasingly
unfavourable climate changes and natural disasters, but also wars and political and socio-economic
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p. 8. https://www.gfdrr.org/sites/default/files/publication/Beyond%20Economic%20Growth_0.pdf
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instability. Through their action, humans have negatively impacted on the environment, endangering
the survival of the Earth and the future generations. These conditions have indicated changes in the
behaviour aiming towards more rational and efficient management of all resources that will allow
less pressure and environmental impact. Such responsible behaviour that will ensure the long-term
exploitation of resources, without jeopardizing future generations is considered within the concept of
sustainable development evolving in the 70s and especially in the 80s of the last century. The concept
of sustainable development is based on the concept of development (socio-economic development in
line with ecological constraints), the concept of needs (redistribution of resources to ensure the
quality of life for all) and the concept of future generations (the possibility of long-term usage of
resources to ensure the necessary quality of life for future generations).4
The essence of the concept of sustainable development derives from the Triple bottom line
concept, which implies the balance between three pillars of sustainability – environmental
sustainability focused on maintaining the quality of the environment which is necessary for
conducting the economic activities and quality of life of people, social sustainability which strives to
ensure human rights and equality, preservation of cultural identity, respect for cultural diversity, race
and religion, and economic sustainability necessary to maintain the natural, social and human capital
required for income and living standards. Complete sustainable development is achieved through a
balance between all these pillars, however, the required condition is not easy to achieve, because in
the process of achieving its goals each pillar of sustainability must respect the interests of other
pillars not to bring them into imbalance. So, while a certain pillar of sustainable development
becomes sustainable, others can become unsustainable, especially when it comes to ecological
sustainability, on which the overall capacity of development depends.5
Classical theories of development consider development within the framework of economic
growth and development. According to these theories, development is a synonym for the economic
growth that every state in a particular stage has to undergo, driven by the transformation of traditional
agriculture into modern industrialized production of various products and services, i.e. shifting from
the traditional society to the stage of maturity and high consumption.6
According to several neoliberal and modern development theories established over the past 60
years (Willis, 2005: 27) and the contemporary understanding, development is a process whose output
4
Klarin, Tomislav. The Concept of Sustainable Development: From its Beginning to the Contemporary Issues. Zagreb
International Review of Economics & Business, Vol. 21, No. 1, pp. 67-94, 2018, pp. 67-68.
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International Review of Economics & Business, Vol. 21, No. 1, pp. 67-94, 2018, p. 68.
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International Review of Economics & Business, Vol. 21, No. 1, pp. 67-94, 2018, pp. 68-69.
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aims to improve the quality of life and increase the self-sufficient capacity of economies that are
technically more complex and depend on global integration (Remeny, 2004: 22). Fundamental
purpose of this process is a creation of stimulating environment in which people will enjoy and have
long, healthy and creative life.7
Romer’s new or endogenous growth theory suggests that economic growth is a result of the
internal state or corporate system, and the crucial role in economic growth is knowledge and ideas
(Romer, 1986; Todaro and Smith, 2003). The endogenous growth theory model consists of four basic
factors: 1) capital measured in units of consumer goods, 2) labour involving the individual skills, 3)
human capital comprising education, learning, development and individual training, and 4)
technological development. In accordance with this model, if countries want to stimulate economic
growth, they have to encourage investment in research and development and the accumulation of
human capital, considering that appropriate level of the state capital stock is the key of economic
growth.8
In the literature different taxonomies of the meaning of the term development are found, and
most often the following meanings are emphasized: 1) development as structural transformation, 2)
human development, 3) development of democracy and governance, and 4) development as
environmental sustainability describes development as a process of targeted change, which includes
goals and resources to achieve these goals..9
Sustainable development is a central concept for our age. It is both a way of understanding the
world and a method for solving global problems.
According to economist Kate Raworth (2017), sustainability is like a doughnut, where the
inner circle contains the social foundation for a life of dignity and the outer circle shows the Earth’s
carrying capacity. The challenge for the modern world is that, while not everyone’s human needs are
fulfilled, other people are living beyond the capacity of natural resources. Sustainable development
aims at human wellbeing within the carrying capacity of the Earth. This calls for the kind of
economic development that takes account of both the limits of the Earth’s carrying capacity and the
fundamentals of human progress and life.10
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State of Sustainable Development.
https://sustainabledevelopment.un.org/content/documents/26264VNR_2020_Annex_2.pdf
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2. The emergence and evolution of the concept of sustainable development.
In the 18th century economic theoreticians such as Adam Smith pointed out issues of
development, in the 19th century Karl Marx and classical economists Malthus, Ricardo and Mill also
argued about certain elements of sustainable development, while later neoclassical economic theory
emphasized the importance of pure air and water and renewable resources (fossil fuels, ores) as well
as the need for government intervention in the case of externalities and public goods. The term
sustainable development was originally introduced in the field of forestry, and it included measures
of afforestation and harvesting of interconnected forests which should not undermine the biological
renewal of forests. This term was firstly mentioned in the Nature Conservation and Natural Resources
Strategy of the International Union for Conservation of Nature published in 1980. Although initially
sustainable development primarily viewed an ecological perspective, soon it spread to social and
economic aspects of study. 11
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Development based on economic growth remained until the 1970s when it was obvious that
consumerism and economic growth put pressure on environment with the consequences of polluted
and inadequate living space, poverty and illness. At the same time, the exploitation of natural
resources, in particular the stock of raw materials and fossil fuels, has led to deliberation of the needs
of future generations and created a prerequisite for defining the attitude of long-term and rational use
of limited natural resources. The imbalance between human development and ecological limits has
pointed to the growing environmental problems and possible consequences with disastrous
proportions.12
Črnjar & Črnjar (2009) summed up the basic causes of environmental pollution: 1)
anthropogenic causes of environmental pollution (economic growth, technical and technological
development, industrial development, development of traffic and transport infrastructure, population
growth and urbanization and mass tourism), 2) natural causes of environmental pollution (soil
erosion, floods, earthquakes, volcano eruptions, fires, droughts and winds) and 3) other causes of
environmental pollution (wars, insufficient ecological consciousness, imbalance between
development and natural ecosystems and limited scientific, material, organizational and technological
opportunities of society). The consequences of these factors − seen in various ecological problems,
ecosystem disturbances, global climate change, natural catastrophes, hunger and poverty, and many
other negative consequences − have been warning about the sustainability of the planet.13
Aspiration of developed countries to improve the socio-economic and ecological situation of
developing and undeveloped countries gathered scientists, economists and humanists from ten
countries in Rome in 1968 to discuss the current problems and future challenges of humankind
(limited natural resources, population growth, economic development, ecological problems, etc.).
Grouped as an independent global organization called the Roman Club, these scientists have
published two significant editions – Limits of Growth in 1972 and Mankind at the Turning Point in
1974, containing the results of their research and appealing the world to change the behaviour toward
the planet, while in the first edition the term sustainability was clarified in the framework of the
contemporary concept of sustainable development. The Roman club warned that excessive
industrialization and economic development would soon cross the ecological boundaries. 14
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International Review of Economics & Business, Vol. 21, No. 1, pp. 67-94, 2018, p. 70-71.
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Different organizations and institutions participated in the creation of the concept of sustainable
development. The most significant is the United Nations (UN), founded in 1945 with headquarters in
New York, which nowadays includes more than 190 member states. A total of 33 programmes, funds,
specialized agencies and affiliated organizations are active within the United Nations, while some of
them play a significant role in the creation and implementation of the concept of sustainable
development. The United Nations Division for Sustainable Development (UNDSD) has also been
established to promote and coordinate the implementation of sustainable development, particularly in
the field of intergenerational and international co-operation. The Division also serves as a support to
policy management and management of sustainable development, and especially as a communication
platform for knowledge and data dissemination.15
Among the various activities, three key events set the fundaments and principles of
sustainable development. According to them, the history of the concept of sustainable development is
divided into three periods. The first period covers the period from economic theories, where certain
theorists (Smith, Marx, Malthus, Ricardo and Mill mentioned above) recognized the boundaries of
development and environmental requirements, through the activities of the Roman Club, which
warned on the negative consequences of economic development, to the First United Nations
Conference on the Human Environment held in Stockholm in 1972. This conference marked the
introduction of the concept of sustainable development, and although it did not fully associate
environmental problems with development, it stressed the need for changes in economic development
policy.16
Years after the Stockholm conference represent the second period of the concept of
sustainable development. The terms such as development and environment, development without
destruction and development in accordance with the environment were increasingly used in
publications, while the term eco-development was first described in edition of the United Nations
Environment Programme (UNEP) published in 1978. In 1980, International Union for Conservation
of Nature (IUCN) set an idea of linking economics and the environment through the concept of
sustainable development. A few years later, more precisely in 1983, the United Nations World
Commission on Environment and Development (WCED) was established to develop a global change
programme. This programme was aimed to raise awareness and concern about the negative impact of
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socio-economic development on the environment and natural resources as well as provision of
perspectives of a long-term and sustainable development in accordance with the environmental
protection and conservation. After several years of work, in 1987 the Commission of 19 delegates
from 18 countries, led by Gro Harlem Brundtland (the then Norwegian Prime Minister), published a
report Our Common Future, better known as the Brundtland Report, where the concept of sustainable
development was introduced in its true sense (WCED, 1987; Drexhage & Murphy, 2010). In its
twelve chapters this report analysed and provided a clear overview of the conditions in the world
(socio-economic development and order, environmental degradation, population growth, poverty,
politics, wars, etc.) and elaborated the concept of sustainable development. As a new approach, this
concept should be able to respond to future challenges, such as achieving balance between socio-
economic development and the environment, reducing pollution and environmental degradation,
exploiting natural resources, reducing harmful gas emissions and climate impacts, reducing poverty
and hunger, achieving world peace and other serious challenges and threats faced by humanity
(WCED, 1987). In the second chapter, the concept of sustainable development is defined as
“development that meets the needs of the present without compromising the ability of future
generations to meet their own needs” (WCED 1987: 43), which contains the core of the concept and
soon became a generally accepted and probably the most cited definition in the literature, no matter
where the context of sustainable development is being discussed. The fundamental objective of the
concept outlined in the document is to provide basic human needs to all people (home, food, water,
clothing, etc.), with a tendency to improve living standards, as well to achieve the aspiration of a
better life. An imperative of the Brundtland report is: rational and controlled use of resources focused
on renewable and long-term usage, protection and conservation of nature, raising ecological
awareness, stricter national regulation and international co-operation, stopping population growth,
using industry and technology in line with environmental requirements, developing technological
innovations in order to reduce impact on environmental (WCED, 1987). Thus, according to the
Report, the underlying principles of the concept of sustainable development are assurance of the
human needs, while respecting certain environmental constraints. The Brundtland report marked the
beginning of a new global socio-economic policy in which the concept of sustainable development
has become a key element in environmental management and other areas of human activities
(Mebratu, 1998).17
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This event was followed by the third, so-called After Brundtland period, which lasts until
today and included several significant events. Marking the twentieth anniversary of the conference in
Stockholm, UN conference on environment and development called the Earth Summit or the Rio
Conference was held in Rio de Janeiro in 1992. The conference saw the participation of numerous
governmental and non-governmental organizations from 178 countries. Its focus was to define a
global framework for solving issues of environmental degradation through the concept of sustainable
development, considering that in the 20-year period the integration of environmental concerns and
economic decision-making was ignored and the state of the environment was worse (UNCED,
1992ab; Mebratu, 1998; Drexhage & Murphy, 2010). More than 10,000 international journalists
transmitted the conference to millions of people around the world, witnessing the importance of the
conference. 18
The Rio Declaration on Environment and Development contains 27 principles of sustainable
development on the rights and responsibilities of the United Nations. These principles also form the
basis for future policy and decision making and balance between socio-economic development and
the environment (UNCED, 1992b). The Declaration gives people the right for development but also
the obligation for preserving the environment, and since the environment is a public and common
good, it also highlights the need for cooperation and understanding between the public and private
sectors and civil society. Among the principles, it is emphasized how humans are in the centre of
concern for sustainable development and should not delay measures to prevent environmental
degradation. At the same time, it is emphasized that each country has the sovereign right to exploit its
own resources, if this does not endanger the environment of other countries, thereby polluters should
bear the costs of pollution. Eradication of poverty, reduction of inequalities and assuring basic living
standards and peace in the world are essential for sustainable development, therefore developed
countries have the responsibility to ensure sustainable development, particularly for technology and
financial resources (UNCED, 1992b).19
Agenda 21 is a global programme with objectives of sustainable development and action
plans and resources for their implementation set in 40 chapters (UNDSD, 1992). The document
comprehensively provides guidelines for socio-economic development in line with the environmental
conservation. The document highlights the need for international cooperation and consensus between
development and environmental protection, whereby governments play an important role in the
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adoption and implementation of policies, plans and programmes, although the participation of all
other stakeholders is also necessary. Further on, developed countries play a key role, particularly in
providing financial funds to developing countries. As a priority goal, the document emphasizes the
suppression of poverty, especially in poor countries where it is also necessary to preserve and protect
natural resources. At the same time, in these countries there is a need for improvement of the
protection of human health and gender equality. It is also necessary to change patterns of behaviour
in production and consumption in order to rationally exploit natural resources and fossil fuels which
would result in reduced negative impact on the environment. Finally, Agenda 21 highlights the
importance of educational programmes focused on raising awareness and promotion of the
sustainable development which are necessary for its implementation (UNDSD, 1992).20
From these fundamental activities and documents the three key elements of the concept were
identified: 1) the concept of development (socio-economic development in line with ecological
constraints), 2) the concept of needs (redistribution of resources to ensure the quality of life for all)
and 3) the concept of future generations (the possibility of a long-term usage of resources to ensure
the necessary quality of life for future generations). At the same time, concept of sustainable
development outlined core principles, namely: ensuring needs and care for the community of present
and future generations, continuously improving the overall quality of life and equality, protecting and
preserving the environment, biodiversity and ecosystems, protecting and preserving the natural
resources, with the rational use of renewable resources and reduced depletion of non-renewable
resources, changing production and consumption respecting the ecological constraints, using
renewable energy and innovative technologies to reduce the negative impact on the environment,
strengthening international cooperation at the national, regional and local level, creating an
institutional framework with a strong network of stakeholders interested in implementing the concept
of sustainable development, etc. Here it could be mentioned how the three key elements of the
concept were also described by the Maslowian portfolio theory (MaPT) and the hierarchy of needs
(De Brouwer, 2008).21
3. The dimensions of sustainable development.
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Today, it is generally accepted that sustainability is a dynamic process based on three pillars,
which interact with each other.
Sustainable development is seen as a process towards a goal. With growing awareness of the
crucial importance of good governance, a political dimension can be added to the traditional three
dimensions of sustainable development, underscoring the role of public participation in community
and governmental decision-making.22
When the World Commission on Environment and Development presented their 1987 report,
Our Common Future, they sought to address the problem of conflicts between environment and
development goals by formulating a definition of sustainable development: Sustainable development
is development which meets the needs of the present without compromising the ability of future
generations to meet their own needs.6 In the extensive discussion and use of the concept since then,
there has generally been a recognition of three aspects of sustainable development:
• Economic: An economically sustainable system must be able to produce goods and services
on a continuing basis, to maintain manageable levels of government and external debt, and to avoid
extreme sectoral imbalances which damage agricultural or industrial production.
• Environmental: An environmentally sustainable system must maintain a stable resource
base, avoiding over-exploitation of renewable resource systems or environmental sink functions, and
depleting non-renewable resources only to the extent that investment is made in adequate substitutes.
This includes maintenance of biodiversity, atmospheric stability, and other ecosystem functions not
ordinarily classed as economic resources.
• Social: A socially sustainable system must achieve distributional equity, adequate provision
of social services including health and education, gender equity, and political accountability and
participation.
22 Mochizuki Yoko, Christodoulou Eleni. Textbooks for Sustainable Development. A Guide to Embedding. UNESCO
MGIEP 2017. p. 16. https://www.researchgate.net/publication/318983986_Textbooks_for_Sustainable_Development_-
_A_Guide_to_Embedding
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Some scientists consider that there are four dimensions to sustainable development – society,
environment, culture and economy – which are intertwined, not separate. Sustainability is a paradigm
for thinking about the future in which environmental, societal and economic considerations are
balanced in the pursuit of an improved quality of life. For example, a prosperous society relies on a
healthy environment to provide food and resources, safe drinking water and clean air for its citizens.
4. Principles of sustainable development.

The main goal of sustainability is human survival and in this sense it is anthropocentric the
sustainability in its present sense is a route, a process of humanity to be maintained in the finite
ecosystem of the Earth.
some of the salient principles of sustainable development are mentioned from Brundtland
Report and other international documents such as Rio Declaration and Agenda 21 are as follows: 1.
Inter-Generational Equity: The central theme of the theory of intergenerational equity is the right of
each generation of human beings to benefit from the cultural and natural inheritance of the past
generations as well as the ‘obligation’ to preserve such heritage for future generations.
Intergenerational equity requires conserving the diversity and quality of biological resources and of
renewable resources such as forest, water and soil. Meeting the essential needs dependents in part on
achieving full growth potential and sustainable development clearly requires economic growth in
places where such needs are not being met. The Brundtland Report has defined the sustainable
development as the development which “meets the needs of the present without compromising the
ability of the future generation to meet their own needs”. Similarly, 3rd Principle of the Rio
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Declaration of 1992 says that “the right to development must be fulfilled so as to equitably meet
developmental and environmental needs of present and future generations”. The natural resources,
land, air and water on the planet earth cannot be exhausted by the present generations to meet their
needs. Economic growth and development obviously involve changes in the physical ecosystem in
general; renewable resources like forest and fish stocks need not be depleted provided the rate of use
in within the limits of regeneration and natural growth. As for as non-renewable resources like fossil
fuels and minerals are concerned, their use reduces the stock available for future generation.
According to Brundtland Report, the rate of depletion should take into account. Further the
availability of technologies for minimizing depletion and the likely hood of substitute being available
should be taking into consideration. 2. Use and Conservation of Natural Resources: In order to meet
the needs on sustainable basis, it’s absolutely necessary to use the natural resources carefully and the
natural resources base must be conserved and enhanced. It is part of our moral obligation to other
living beings and future generations. The resources must be conserved and enhanced to meet the
needs of growing population. Principle 23 of the Rio Declaration specifically says that the
environment and natural resources of people under oppression, domination and occupation shall be
protected. Similarly in Principle 8 of the Rio Declaration it is stated that to achieve sustainable
development and a high quality of life for all people, states should reduce and eliminate unsustainable
pattern of production and consumption. Thus, use and conservation of natural resources is an
essential principle of sustainable development. 3. Environment Protection: The protection of the
environment is an essential part of sustainable development without adequate environment
protection, development is undermined; without development, resources will be inadequate for
needed investments and environmental protection will fail. The environmental problems can and do
undermine the goals of development in many ways. Take for example – pollution free water and air is
itself a part of improvement and welfare that development attempts to bring. If the benefits from the
rising incomes are offset by costs imposed on health and the quality of life by pollution, this cannot
be called development. Also environmental damage can undermine future productivity and thus it
affects the sustainability. It must be remembered that environment is not a separate sector, distinct
from industry, agriculture and energy. Hence environment protection must become an integral part of
the decision making at all levels. 4. The Precautionary Principle: ‘Prevention is better than cure’, -
This is the sum and substance of the concepti . This principle has widely been recognized as the most
important principle of “sustainable development”. Principle 15 of the Rio declaration states that: “in
order to protect the environment, the precautionary approach shall be widely applied by states
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according to their capabilities. Where there are threats of serious or irreversible damage, lack of full
scientific certainty shall not be used as a reason for postponing costeffective measures to prevent
environmental degradation”ii . The principle of precaution involves the anticipation of environmental
harm and taking measures to avoid it or to choose the least environmentally harmful activity. It is
based on scientific uncertainty. Environmental protection should not only aim at protecting health,
property and economic interests but also protect the environment for its own sake. Precautionary
duties must not only be triggered by the suspicion of concrete danger but also by justified concern or
risk potential. The precautionary principle was recommended by the United Nations Environment
Program in 1989. The Bamako Convention also lowered the threshold at which scientific evidence
might require action by not referring to ‘serious’ or ‘irreversible’ as adjectives qualifying harm. The
legal status of the precautionary principle, ‘evolving’ for though it is accepted as part of the
international customary law, the consequences of its application in any potential situation will be
influenced by the circumstances of each caseiii . 5. The Polluter Pays Principle: ‘Guilty should be
punished’ is the gist of this principle. In 1972, the member countries of Organization for Economic
Cooperation and Development agreed to base their environmental policies on a polluter pays
principle. The polluter pays principle as interpreted by the Supreme Court of India means that the
absolute liability for harm to the environment extends not only to compensate the victims of pollution
but also the cost of restoring the environmental degradation. Thus, it includes environmental costs as
well as direct costs to people or property. Remediation of the damaged environment is part of the
process of sustainable development and as such the polluter is liable to pay the cost to the individual
suffers as well as the cost of reversing the damaged ecology. Under this principle it is not the role of
government to meet the costs involved in either prevention of such damage or in carrying out
remedial action because the effect of this would be the shift the financial burden of the pollution
incident to the taxpayeriv. The World Commission on Environment and Development in its report,
has suggested that ‘Environment Cost’ of ‘Economic Activity’ can be internalized paid by the
enterprises. It may be in the form of investment to prevent the damages or to restore unavoidable
damages example a forestation, restocking fish, rehabilitation of man and land, etc. or compensating
the victims of health and property damage. Thus, enterprises may be encouraged to invest in
preventive restorative compensatory measures. But it was the Organization of Economic Cooperation
and Development (OECD), who for the first time agreed to base their environmental policies on a
‘polluter pays principle’ and it was recommended by the World Commission on Environment and
Development in 1972 as an ‘essentially economic efficiency measure to internalize environmental
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costs. Polluter pays principle which was initially recognized as one of the economic and
administrative measures to restrain and contain the pollution problem, has recently been adopted as a
strong legal measure to minimize environmental pollutionv. Principle 16 of the Rio Declaration of
1992 also states polluter pays principle. It is quite obvious that the object of this principle was to
make the polluter liable not only for the compensation to the victims but also for the cost of restoring
of environmental degradationvi . 6. Obligation to Assist and Cooperate: The environmental problem
is not the problem of an individual or that of one country. It is a global problem and it can be tackled
only with the assistance and cooperation of all. Principle 9 of the Rio Declaration provides that the
state should cooperate to strengthen endogenous capacity building for sustainable development by
improving scientific understanding through exchanges of scientific and technological knowledge and
by enhancing the development, adoption, diffusion and transfer of technologies, including new and
innovative technologies. Principle 10 of the Rio Declaration further provides that environmental
issues are best handled with the participation of all concerned citizens, at the relevant level. Similarly
Article 12 of the Rio Declaration provides that the states should cooperate to promote a supportive
and open international economic system that would let to economic growth and sustainable
development in all countries, to better address the problems of environmental degradation. 7.
Eradication of Poverty: The sustainable development has to address the problem of the large number
of people who live in absolute poverty and who can not satisfy even their basis needs. The
Brundtland report has rightly pointed out that poverty reduces people capacity to use resources in a
sustainable manner and hence it intensifies pressure on the environment. Most of the developing
countries are under the stress of poverty. Therefore, it is necessary that the growth must be revived in
developing countries because that is where the links between economic growth, the alleviation of
poverty and environmental conditions operate most directly. The United Nations Conference on
Environment and Development, that is “Earth Summit’ of 1992 has brought about a leap in public
awareness of key environment and development issue and rightly projected that elimination of
poverty is a must for sustainable development particularly in developing countries. The key to
achieve sustainability is to break the vicious cycle of poverty. 8. Financial Assistance to Developing
Countries: The people in the developing countries strain their natural resources and over exploit them
to meet their basic needs. The developing countries also do not have the finances and modern
technology to follow the path of development which is sustainable. Therefore, the financial assistance
and transfer of technology from the developed nations to the developing nations is a must to achieve
the goal of sustainable development and environment protection. In Chapter 33 of Agenda – 21 it was
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provided that the provision to developing countries of effective means, inter alia, financial resources
and technology, without which it will be difficult for them to fully implement their commitment, will
serve the common interest of developed and developing countries and of human kind in general,
including future generations. It is worth mentioning here that the World Bank, in addition to various
other international institutions, has been playing a key role in response to the clarion call of
sustainable development at “Earth Summit”23
The guiding principle of sustainable development is development that meets the needs of the
present without compromising the ability of future generations to meet their own needs. Sustainable
development recognises the interdependence of environmental, social and economic systems and
promotes equality and justice through people empowerment and a sense of global citizenship. Whilst
we cannot be sure what the future may bring, a preferable future is a more sustainable one.24
5. Strategies of sustainable development.

What are strategies for sustainable development? This guidance defines a strategy for sustainable
development as comprising: “A co-ordinated set of participatory and continuously improving
processes of analysis, debate, capacity-strengthening, planning and investment, which integrates the
economic, social and environmental objectives of society, seeking trade offs where this is not
possible”. To substantiate the definition, this guidance also offers a set of principles. These
encompass a set of desirable processes and outcomes which, taken together, are likely to help ensure
success of strategies for sustainable development. The principles emphasise local ownership of the
strategy process, effective participation from all levels, and high-level commitment. They point to the
importance of convergence and coherence between different planning frameworks, integrated
analysis, and capacity development. What does this mean in practice? An effective strategy for
sustainable development brings together the aspirations and capacities of government, civil society
and the private sector to create a vision for the future, and to work tactically and progressively
towards it. It identifies and builds on ‘what works’, improves integration between approaches, and
provides a framework for making choices where integration is not possible. Focusing on what is
realistically achievable, an effective strategy will benefit from comprehensive understanding, but will
not be paralysed by planning overly comprehensive actions on many fronts at once. As a process of
practical institutional change aimed primarily at mainstreaming sustainability concerns, the strategy
23
Sanjith M N Mohanram A.. Principles of Sustainable Development. International Journal of Multidisciplinary Research
and Modern Education (IJMRME) ISSN (Online): 2454 - 6119 (www.rdmodernresearch.org) Volume II, Issue I, 2016.
http://rdmodernresearch.org/wp-content/uploads/2016/03/164.pdf
24
https://www.sustainable-environment.org.uk/Principles/principles.php
16
is likely to be focused on only a few priority objectives. A strategy for sustainable development will
rarely imply initiating a completely new or stand-alone strategic planning project. Rather, a number
of initiatives, taken together, could meet the definition and the principles. Bringing existing initiatives
closer to an effective strategy for sustainable development might involve complementing them with a
broad ‘umbrella’: a vision and set of co-ordinated mechanisms and processes to improve their
complementarity, smooth out inconsistencies, and fill gaps when needed. In practice, many countries
have taken the approach of building on whichever strategy models have been found useful. These
include development plans, poverty reduction strategies or action plans, national green plans,
decentralised planning and consultation processes – or the national exercises that have proliferated
over the last two decades connected to international agreements. In some countries, alternative
approaches have been developed by civil society organisations. In recognition of this broad range of
starting points, this guidance emphasises that the label does not matter – what is important is the
consistent application of the underlying principles referred to above. Depending on circumstances, a
sustainable development strategy may be viewed as a system comprising the following components:
■ Regular multi-stakeholder fora and means for negotiation at national and decentralised levels, with
links between them.
■ A shared vision and set of broad strategic objectives.
■ A set of mechanisms to pursue those objectives in ways that can adapt to change (notably an
information system; communication capabilities; analytical processes; international engagement; and
co-ordinated means for policy integration, budgeting, monitoring, and accountability).
■ Principles and standards to be adopted by sectors and stakeholders, through legislation, voluntary
action, market-based instruments, etc.
■ Pilot activities, to generate learning and ownership.
■ A secretariat or other facility with authority for co-ordinating these mechanisms.
■ A mandate for all the above from a high-level, central authority such as the prime minister’s office
and, to the extent possible, from citizens’ and business organisations. 25
In September 2015, UN member states, including the Republic of Moldova, adopted the
Declaration of the Sustainable Development Summit, committing them to implementing the 2030
Agenda for Sustainable Development.
In September 2015, the Republic of Moldova undertook to implement the United Nations
(UN) 2030 Agenda for Sustainable Development along with 192 other countries. Shortly afterwards,
25
The DAC Guidelines Strategies for Sustainable Development.
https://www.oecd.org/dac/environment-development/2669958.pdf
17
the country set up a National Council for Sustainable Development, which is to coordinate the
implementation of the Sustainable Development Goals (SDGs). This permanent body supervises the
adaptation, integration and implementation of the 2030 Agenda and its goals. It comprises
representatives from ministries, the National Bank, the statistics authority, trade unions, employers’
associations and the national association of local authorities.
6. Sustainable development goals.
In 2015 the Sustainable Development Goals (SDGs) were released and ratified by the United
Nations as part of Agenda 2030, an agreement by the United Nations to improve global sustainability
by 2030. The SDGs are made up of 17 goals covering all aspects of sustainability and are an
ambitious step toward actionable targets for sustainable development covering all aspects of
sustainability and all sectors of society Yet there remain a number of key challenges relating to
implementation of the strategies and action plans required to achieve the goals. The main challenges
include: coordinating local, national and global responses [22,4], avoiding negative consequences
from responses to goals (or parts there-of) in isolation [12,36–38], accessing information and
18
resources to understand the goals and how to respond [21,42], and monitoring, evaluating and
assessments of progress at all scales in particular sectors.26
The 17 Sustainable Development Goals, addressing key socioeconomic, environmental, and
governance issues, provide a framework for thinking about sustainable development. They place
central importance on the nature of economic growth in terms of social inclusion, environmental
stewardship, and good governance. These goals, surrounding “wicked problems” too complex to be
dealt with directly, have received short shrift in country policies, despite their growing importance.27
1. NO POVERTY – End poverty in all its forms everywhere.
2. ZERO HUNGER – End hunger, achieve food security and improved nutrition and promote
sustainable agriculture.
3. GOOD HEALTH AND WELL-BEING – Ensure healthy lives and promote well-being for all at all
ages.
4. QUALITY EDUCATION – Ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all.
5. GENDER EQUALITY – Achieve gender equality and empower all women and girls.
6. CLEAN WATER AND SANITATION – Ensure availability and sustainable management of water
and sanitation for all.
7. AFFORDABLE AND CLEAN ENERGY – Ensure access to affordable, reliable, sustainable and
clean energy for all.
8. DECENT WORK AND ECONOMIC GROWTH – Promote sustained, inclusive and sustainable
economic growth, full and productive employment and decent work for all.
9. INDUSTRY, INNOVATION AND INFRASTRUCTURE – Build resilient infrastructure, promote
inclusive and sustainable industrialization and foster innovation.
10. REDUCED INEQUALITIES – Reduce inequality within and among countries.
11. SUSTAINABLE CITIES AND COMMUNITIES – Make cities and human settlements inclusive,
safe, resilient and sustainable.
12. RESPONSIBLE CONSUMPTION AND PRODUCTION – Ensure sustainable consumption and
production patterns.
13. CLIMATE ACTION – Take urgent action to combat climate change and its impacts.
26
Fleminga Aysha, Wisec Russell M., Hansend Heidi, Samsd Linda. The sustainable development goals: A case study.
In: Marine Policy 86 (2017) 94–103. https://isiarticles.com/bundles/Article/pre/pdf/94265.pdf
27
Thomas Vinod, Chindarkar Namrata. Economic Evaluation of Sustainable Development p. V.
https://library.oapen.org/bitstream/id/2e243f93-6068-4ae0-b74e-93bf2497bdce/1006970.pdf
19
14. LIFE BELOW WATER – Conserve and sustainably use the oceans, seas and marine resources for
sustainable development.
15. LIFE ON LAND – Protect, restore and promote sustainable use of terrestrial ecosystems,
sustainably manage forests, combat desertification, and halt and reverse land degradation and halt
biodiversity loss.
16. PEACE, JUSTICE AND STRONG INSTITUTIONS – Promote peaceful and inclusive societies
for sustainable development, provide access to justice for all and build effective, accountable and
inclusive institutions at all levels.
17. PARTNERSHIPS FOR THE GOALS – Strengthen the means of implementation and revitalize
the global partnership for sustainable development.
20
2. SUSTAINABLE DEVELOPMENT INDICATORS (4 hours)
1. Development indicators.
2. Importance of sustainable development indicators.
3. Systems of sustainable development indicators.
1. Development indicators.
The field of sustainability has developed immensely over the past few decades. The
awareness and action that precipitated this progress has accomplished a great deal, however one
difficult aspect of sustainable improvement is that it can be hard to measure and quantify. However
these measurements are still extremely important; they can validate actions taken, reveal areas in
which methods have been ineffective, and identify how our efforts can be improved into the future.28
The concept of indicators was originally used in a purely scientific context: sociological
research. It designated the translation of theoretical (abstract) concepts into observable variables so
that the scientific hypotheses involving these concepts could be submitted to empirical verification.
We come across the word in a seminal text by Lazarsfeld on the operationalisation of sociological
theories (Lazarsfeld, 1958) where the various stages in the translation of concepts into indices were
clearly identified and analysed for the first time.
An indicator is therefore an observable variable used to report a non-observable reality. As
regards the word 'index', it designates a synthetic indicator constructed by aggregating other so-called
'basic" indicators. Most of the indicators used in public policy-making are in fact indices: this is true
for GDP, the index of consumer prices, stock exchange indices such as the Dow-Jones and the
Human Development Index (HDI) of the United Nationals Development Programme (UNDP).
Shortly after Lazarsfeld's article was published, the word 'indicator", to which the 'social' was
added as a qualifier, became popular in the public domain, or at least in the domain of public policy.
A "social indicator movement" emerged in the United States, then in Europe, following the
publication by Bauer, Biderman and Gross (1966) of a report called "Social Indicators". Whereas for
Lazarsfeld and later, the scientific community, the role of indicators was purely methodological, it
became normative and axiological with the movement for social indicators. The reference to norms
and values is given at the outset in the definition Bauer gives for social indicators: "statistics,
28
Indicators of Sustainability action. https://blogs.rochester.edu/thegreendandelion/2014/04/indicators-of-sustainability-
action/
21
statistical series, and all other forms of evidence that enable us to assess where we stand and are
going with respect to our values and goals." (Bauer et al., 1966, p1).29
Indicators are a part of everyday life. In the cars, indicators like the check engine light and
temperature gauge alert us to potential issues with the engine. The battery icons on our phones or
tablets give us an idea of how much power we have left. For a country, indicators like unemployment
rates, the gross domestic product, and the consumer price index shed light on the state of economy.
Indicators are succinct measures that aim to describe as much about a system as possible in as
few points as possible. Indicators help us understand a system, compare it and improve it.
Indicators, like many other forms of measurement, can be used in three broad ways:
1. for understanding: to know how a system works and how it might be improved (research role),
2. for performance: monitoring if and how a system is performing to an agreed standard
(performance/ managerial/improvement role).
3. for accountability: allowing us to hold ourselves up to patients, the government and taxpayers and
be openly scrutinised as individuals, teams and organisations (accountability/democratic role)30
Indicators very often make people and organisations feel vulnerable, exposed and defensive.
This feeling is not likely to change unless more is done to help people understand and accept the
strengths, as well as the limitations, of these important measurement tools.31
The core characteristics of indicators are:
• Indicators only indicate: an indicator will never completely capture the richness and
complexity of a system. This makes people nervous that they will be judged unfairly on the basis of
only one (or a few) facts. A set of indicators will usually not improve things much. Indicators are
designed to give ‘slices’ of reality. They might provide the truth, but they rarely give the whole truth.
This leads to people’s understandable fear that they are being unfairly measured and judged. Like any
reductionist approach, an indicator must be understood in context.
29
Boulanger, Paul-Marie. Sustainable development indicators: a scientific challenge, a democratic issue
https://journals.openedition.org/sapiens/166
30
The Good Indicators Guide: Understanding how to use and choose indicators. p, 5.
https://www.england.nhs.uk/improvement-hub/wp-content/uploads/sites/44/2017/11/The-Good-Indicators-Guide.pdf
31
22
• Indicators encourage explicitness: indicators force us to be clear and explicit about what we are
trying to do. Not everyone feels comfortable with this as there is often a desire to retreat to non
specific agreements rather than face important differences in understanding. It can be difficult
attaining a true agreement and understanding of the work, though indicators can be very helpful in
achieving this by asking such questions as “What would success look like if we could only measure
three things?”
• Indicators usually rely on numbers and numerical techniques: A lot of people – even
competent professionals - fear numbers. Yet, in order to be able to use indicators properly or
challenge them, we need a basic understanding of elementary statistics (rates, ratios, comparisons,
standardisation etc). Although many statistical methodologies can be difficult and counter-intuitive to
learn (especially if they are only used occasionally), indicators don’t always use complex methods.
• Indicators should not just be associated with fault-finding: people often assume that
indicators are designed to find fault. In fact, they can help us understand our performance be it good
or bad. Well-designed measurement systems identify high performers (from whom we can learn), as
well as systems (or parts of systems), that may warrant further investigation and intervention.32
Social indicators, and therefore sustainable development indicators also, are scientific
constructs whose principal objective is to inform public policy-making. Their usefulness is dependant
on tradeoffs between scientific soundness and rigor, political effectiveness and democratic
legitimacy.33
2. Importance of sustainable development indicators.

Indicators perform many functions. They can lead to better decisions and more effective
actions by simplifying, clarifying and making aggregated information available to policy makers.
They can help incorporate physical and social science knowledge into decision-making, and they can
help measure and calibrate progress toward sustainable development goals. They can provide an early
warning to prevent economic, social and environmental setbacks. They are also useful tools to
communicate ideas, thoughts and values.
The United Nations Conference on Environment and Development in 1992 recognized the
important role that indicators could play in helping countries make informed decisions concerning
sustainable development. At the international level, the Commission on Sustainable Development
32
33
23
(CSD) approved its Work Programme on Indicators of Sustainable Development in 1995. The first
two sets of CSD Indicators of Sustainable Development (henceforth CSD indicators) were developed
between 1994 and 2001. They have been extensively tested, applied and used in many countries as
the basis for the development of national indicators of sustainable development.34
The last two decades have seen a proliferation of methods and indicators to measure
sustainable development. A number of composite indicators have been proposed in the academic
literature, and many national statistical offices have adopted sets of sustainable development
indicators to track progress towards a sustainable society. While these initiatives have helped to put
sustainable development on the agenda of national and international institutions, the differences
between the approaches remain large. Therefore, the Conference of European Statisticians (CES) set
up in 2009 a joint United Nations Economic Commission for Europe (UNECE), European
Commission (Eurostat) and Organisation for Economic Co-operation and Development (OECD)
Task Force to develop recommendations aiming to harmonize the different ways in which sustainable
development is being measured. The Task Force followed up on the work of a previous
UNECE/Eurostat/OECD Working Group on this topic which produced a publication Measuring
Sustainable Development in 2009.35
Example of indicators of sustainability:

Health Indicators:
The following indicators illustrate not only the state of a nation’s health but also the status of
primary health service available. Such indicators will assist the Government in recognising some
of the external and internal pressures on sustainability that are manifested as health issues.
 Overall life expectancy
 Infant mortality rate
 Mortality rate for specific health problems like heart disease and cancer
 Mortality rate for accidents
 % GDP spent on primary health care
 Hospital waiting lists and hospital waiting times
 Epidemiological studies and other health monitoring initiatives
 Population living in industrial areas by diversity
34
Indicators of Sustainable Development: Guidelines and Methodologies October 2007 Third Edition. P.3.
https://www.un.org/esa/sustdev/natlinfo/indicators/guidelines.pdf
35
Conference of European Statisticians Recommendations on Measuring Sustainable Development. UNITED NATIONS
New York and Geneva, 2014. https://unece.org/fileadmin/DAM/stats/publications/2013/CES_SD_web.pdf
24
(https://www.sustainable-environment.org.uk/Indicators/Health.php)
Smart city indicators:
From: https://www.researchgate.net/figure/Smart-city-indicators-and-categorization_fig4_336913541
3. Systems of sustainable development indicators.

Using systems or set of various indicators we can measure the sustainable development within
a certain country. Also, a small set of indicators can be used for international comparison.
The following three considerations were taken into account in selecting the indicators
included in the two large sets:
(a) Indicators based on theoretical concepts that are most fitting to measure specific aspects of
sustainable development. These are referred to as “ideal indicators”. The indicators are derived by
taking into account the measurement methods described in the academic literature although not all of
them are currently available in practice. The choice of indicators is primarily based on conceptual
grounds.
25
(b) Indicators based on the analysis of commonalities in existing SDI sets. These are
indicators which are included in the majority of existing SDI sets. Annex V of the publication
provides a detailed analysis of the indicators developed and used by the United Nations, Eurostat and
the World Bank as well as seven countries, members of the Task Force that developed the
Recommendations.
(c) Analysis of the data availability in international databases. The availability of the
indicators was checked in the databases of the United Nations, OECD and Eurostat.
There are more than 100 indicators for measuring the progress towards sustainable
development. Among them, eleven are more important, we call them key indicators. These indicators
are meant to evaluate the EU progress towards sustainable development in terms of objectives set in
the strategy.
From: https://www.researchgate.net/figure/Sustainable-development-indicators_tbl1_262563339
The need for reliable and pertinent indicators to guide the sustainable development process
was recognised early, at the time of the Rio Conference. It was reaffirmed in many sections of
Agenda 21 the programme document which was agreed at the summit, and was the central theme of
26
Chapter 40, the last one, which deals with information required for decision-making. The most
explicit reference to the limitations of existing indicators and to the need for new ones to evaluate
sustainability is in paragraph 40.4:
"40.4. Commonly used indicators such as the gross national product (GNP) and measurements
of individual resource or pollution flows do not provide adequate indications of sustainability.
Methods for assessing interactions between different sectoral environmental, demographic, social and
developmental parameters are not sufficiently developed or applied. Indicators of sustainable
development need to be developed to provide solid bases for decision-making at all levels and to
contribute to a self-regulating sustainability of integrated environment and development systems."
Therefore:
" 40.22. Countries and international organizations should review and strengthen information
systems and services in sectors related to sustainable development, at the local, provincial, national
and international levels. Special emphasis should be placed on the transformation of existing
information into forms more useful for decisionmaking and on targeting information at different user
groups. Mechanisms should be strengthened or established for transforming scientific and socio-
economic assessments into information suitable for both planning and public information. Electronic
and non-electronic formats should be used." 36
The Green Dandelion
36
27
III. GROSS DOMESTIC PRODUCT – AN IMPORTANT INDICATOR OF SUSTAINABLE
DEVELOPMENT (2 hours)
1. Gross domestic product (GDP). Methods for calculating GDP.
2. GDP, employment and sustainable development.
3. Real GDP and quality of life.
4. The limits of GDP as an indicator of sustainable development.
1. Gross domestic product (GDP). Methods for calculating GDP.

Countries are unequally endowed with natural resources. For example, some countries benefit
from fertile agricultural soils, while others have to put a lot of effort into artificial soil amelioration.
Some countries have discovered rich oil and gas deposits within their territories, while others have to
import most “fossil” fuels. In the past a lack or wealth of natural resources made a big difference in
countries’ development. But today a wealth of natural resources is not the most important
determinant of development success. Consider such high-income countries as Japan or the Republic
of Korea. Their high economic development allows them to use their limited natural wealth much
more productively (efficiently) than would be possible in many less developed countries. The
productivity with which countries use their productive resources—physical capital, human capital,
and natural capital—is widely recognized as the main indicator of their level of economic
development.37
Theoretically, then, economists comparing the development of different countries should
calculate how productively they are using their capital. But such calculations are extremely
challenging, primarily because of the difficulty of putting values on elements of natural and human
capital. In practice economists use gross national product (GNP) per capita or gross domestic product
(GDP) per capita for the same purpose. These statistical indicators are easier to calculate, provide a
rough measure of the relative productivity with which different countries use their resources, and
measure the relative material welfare in different countries, whether this welfare results from good
fortune with respect to land and natural resources or from superior productivity in their use.38
GDP is calculated as the value of the total final output of all goods and services produced in a
single year within a country’s boundaries. GNP is GDP plus incomes received by residents from
abroad minus incomes claimed by nonresidents. There are two ways of calculating GDP and GNP:
37
38
28
 By adding together all the incomes in the economy—wages, interest, profits, and rents.
 By adding together all the expenditures in the economy—consumption, investment,
government purchases of goods and services, and net exports (exports minus imports).
In theory, the results of both calculations should be the same. Because one person’s expenditure is
always another person’s income, the sum of expenditures must equal the sum of incomes. When the
calculations include expenditures made or incomes received by a country’s citizens in their
transactions with foreign countries, the result is GNP. When the calculations are made exclusive of
expenditures or incomes that originated beyond a country’s boundaries, the result is GDP. GNP may
be much less than GDP if much of the income from a country’s production flows to foreign persons
or firms. For example, in 1994 Chile’s GNP was 5 percent smaller than its GDP. If a country’s
citizens or firms hold large amounts of the stocks and bonds of other countries’ firms or governments,
and receive income from them, GNP may be greater than GDP. In Saudi Arabia, for instance, GNP
exceeded GDP by 7 percent in 1994. For most countries, however, these statistical indicators differ
insignificantly.39
GDP and GNP can serve as indicators of the scale of a country’s economy. But to judge a
country’s level of economic development, these indicators have to be divided by the country’s
population. GDP per capita and GNP per capita show the approximate amount of goods and services
that each person in a country would be able to buy in a year if incomes were divided equally. That is
why these measures are also often called “per capita incomes.”40
Gross domestic product (GDP) is the standard measure of the value of final goods and
services produced by a country during a period.
Gross domestic product (GDP) is the value of the goods and services produced by the nation’s
economy less the value of the goods and services used up in production. GDP is also equal to the sum
of personal consumption expenditures, gross private domestic investment, net exports of goods and
services, and government consumption expenditures and gross investment.41
“Gross” signifies that no deduction has been made for the depreciation of machinery,
buildings and other capital products used in production. “Domestic” means that it is production by
the resident institutional units of the country. The products refer to final goods and services, those
39
40
41
Dynan Karen, Sheiner Louise. GDP as a Measure of Economic Well-being. Hutchins Center Working Paper #43. 2018.
https://www.brookings.edu/wp-content/uploads/2018/08/WP43-8.23.18.pdf
29
that are purchased, imputed or otherwise, as: the final consumption of households, non-profit
institutions serving households and government; fixed assets; and exports (minus imports).
Gross domestic product (GDP) is a key measure of a nation’s economic development and
growth. Although GDP is the single most important indicator to capture economic activities, it is not
a good measure of societies’ well-being and only a limited measure of people’s material living
standards. Countries calculate GDP in their own currencies. In order to compare across countries
these estimates have to be converted into a common currency.
Like many of the ubiquitous inventions that surround us, the modern conception of GDP was
a product of war. While Simon Kuznets is often credited with the invention of GDP (since he
attempted to estimate the national income of the United States in 1932 to understand the full extent of
the Great Depression), the modern definition of GDP was developed by John Maynard Keynes during
the second world war.
In 1940, one year into the war with Germany, Keynes, who was working in the UK Treasury,
published an essay complaining about the inadequacy of economic statistics to calculate what the
British economy could produce with the available resources. He argued that such data paucity made it
difficult to estimate Britain’s capacity for mobilization and conflict.
According to him, the estimate of national income should be the sum of private consumption,
investment and government spending. He rejected Kuznets’ version, which included government
income, but not spending, in his calculation. Keynes realized that if the government’s wartime
procurement was not considered as demand in calculating national income, GDP would fall despite
actual economic growth taking place. His method of calculating GDP, including government
spending into a country’s income, which was driven by wartime necessities, soon found acceptance
around the world even after the war was over. It continues to this day.42
2. GDP, employment and sustainable development.

Employment is often pointed out as a link channel between economic growth and poverty.
Through employment economic growth transmitted onto poverty. Job creation produced by economic
growth enhances opportunities employment which in turn increases income of poor people. Higher
level of earnings would enable workers to spend more on education, thus raising the capacity and
42
Amit Kapoor, Bibek Debroy. GDP Is Not a Measure of Human Well-Being. https://hbr.org/2019/10/gdp-is-not-a-
measure-of-human-well-being
30
productivity their children, and creating necessary conditions for achieving higher level of economic
growth in the future
In the short run, the relationship between economic growth and the unemployment rate may be a
loose one. It is not unusual for the unemployment rate to show sustained decline some time after
other broad measures of economic activity have turned positive. Hence, it is commonly referred to as
a lagging economic indicator. One reason that unemployment may not fall appreciably when
economic growth first picks up after a recession’s end is that some firms may have underutilized
employees on their payrolls because laying off workers when product demand declines and rehiring
them when product demand improves has costs. As a result, employers may initially be able to
increase output to meet rising demand at the outset of a recovery without hiring additional workers by
raising the productivity of their current employees. This temporarily boosts labor productivity growth
above its trend (long-run) rate. Once the labor on hand is fully utilized, output can grow no faster
than the rate of productivity growth until firms begin adding workers. As an economic expansion
progresses, output growth will be determined by the combined rates of growth in the labor supply and
labor productivity. As long as growth in real gross domestic product (GDP) exceeds growth in labor
productivity, employment will rise. If employment growth is more rapid than labor force growth, the
unemployment rate will fall. Over an extended period of time, there is a negative relationship
between changes in the rates of real GDP growth and unemployment. This long-run relationship
between the two economic variables was most famously pointed out in the early 1960s by economist
Arthur Okun. “Okun’s law” has been included in a list of “core ideas” that are widely accepted in the
economics profession. 2 Okun’s law, which economists have expanded upon since it was first
articulated, states that real GDP growth about equal to the rate of potential output growth usually is
required to maintain a stable unemployment rate.3 Thus, the key to the long-run relationship between
changes in the rates of GDP growth and unemployment is the rate of growth in potential output.
Potential output is an unobservable measure of the capacity of the economy to produce goods and
services when available resources, such as labor and capital, are fully utilized. The rate of growth of
potential output is a function of the rate of growth in potential productivity and the labor supply when
the economy is at full employment.4 When the unemployment rate is high, as it is now, then actual
GDP falls short of potential GDP. This is referred to as the output gap. In the absence of productivity
growth, as long as each new addition to the labor force is employed, growth in output will equal
growth in the labor supply. If the rate of GDP growth falls below the rate of labor force growth, there
will not be enough new jobs created to accommodate all new job seekers. As a result, the proportion
31
of the labor force that is employed will fall. Put differently, the unemployment rate will rise. If the
rate of output growth exceeds the rate of labor force growth, some of the new jobs created by
employers to satisfy the rising demand for their goods and services will be filled by drawing from the
pool of unemployed workers. In other words, the unemployment rate will fall.5 If GDP growth equals
labor force growth in the presence of productivity growth, more people will be entering the labor
force than are needed to produce a given amount of goods and services. The share of the labor force
that is employed will fall. Expressed differently, the unemployment rate will rise. Only as long as
GDP growth exceeds the combined growth rates of the labor force and productivity (potential output)
will the unemployment rate fall in the long run. Knowing what that rate of GDP growth is might be
useful to policymakers interested in undertaking stimulus policies to bring down the unemployment
rate. But as just stated, the rate of output growth necessary to lower the unemployment rate requires
knowledge of the rates of labor force and productivity growth. Both have changed over time.
Between 1950 and 2000, the civilian labor force grew at an average annual rate of 1.6%.6 The growth
rate has slowed since then and is expected to continue doing so partly as a result of the aging of the
baby-boom generation. Between 2000 and 2010, the annual rate of labor force growth fell to 0.8%. It
is projected to fall further, to 0.7% per year on average, between 2010 and 2020. Predicting
productivity growth is more difficult than predicting labor force growth. Economists had, until
recently, identified three time periods that correspond with three different trend rates of growth in
productivity.8 Between 1947 and 1973, output per hour of labor in the private nonfarm business
sector grew at an annual rate of 2.8%. Between 1973 and 1995, productivity slowed to an annual
average rate of 1.4%. Between 1995 and 2005, it accelerated to 2.9% per year. Since then (2005-
2011), the rate of productivity growth has slowed to 1.6% annually.9 If recent trends in labor force
and productivity growth continue, real GDP growth above about 2.5% will be needed to push down
the unemployment rate from its currently elevated level. “More specifically, according to currently
accepted versions of Okun’s law, to achieve a 1 percentage point decline in the unemployment rate in
the course of a year, real GDP must grow approximately 2 percentage points faster than the rate of
growth of potential GDP over that period.”
3. Real GDP and quality of life.

Economic growth has raised living standards around the world. However, modern economies
have lost sight of the fact that the standard metric of economic growth, gross domestic product
(GDP), merely measures the size of a nation’s economy and doesn’t reflect a nation’s welfare. Yet
32
policymakers and economists often treat GDP, or GDP per capita in some cases, as an all-
encompassing unit to signify a nation’s development, combining its economic prosperity and societal
well-being. As a result, policies that result in economic growth are seen to be beneficial for society.
We know now that the story is not so simple – that focusing exclusively on GDP and economic gain
to measure development ignores the negative effects of economic growth on society, such as climate
change and income inequality. It’s time to acknowledge the limitations of GDP and expand our
measure development so that it takes into account a society’s quality of life.
A number of countries are starting to do this.
How well GDP measures the well-being of society
 GDP is an indicator of a society’s standard of living, but it is only a rough indicator because it does
not directly account for leisure, environmental quality, levels of health and education, activities
conducted outside the market, changes in inequality of income, increases in variety, increases in
technology, or the—positive or negative—value that society may place on certain types of output.
 The standard of living is all elements that affect people’s happiness, whether these elements are
bought and sold in the market or not.
The term standard of living before—it means all of the elements that contribute to a person's
happiness.
Standard of living is a broad term that encompasses many factors—including some that
are not bought and sold in the market and some that are. The level of GDP per capita, for instance,
captures some of what we mean by the term standard of living, as illustrated by the fact that most of
the migration in the world involves people who are moving from countries with relatively low GDP
per capita to countries with relatively high GDP per capita.
To understand the limitations of using GDP to measure the standard of living, it is useful to spell out
some things that GDP does not cover that are relevant to standard of living.
Limitations of GDP as a measure of standard of living
Because many factors that contribute to people's happiness are not bought and sold, GDP is a limited
tool for measuring standard of living. To understand it's limitations better, let's take a look at several
factors that are not accounted for in GDP.
GDP does not account for leisure time. The US GDP per capita is larger than the GDP per capita of
Germany, but does this prove that the standard of living in the United States is higher? Not
necessarily since it is also true that the average US worker works several hundred hours more per
33
year more than the average German worker. The calculation of GDP does not take German workers
extra weeks of vacation into account.
GDP includes what is spent on environmental protection, healthcare, and education, but it does not
include actual levels of environmental cleanliness, health, and learning. GDP includes the cost of
buying pollution-control equipment, but it does not address whether the air and water are actually
cleaner or dirtier. GDP includes spending on medical care, but it does not address whether life
expectancy or infant mortality have risen or fallen. Similarly, GDP counts spending on education, but
it does not address directly how much of the population can read, write, or do basic mathematics.
GDP includes production that is exchanged in the market, but it does not cover production that is not
exchanged in the market. For example, hiring someone to mow your lawn or clean your house is part
of GDP, but doing these tasks yourself is not part of GDP.
[Check out this example.]
GDP has nothing to say about the level of inequality in society. GDP per capita is only an average.
When GDP per capita rises by 5%, it could mean that GDP for everyone in the society has risen by
5% or that the GDP of some groups has risen by more while the GDP of others has risen by less—or
even declined.
GDP also has nothing in particular to say about the amount of variety available. If a family buys 100
loaves of bread in a year, GDP does not care whether they are all white bread or whether the family
can choose from wheat, rye, pumpernickel, and many others—GDP just looks at whether the total
amount spent on bread is the same.
Likewise, GDP has nothing much to say about which technology and products are available. The
standard of living in, for example, 1950 or 1900 was not affected only by how much money people
had—it was also affected by what they could buy. No matter how much money you had in 1950, you
could not buy an iPhone or a personal computer.
In certain cases, it is not clear that a rise in GDP is even a good thing. If a city is wrecked by a
hurricane and then experiences a surge of rebuilding construction activity, it would be peculiar to
claim that the hurricane was therefore economically beneficial. If people are led by a rising fear of
crime to pay for installation of bars and burglar alarms on all their windows, it is hard to believe that
this increase in GDP has made them better off. In that same vein, some people would argue that sales
of certain goods, like pornography or extremely violent movies, do not represent a gain to society’s
standard of living.
Does a rise in GDP overstate or understate the rise in the standard of living?
34
The fact that GDP per capita does not fully capture the broader idea of standard of living has led to a
concern that the increases in GDP over time are illusory. It is theoretically possible that while GDP is
rising, the standard of living could be falling if human health, environmental cleanliness, and other
factors that are not included in GDP are worsening. Fortunately, this fear appears to be overstated.
In some ways, the rise in GDP actually understates the actual rise in the standard of living. For
example, the typical workweek for a US worker has fallen over the last century from about 60 hours
per week to less than 40 hours per week. Life expectancy and health have risen dramatically, and so
has the average level of education.
Since 1970, the air and water in the United States have generally been getting cleaner. New
technologies have been developed for entertainment, travel, information, and health. A much wider
variety of basic products like food and clothing is available today than several decades ago. GDP
does not capture leisure, health, a cleaner environment, the possibilities created by new technology,
or an increase in variety.
On the other side, rates of crime, levels of traffic congestion, and inequality of incomes are higher in
the United States now than they were in the 1960s. Moreover, a substantial number of services that
used to be provided, primarily by women, in the nonmarket economy are now part of the market
economy that is counted by GDP. By ignoring these factors, GDP would tend to overstate the true
rise in the standard of living.
GDP is rough, but useful
A high level of GDP should not be the only goal of macroeconomic policy—or broader government
policy. But, even though GDP does not measure the broader standard of living with any precision, it
does measure production well, and it does indicate when a country is materially better or worse off in
terms of jobs and incomes. In most countries, a significantly higher GDP per capita occurs hand in
hand with other improvements in everyday life along many dimensions, like education, health, and
environmental protection.
No single number can capture all the elements of a concept as broad as standard of living.
Nonetheless, GDP per capita is a reasonable, rough-and-ready measure of the standard of living.
4. The limits of GDP as an indicator of sustainable development.

In an age of uncertainty, the global society needs a new compass that will direct it toward real
progress because the myth of economic growth as a synonym of progress ruled for more than half a
century (Abdallah et al., 2009). In economics, the GDP has long been used as a general indicator of
35
progress, and is already, by inertia, taken as a measure of progress, prosperity and even well-being.
Michaelson et al. (2009) point out that modern society is organized around a model of development
whereby increased economic output directly improves the well-being, reflected in higher living
standards and a better quality of life in society. Monitoring and increasing tendency of economic
output (usually measured by the GDP) over time, however, proved as an inadequate method of
progress evaluation as can be witnessed by the recent big financial crisis.43
The misuse of Gross Domestic Product as a measure of public wellbeing results from the idea
that economic growth is always synonymous with enhanced quality of life, disregarding the fact that
the economy profits from natural, social, and human capital. In order to monitor progress towards
sustainability and increased well-being, governments working closely with scientists developed new
metrics that go further than income and material wealth. There are several candidates for revisions of
the Gross Domestic Product. Based on a comprehensive literature review, this paper identified
several possible indicators that intend to adjust, supplement or substitute for Gross Domestic Product.
Two main approaches were identified. The first uses Gross Domestic Product as foundation to
build a complete index and includes proposals to greening Gross Domestic Product, socializing the
indices and including it in a more comprehensive index. The second approach relates to efforts to
redefine the indicators, with the use of environmentally oriented indicators and socially oriented
measures. Challenges to measure development, welfare, and wellbeing are discussed to provide a
wide-angle view of efforts to develop measures of social-economic-ecological status and progress
beyond the current very narrow Gross Domestic Product. It was recognized an urgent need for
guidance for the development of governance regimes designed to change from short-term decision-
making processes to those, which support the multidecade planning and implementation processes
that are needed to guide the transition to post fossil carbon societies. This comprehensive review
covers a wide range of topics, from problems of GDP to challenges and thoughts about indicators.
The review shows that if mankind is concerned with the sustainable development of the planet as a
whole, then progress indicators measured only in monetary or social terms are limited and restricted
to the weak or the medium sustainability model, and must be complemented by biophysical
indicators. It is time to change the global knowledge of what progress really is, changing the
discussion from growth to sustainable development and human well-being.44
43
Frajman Ivković, Anita. Limitations of the GDP as a measure of progress and well-being. Ekonomski Vjesnik. God.
XXIX, BR. 1/2016. pp.257-258
44
B.F. Giannetti, F. Agostinho, C.M.V.B. Almeida, D. Huisingh. A review of limitations of GDP and alternative indices
to monitor human wellbeing and to manage eco-system functionality. www.journals.elsevier.com/journal-of-cleaner-
production
36
How GDP falls short. But a measure created to assess wartime production capabilities of a
nation has obvious drawbacks in peacetime. For one, GDP by definition is an aggregate measure that
includes the value of goods and services produced in an economy over a certain period of time. There
is no scope for the positive or negative effects created in the process of production and development.
For example, GDP takes a positive count of the cars we produce but does not account for the
emissions they generate; it adds the value of the sugar-laced beverages we sell but fails to subtract the
health problems they cause; it includes the value of building new cities but does not discount for the
vital forests they replace. As Robert Kennedy put it in his famous election speech in 1968, “it [GDP]
measures everything in short, except that which makes life worthwhile.”
Environmental degradation is a significant externality that the measure of GDP has failed to reflect.
The production of more goods adds to an economy’s GDP irrespective of the environmental damage
suffered because of it. So, according to GDP, a country like India is considered to be on the growth
path, even though Delhi’s winters are increasingly filled with smog and Bengaluru’s lakes are more
prone to fires. Modern economies need a better measure of welfare that takes these externalities into
account to obtain a truer reflection of development. Broadening the scope of assessment to include
externalities would help in creating a policy focus on addressing them.
GDP also fails to capture the distribution of income across society – something that is becoming
more pertinent in today’s world with rising inequality levels in the developed and developing world
alike. It cannot differentiate between an unequal and an egalitarian society if they have similar
economic sizes. As rising inequality is resulting in a rise in societal discontentment and increased
polarization, policymakers will need to account for these issues when assessing development.
Another aspect of modern economies that makes GDP anachronistic is its disproportionate focus on
what is produced. Today’s societies are increasingly driven by the growing service economy – from
the grocery shopping on Amazon to the cabs booked on Uber. As the quality of experience is
superseding relentless production, the notion of GDP is quickly falling out of place. We live in a
world where social media delivers troves of information and entertainment at no price at all, the value
for which cannot be encapsulated by simplistic figures. Our measure of economic growth and
development also needs to adapt to these changes in order to give a more accurate picture of the
modern economy.
The end goal is to have a more just and equitable society that is economically thriving and offering
citizens a meaningful quality of life. With a change in what we measure and perceive as a barometer
of development, how we frame our policies will also catch up. In an economy with well-being at its
37
heart, economic growth will simply be another tool to guide it in the direction that the society
chooses. In such an economy, the percentage points of GDP, which are rarely connected with the
lives of average citizens, will cease to take the center stage. The focus would instead shift towards
more desirable and actual determinants of welfare.45
This chapter describes best practice of indicators, indices or indicators systems that have the potential
to go beyond GDP. Th ey have been selected to cover a wide variety of approaches applied by diff
erent actors, including international organisations (World Bank, UNDP), statistical offi ces (Eurostat,
Destatis), civil-society organisations and campaigns (Sbilanciamoci!) or independent think-tanks
(new economics foundation, Redefi ning Progress). In doing so, the diff erent indicators, indices or
indicator systems have been grouped into three diff erent categories: adjusting, replacing and
supplementing GDP as the dominant measure of development and societal progress.
1. The category adjusting GDP includes those approaches where traditional economic performance
measures like GDP or national saving rates have been adjusted by including monetised environmental
and social factors.
2. The category replacing GDP on the other hand contains indicators that try to assess well-being
more directly than GDP, e.g. by assessing average satisfaction (like the Happy Planet Index) or the
achievement of basic human functions (like the Human Development Index).
3. The category supplementing GDP consists of approaches, which have been designed to supplement
GDP. Here GDP is not adjusted or replaced by constructing new indices but complemented with
additional environmental and/or social information.46
Green GDP or Green National Accounting Green GDP is an index of economic growth
incorporating the environmental consequences of that growth, including the depletion of natural
resources and degradation of the environment. However, ecological or health damage caused by
industrial pollution may take years to appear. Furthermore, pollution may not harm locally, close to
the enterprise causing the pollution, but may damage more distant areas. Besides, pollution impacts
may be aggravated by externalities such as wind or rain (Xiaoqiang, 2004). As seen from the
viewpoint of Boyd (2006), Green GDP is to account for the non-market benefits of nature. However,
the practicality and validity of Green GDP are being complicated by the need of putting prices and
values on the nature aspects that society benefi ts from and by the need of calculating the
45
Amit Kapoor, Bibek Debroy. GDP Is Not a Measure of Human Well-Being. https://hbr.org/2019/10/gdp-is-not-a-
measure-of-human-well-being
46
Towards Sustainable Development. Alternatives to GDP for measuring progress.
https://epub.wupperinst.org/frontdoor/deliver/index/docId/3486/file/WS42.pdf
38
‘units/quantities consumed’. Boyd therefore calls for accounting ‘ecosystem services’ rather than
ecosystem components or processes. In most cases however, the Green GDP is calculated based on
the user costs of exploiting natural resources and on the value for the social costs of pollution
emissions (IPCC, 2000).47
Among indicators ‘replacing’ GDP there are: Human Development index (HDI) and
Genderrelated Development Index (GDI)
➤ Human Development Index (HDI) The Human Development Index (HDI) is a composite
index measuring the average achievements of a country in three basic dimensions of human
development (UNDP, 2004): • a long and healthy life, measured by life expectancy at birth; •
knowledge as measured by the adult literacy rate (with 2/3 weight) and the combined primary,
secondary and tertiary gross enrolment ratio (with 1/3 weight); and • living standard, as measured by
GDP per capita and adjusted for the local cost of living (PPP USD). Performance in each dimension
is expressed as a value between 0 and 1 by applying the following general formula: The HDI is then
calculated as a simple average of the dimension indices. The HDI was created to re-emphasize that
people and their capabilities should be the ultimate criteria for assessing the development of a
country, not economic growth. The HDI is annually reported for 177 countries and relies on
international data agencies with the resources and expertise to collect and compile international data
on specifi c statistical indicators. The HDI can be used to assess national policy choices, to stimulate
debate on government policies on health and education, asking why what is achieved in one country
is far from the reach of another (for example in case of two countries with a similar level of income
but yet with very different human development outcomes, or vice versa). Furthermore, it can also be
used to highlight internal disparities
➤ Gender-related Development Index (GDI) Despite the fact that the HDI incorporates social issues
such as longevity and knowledge, it does not take into account gender equity. Th e Gender-related
Development Index (GDI) takes note of inequalities between any two groups. Th e two groups
considered can in this case be ‘male’ and ‘female’. Th e indicator can be seen as an adjustment of the
HDI components in the following way (Saith et al., 1998): • Longevity: use of an indicator refl ecting
mortality rates in younger age groups is preferred. Th erefore, the indicators ‘female male ratio’ for
diff erent age groups (0-4 years and 5-9 years) can be used as a more appropriate gender-sensitive
indicator of ‘being healthy’. • Knowledge: Since the majority of the population in developing
countries is under 15, a reversal of weights — so that adult literacy accounts for 1/3 and the average
47
39
enrolment for 2/3 — might be more appropriate. • Income: the share of income earned by men and
women is derived by calculating their wage as a ratio to the average national wage and multiplying
this ratio by their shares of the labour force. Therefore, its result is based both on the ratio of female
wages to male wages and on the female to male ratio of the labour force. However, it does not aim to
reflect women’s access to income for consumption or other uses: women earning money may not
have any control over it within the household, or women not earning any money could, in principle,
control what is earned by male members of the household. Furthermore, the indicator could be
replaced by an indicator refl ecting time allocation by using an indicator which captures the
differential in the number of hours (paid and unpaid) that males and females work.
➤ Ecological Footprint (EF) — WWF and the Global Footprint Network Th e Ecological Footprint
(EF) is a resource accounting tool which measures the extent to which the ecological demand of
human economies stays within or exceeds the capacity of the biosphere to supply goods and services.
Th e EF measures how much land area (‘how many planets?’) is required to sustain a given
population at present levels of consumption, technological development and resource effi ciency. Th
e main components of the EF are land used for crops, animal products, fi sheries, forest products,
builtup land and the land needed to absorb and sequester CO2 emissions from fossil fuels. Th e EF
measures the fi nal consumption attributable to the residents of a country/ region, whether or not the
impacts of that consumption occur inside or outside the boundaries of that country/ region. Th e
footprint of a country should be understood as a measure of its consumption, and its worldwide
environmental impact. For this reason, a country’s EF can be signifi cantly larger than its actual
biocapacity. According to a report from WWF, global EF has more than tripled between 1961 and
2003. In a similar way, the Earth’s biocapacity, its biologically productive area — its resource-
supply, can be calculated. In 2001, Earth’s biocapacity was around 11.2 billion hectares or 1.8 global
hectares per person (assuming that no capacity is set aside for non-human species). However,
humanity’s global EF was 13.7 billion global hectares, or over 2.2 global hectares per person (gha).
Th erefore, the EF was exceeding the biocapacity by 0.4 global hectares per person, or 23%. Th is
means that the planet’s living stocks are being depleted faster than nature can regenerate them. Some
graphs illustrating these numbers are to be found in Annex 6.4. For Europe, these numbers are: an EF
of 4.8 global hectares per person versus a biocapacity of 2.2 global hectares per person for 2003
(Global Footprint Network, 2006; WWF, 2006). Countries with ecological defi cits (or ‘ecological
debt’) use more biocapacity than they control within their own territories. Ecological creditor
countries have footprints smaller than their own biocapacity. Taking a typical calendar year, the nef
40
41 has calculated that the world has gone into ‘ecological debt’ on 23 October 2007, causing
longterm environmental degradation. Th e concept of EF is useful for developing and assessing future
scenarios related to diff erent policy options. It provides a tool for evaluating success or failure of
policies and gearing them into a more sustainable direction. Possible scenarios have been brought
forward by WWF in their ‘Living Planet Report 2006’. Subtracting from total Earth’s biocapacity
(which is about 1.8 gha per person) all what is required to support our dietary needs and built-up land
use, only 1.0 gha per person is available for carbon sequestration. Looking at the per capita Carbon
Footprint of Europe, only Latvia is living within its global fair share with 0.45 gha. The highest per
capita Carbon Footprint is found in Luxemburg (6.88 gha) (Th omson et al., 2007).
For practical reasons, it is easier to measure the Carbon Footprint than the total Ecological Footprint
(due to data availability and reliable measuring techniques). At this stage, the Carbon Footprint might
therefore be a more appropriate tool to use within policy-making than the EF.
➤ Happy Planet Index (HPI) — new economics foundation Th e Happy Planet Index, introduced in
July 2006 by the new economics foundation (nef) and measured for 178 countries, is an index of
human well-being and environmental impact. Th e indicator shows the ecological effi - ciency with
which the well-being is delivered. It is based on two objective indicators, life expectancy and
Ecological Footprint per capita, and one subjective indicator ‘life satisfaction’. Multiplying longevity
and the subjective life satisfaction, you get the ‘degree to which people live long and happily in a
certain country at a given time’, also called Happy Life Years (HLY). Th e Ecological Footprint (EF,
see also Chapter 4.2.2) measures the extent to which the ecological demand of human economies
stays within or exceeds the capacity of the biosphere to supply goods and services. Th e data sources
for this indicator are: • UN Human Development Reports for ‘life expectancy’; • the World Database
for Happiness for ‘life satisfaction’ by R. Veenhoven; and • the Global Footprint Network for the
‘Ecological Footprint’.48
IV. WELL-BEING AND SUSTAINABLE DEVELOPMENT (4 hours)
48
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1. The concept of well-being.
2. Mechanisms of welfare production in the market economy.
3. Individual well-being versus social well-being.
4. The concept of poverty and sustainable development. Poverty level indicators.
5. Economic inequality and sustainable development.
1. The concept of well-being.

The term well-being encompasses all the ways in which people experience and evaluate their
lives positively. What exactly it means to experience life positively can be understood in myriad
ways. Some equate well-being with happiness, but this can sometimes conjure up images of an
immensely joyful, cheerful person that many do not identify with. As a result, some prefer to view
well-being as a prolonged state of contentment. For others still, well-being is simply about wellness--
as in having good physical and mental health. None of these views is incorrect; but each perspective
is incomplete in itself. A great challenge for the science of well-being has been to define and measure
this broad, encompassing construct. An important development in this field over the past few decades
is the recognition and growing acceptance that well-being consists of many aspects--that it cannot be
fully represented by any one measure. A person who is depressed cannot be said to be well; however,
to equate well-being with an absence of depression misses much of what people strive for when they
seek to enhance and preserve their well-being. In other words, well-being includes the lack of
suffering, but it is more than this.49
Well-being is a positive outcome that is meaningful for people and for many sectors of
society, because it tells us that people perceive that their lives are going well. Good living conditions
(e.g., housing, employment) are fundamental to well-being. Tracking these conditions is important
for public policy. However, many indicators that measure living conditions fail to measure what
people think and feel about their lives, such as the quality of their relationships, their positive
emotions and resilience, the realization of their potential, or their overall satisfaction with life—i.e.,
their “well-being.” Well-being generally includes global judgments of life satisfaction and feelings
ranging from depression to joy.
There are different aspects of well-being that include the following:
Physical well-being.
Economic well-being.
Social well-being.
49
Tov, William. Well-Being Concepts and Components. 2018. https://www.nobascholar.com/chapters/12/download.pdf
42
Development and activity.
Emotional well-being.
Psychological well-being.
Life satisfaction.
Domain specific satisfaction.
Engaging activities and work.
Because well-being is subjective, it is typically measured with self-reports. The use of self-
reported measures is fundamentally different from using objective measures (e.g., household income,
unemployment levels, neighborhood crime) often used to assess well-being. The use of both objective
and subjective measures, when available, are desirable for public policy purposes. There are many
well-being instruments available that measure self-reported well-being in different ways, depending
on whether one measures well-being as a clinical outcome, a population health outcome, for cost-
effectiveness studies, or for other purposes. For example, well-being measures can be
psychometrically-based or utilitybased. Psychometrically-based measures are based on the
relationship between, and strength among, multiple items that are intended to measure one or more
domains of well-being. Utility-based measures are based on an individual or group’s preference for a
particular state, and are typically anchored between 0 (death) to 1 (optimum health). Some studies
support use of single items (e.g., global life satisfaction) to measure well-being parsimoniously. Peer
reports, observational methods, physiological methods, experience sampling methods, ecological
momentary assessment, and other methods are used by psychologists to measure different aspects of
well-being.
2. Mechanisms of welfare production in the market economy.

Welfare is one of the highest values in modern societies and refers primarily to the living
conditions and the perceived life quality of individuals and families. How welfare is generated in
society, what are the producers, the products, the production processes, the limits of particular
productions, and new innovative “mixes”? After a survey of the literature (theory of social
production, well-being accounting, political productivity, social policy intervention), a scheme of
four major institutions of welfare production is discussed: markets, bureaucracies, associations,
private households. How private initiatives, the resources of associations and private households, and
new combinations of public and private efforts may overcome some of the deadlocks in the present
“market failure” and “state failure”?
43
3. Individual well-being versus social well-being.
One of the common ways to deal with defining and measuring the "good life" is to use the concept of
individual and community wellbeing. According to Wilkinson (1991), well-being is a concept meant
to "recognize the social, cultural and psychological needs of people, their family, institutions and
communities". From this definition, the complexity of the concept is clearly seen. It indicates a
necessity to consider different aspects of a community (such as quality of life), as well as economic
and social structures. The concept of community well-being is one of the frameworks for community
assessment (among with other concepts, i.e. local community quality-of life studies, community
health or community capacity). As Kusel and Fortmann put it in their works on the forest
communities in Canada, the concept is focussed on understanding the contribution of the economic,
social, cultural and political components of a community in maintaining itself and fulfilling the
various needs of local residents (Kusel and Fortmann, 1991). The studies of community well-being
use several approaches. Some studies analyze certain factors influencing well-being, such as poverty
or economic development (for example, Cook, 1995). Other studies focus on general well-being and
try to identify factors forming well-being in the communities (for example, Kusel and Fortmann,
1991). These studies build on a mix of social indicators, historical information, and data collection in
the communities, regarding how people themselves perceive different aspects of their lives. Despite
the differences of the approaches, what is common for all of them is the use of social indicators as
one of the main tools of wellbeing assessment. There are two well-being indicator approaches:
qualitative-subjective and quantitative-objective. Subjective measures often require
individual/community self-assessment (by selected informants or through surveys). Objective
measures are based on data sets that document social structure variables. The discussions on the
limitations of each approach can be found, for example, in Kusel's or Beckley's works on forest-
dependent communities (Kusel, 1996; Beckley, 1995). The selection of indicators reflecting
individual/community wellbeing, depends upon the purpose of the assessment. For example, locally
generated indicator lists may differ from public service generated lists. Nevertheless, there are certain
widely accepted sets of indicators that focus on aspects of individual/community wellbeing that are
easy to quantify, generalize and compare. These sets normally include such indicators as poverty,
unemployment, personal physical and mental health, education etc. They also may include suicide,
crime, divorce and other measures of social dislocation.50
50
Ribova Larrissa. Individual and Community well-being http://www.thearctic.is/PDF/Individual%20and%20Community
%20well.pdf
44
Life satisfaction measures how a person feels about their own quality of life, while community
wellbeing measures how they feel about the wellbeing of the community they live in. Communities
whose residents have high levels of individual wellbeing are somewhat more likely to have a higher
community wellbeing score compared to those whose residents have lower individual wellbeing
scores. However, this does not always hold – there are some communities in which residents have
high life satisfaction but report low community wellbeing, and vice versa. These communities are of
special interest because their results point to underlying dynamics to do with community functioning
and connectedness, and possibly to important heterogeneity within the community. Unusual cases
like these are often able to offer important insights into processes that are amenable to intervention
and are thus targets for more in-depth investigation. This will be a focus of future analyses of these
data.51
Factors that influence, and are influenced by, wellbeing. A number of factors that can
influence the wellbeing of individuals and of communities, and there are many ways in which
wellbeing can influence other outcomes.
These fall into two categories:
 Resources that help people and places adapt successfully to change and support their
wellbeing. These include the degree to which people and communities can access financial,
institutional, social, human and physical capital.
 Specific types of change occurring in rural and regional communities, such as migration of
residents to and from that community, difficult times in local agriculture, the emergence of new
industries or changes in government policy. These may lead to changes in the resources available to
people in these communities, and hence to wellbeing.
The Figure below illustrates how these different factors fit together. In any given community,
or an individual’s life, many changes will happen. In fact, at a given point in time, most people and
communities will be experiencing multiple types of change simultaneously, some good and some
bad. The Figure gives examples of some of the changes that are common to rural and regional
communities; many more could be given and this is not an exhaustive list.
These changes, such as the establishment of a new industry in a rural community, occurrence
of a natural disaster such as a flood, or a change in the services available in a community, affect the
access people and communities have to different resources, often called capitals. These resources are
51
Comparing individual and community wellbeing. https://www.canberra.edu.au/research/institutes/health-research-
institute/files/regional-wellbeing-survey/reports/2013-reports/RWS_2013-Report_Page-36-to-Page-90.pdf
45
critical to the adaptive capacity of individual and communities, and are described in this report as
belonging to five ‘capitals’:
 Human capital – skills, resources and health of individuals, and how these are brought
together in the form of leadership and collaboration to help communities adapt to change
 Social capital – ‘…the processes between people which establish networks, norms and
social trust, and facilitate co-ordination and co-operation for mutual benefit.’ (Cox, 1995, p.15)
 Institutional capital – the quality, representativeness and fairness of governance in a
community, and the ability of an individual to participate in governance processes
 Financial capital – the standard of living possible for an individual or community, resulting
from strength of economic activity, access to financial resources, and cost of living
 Physical and natural capital – the quality and accessibility of physical resources including
natural environment, built infrastructure, and access to services.
Access to these capitals is believed to influence the wellbeing of people and communities,
together with other factors that are not examined in this report. For example, the wellbeing of an
individual will be substantially impacted by personal factors such as a relationship ending, winning or
losing a large sum of money or the death of a loved one. These influences are critically important, but
are not examined in detail in this report, which is focused on understanding how the broader changes
occurring in rural and regional areas influence wellbeing, rather than personal events such as these.52
52
46
Fig. Pathways by which change in rural and regional areas may influence the wellbeing of
communities and of the people living in them. From: Comparing individual and community
wellbeing. https://www.canberra.edu.au/research/institutes/health-research-institute/files/regional-
wellbeing-survey/reports/2013-reports/RWS_2013-Report_Page-36-to-Page-90.pdf
 Financial capital:
 Household finances: The financial wellbeing of respondents’ households (individual capital)
 Local economy: Local jobs, economic activity and cost of living (community capital)
 Human capital:
 Human capital – skills and resources: The confidence of individuals that they have access to
the skills and resources they need to achieve what they desire (individual capital)
 Human capital – health: Mental and physical health (individual capital)
 Leadership and collaboration: The extent to which communities come together to cooperate to
use skills and resources to adapt to change (community capital)
 Institutional capital:
 Engagement in decision making: Ability to engage in local decision making processes
(individual capital)
 Governance: Fairness and inclusiveness of local institutions (community capital)
 Social capital (all measures are considered to be forms of both individual and community capital,
although further work may identify more specific distinctions):
 Informal social connectedness: How often a person spends time with friends, extended family
and neighbours (individual and
 Civic engagement: How involved a person is in organised activities such as taking part in
local community groups and attending community events such as festivals
 Political engagement and formal volunteering: How involved a person is in political activities.
Details about their participation in specific types of formal volunteering (emergency services
group, and environmental volunteering) have also been included here, as these are very
important in rural and regional areas and can be closely related to political activity..
 Social cohesion: The extent to which a person feels they belong to their local community,
can access support and resources from their community and trusts others in the
community
 Physical and natural capital (all measures can be considered community capital):
47
 Infrastructure and service provision Availability of key infrastructure like roads and internet
access and key services such as health and education
 Consumer services: Availability of retail, entertainment and recreation opportunities
 Liveability of natural and built environment
The wellbeing of households and communities is influenced by their access to financial and
economic resources. For households, having access to financial resources in the form of jobs and
income supports wellbeing by providing the means they need to access adequate food, housing,
goods and services. Multiple studies of individual wellbeing have identified that increasing household
income is correlated with an increase in a person’s life satisfaction, up to a point – the wellbeing-
enhancing effect of additional income reduces as incomes grow, suggesting that income is very
important to provide key needs but is of significant but steadily decreasing importance to wellbeing
as income increases and basic needs are met (Cummins 2000, Diener and Biswas-Diener 2002).53
4. The concept of poverty and sustainable development. Poverty level indicators.

Poverty is a multidimensional concept that seeks to measure levels of deprivation encountered
by a person, household or community. Although most of the literature focuses on indicators of
deprivation such as income, food, access to housing and so on, the choice of indicators to measure
levels of deprivation can often be arbitrary and hence may not reflect a full-scale measure of unmet
basic needs in different social contexts. This discrepancy leads to concepts such as poverty, social
exclusion and vulnerability being used interchangeably in development discourse.54
UN Definition of Poverty “Fundamentally, poverty is a denial of choices and opportunities, a
violation of human dignity. It means lack of basic capacity to participate effectively in society. It
means not having enough to feed and cloth a family, not having a school or clinic to go to, not having
the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It
means insecurity, powerlessness and exclusion of individuals, households and communities. It means
susceptibility to violence, and it often implies living on marginal or fragile environments, without
access to clean water or sanitation” (UN Statement, June 1998 – signed by the heads of all UN
agencies)
Poverty is pronounced deprivation of well-being. But what is “deprivation,” and how can it be
measured? Traditionally poverty was understood primarily as material deprivation, as living with low
53
54
Definitions and measures of poverty. http://devinit.org/wp-content/uploads/2016/07/Definitions-and-measures-of-
poverty.pdf
48
income and low consumption, characterized primarily by poor nutrition and poor living conditions.
However, it is easy to observe that income poverty in most cases is associated with so-called human
poverty—the low health and education levels that are either the cause or the result of low income.
Income and human poverty also tend to be accompanied by such social deprivations as high
vulnerability to adverse events (for example, disease, economic crisis, or natural disaster),
voicelessness in most of society’s institutions, and powerlessness to improve one’s living
circumstances. This multidimensional nature of poverty is revealed by interviews with the poor
themselves and confirmed by special sociological studies. The broader definition of poverty as a
multidimensional phenomenon leads to a clearer understanding of its causes and to a more
comprehensive policy aimed at poverty reduction. For example, in addition to the issues of economic
growth and income distribution, it brings to the fore equitable access to health and education services
and development of social security systems. Poverty reduction strategies also must allow for the fact
that different aspects of poverty interact and reinforce each other. For example, improving social
security not only makes poor people feel less vulnerable, but also allows them to take advantage of
higherrisk opportunities, such as moving to another location or changing qualifications. And
increasing poor people’s representation and participation not only helps them overcome the feeling of
being excluded from society, but also contributes to better targeting of public health and education
services.55
Key facts and figures on poverty 1. Close to 900 million people around the world live in
severe poverty based on an income poverty line of $1.90 a day in 2015. 2. Poverty levels remain high
globally, and are particularly concentrated in sub-Saharan Africa and South Asia. 3. Global poverty is
concentrated in lower middle income countries and countries dependent on natural resources as well
as in fragile and conflict-affected states. 4. Looking beyond the income measure, 1.6 billion people
are considered poor across measures of access to social services and security, with the largest global
share of poor people being in South Asia and the highest intensity in sub-Saharan Africa 5. Among
other factors, demographic growth is a major challenge to poverty reduction in sub-Saharan Africa. 6.
Meeting the 2030 target of eradicating poverty is contingent on addressing income distributional
patterns as well as incorporating environmental factors in economic policies. 7. Climate change could
account for close to 10.1 million more poor people by the middle of the century. 8. Even if the world
succeeds in reaching its target of 3% poverty by 2030, deep pockets of poverty will still remain
around parts of the world therefore Sustainable Development Goal 1 will not be met.
55
Soubbotina Tatyana P. Beyond Economic Growth. An Introduction to Sustainable Development. Second Edition.
2004. p. 33. https://www.gfdrr.org/sites/default/files/publication/Beyond%20Economic%20Growth_0.pdf
49
Measuring poverty Income poverty measurements generally use the physiological deprivation
model1 to assess lack of access to economic resources (income) to satisfy basic material needs. A
person (or household) is considered poor if the person’s (or household’s) income cannot acquire the
basket of goods and services used to define a threshold for poverty. The monetary value of the basket
is the poverty line and the population of people and households whose incomes are below this line, is
then derived through a head count. While this approach is the most currently used in household and
poverty surveys, it is important to understand that its focus is exclusively on income and expenditure
as surrogates for measuring access to goods and services. Concerns about its limitations as a tool for
assessing people’s level of deprivation has led to definitions that consider other nonmonetary aspects
such as human rights values enshrined in the UN Human Rights Charter, The UN Development
Programme’s Human Development Index has integrated more dimensions to the income/expenditure
measures, notably life expectancy, educational attainment and a measure of income (GNI Index).
Human development is defined as the process of enlarging people's freedoms and opportunities and
improving their well-being. Based on income/expenditure measures of poverty, the prevalence of
poverty is highest in sub-Saharan Africa and South Asia.56
Measures of income poverty are different in different countries. Generally speaking, the richer
a country is, the higher its national poverty line. To allow for international comparisons, the World
Bank has established an international poverty line of $1 a day per person in 1985 purchasing power
parity (PPP) prices, which is equivalent to $1.08 a day per person in 1993 PPP prices. According to
this measure, the portion of extremely poor people in the world’s population—those living on less
than $1 a day—fell between 1990 and 1999, from 29 percent to 23 percent. But, owing to the fast
growth of the world’s population, the absolute number of people living in extreme poverty decreased
by only 123 million in that time period. For middle-income countries, an international poverty line of
$2 a day, $2.15 in 1993 PPP prices, is closer to a practical minimum. Of the 6 billion people living on
Earth at the end of the 20th century, almost half—about 2.8 billion—lived on less than $2 a day, and
about one-fifth— 1.2 billion—lived on less than $1.57
Multidimensional Poverty Index.
Multidimensional poverty assessments aim to measure the non-income based dimensions of poverty,
to provide a more comprehensive assessment of the extent of poverty and deprivation. Several
international multidimensional poverty tools exist, including the EU-2020 official poverty measure
56
Definitions and measures of poverty. http://devinit.org/wp-content/uploads/2016/07/Definitions-and-measures-of-
poverty.pdf
57
50
(combining income, work, and material deprivation), UNDP’s MPI (a headline index summarizing
the proportion of people in poverty and the intensity of their poverty, which breaks down by
indicator), the “Bristol” methodology to measure multidimensional poverty of children, UNICEF’s
MODA (multidimensional poverty of children), and IFAD’s MPAT (10 separate indicators).
The Multidimensional Poverty Index (MPI) is published by the UNDP’s Human Development Report
Office and tracks deprivation across three dimensions and 10 indicators: health (child mortality,
nutrition), education (years of schooling, enrollment), and living standards (water, sanitation,
electricity, cooking fuel, floor, assets).
It first identifies which of these 10 deprivations each household experiences, then identifies
households as poor if they suffer deprivations across one -third or more of the weighted indicators.
Based on the Alkire Foster methodology, the MPI is created by multiplying together two numbers:
the percentage of the population who are poor; and the average percentage of the weighted indicators
that poor people experience (intensity). Including intensity provides an incentive to reach the poorest
of the poor. The MPI reflects those in acute poverty; alternative cutoffs are used to report those who
are vulnerable and those in severe poverty.
To ensure our conceptualization of multidimensional poverty is firmly rooted in the Open Working
Group Outcome Document and proposed SDGs, we support the creation of a revised MPI. At a
minimum this “MPI2015” would track extreme deprivation in nutrition, health, education, water,
sanitation, clean cooking fuel, and reliable electricity, to show continuity with MDG priorities. More
specifically it would reflect the following deprivations:
1. Adult or child malnourishment
2. Disrupted or curtailed schooling (a minimum of years 1-8)
3. The absence of any household member who has completed 6 years of schooling
4. Child mortality within the household within the last 5 years
5. Lack of access to safe drinking water
6. Lack of access to basic sanitation services
7. Lack of access to clean cooking fuel
8. Lack of basic modern assets (radio, TV, telephone, computer, bike, motorbike, etc.)
9. Lack of access to reliable electricity
Potential additional indicators to reflect the SDGs include work; housing; violence; social protection;
quality of schooling; health system functioning; teenage marriage or pregnancy; solid waste disposal;
51
birth registration; internet access; farm assets and a household’s vulnerability to economic shocks and
those posed by natural hazards and/or quality of work; and empowerment or psychological wellbeing
The Vicious Circle of Poverty. Economists generally assume that people’s willingness to save
for future consumption grows with their incomes. It seems natural that the poorer people are, the less
they can afford to plan for the future and save. Thus in poor countries, where most incomes have to
be spent to meet current—often urgent— needs, national saving rates tend to be lower. In
combination with the small size of poor countries’ economies, lower saving rates account for a much
smaller pool of savings available for desperately needed domestic investment in both physical capital
and human capital. 58
The Challenge of Hunger. Hunger is the most extreme manifestation of poverty and arguably
the most morally unacceptable. In the globalized world of the 21st century, with more than enough
food produced to feed all of its 6 billion inhabitants, there are still over 800 million poor suffering
from chronic undernourishment (which is more than the entire population of Latin America or Sub-
Saharan Africa). According to the recent estimate of the UN Food and Agriculture Organization
(FAO), in 1999-2001 there were 842 million undernourished people in the world, including 798
million in developing countries, 34 million in countries with transition economies, and 10 million in
high-income countries. See Figure 6.5 for the regional distribution of hunger and Data Table 2 for the
shares of undernourished adults1 and malnourished children2 in individual countries. Note that three-
quarters of the world’s hungry people live in rural areas and the majority of the hungry are women.59
5. Economic inequality and sustainable development.

Lorenz Curves and Gini Indexes To measure income inequality in a country and compare this
phenomenon among countries more accurately, economists use Lorenz curves and Gini indexes. A
Lorenz curve plots the cumulative percentages of total income received against the cumulative
percentages of recipients, starting with the poorest individual or household.
The Gini coefficient (Gini index or Gini ratio) is a statistical measure of economic inequality
in a population. The coefficient measures the dispersion of income or distribution of wealth among
the members of a population. The Gini coefficient is one of the most frequently used measures of
economic inequality. The coefficient can take any values between 0 to 1 (or 0% to 100%). A
58
59
52
coefficient of zero indicates a perfectly equal distribution of income or wealth within a population. A
coefficient of one represents a perfect inequality when one person in a population receives all the
income, while other people earn nothing. In addition, in some rare cases, the coefficient can exceed
100%. This may theoretically occur when the income or wealth of a population is negative. The Gini
coefficient is not an absolute measure of a country’s income or wealth. The coefficient only measures
the dispersion of income or wealth within a population.
Limitations of the Gini Coefficient
Despite its numerous advantages such as universality and scalability, there are still some limitations
to the Gini coefficient:
1. Sample bias
The validity of Gini coefficient calculations can be dependent on the size of a sample. For example,
small countries or countries with less economic diversity frequently tend to show low coefficients,
while large economically diverse countries usually demonstrate high coefficients.
2. Data inaccuracy
The Gini coefficient is prone to systematic and random data errors. Therefore, inaccurate data can
distort the validity of the coefficient.
3. Same Gini coefficient but different income distribution
In some cases, the coefficient can be the same for countries with different income distributions but
equal levels of income.
4. Does not reflect the structural changes in a population
One of the drawbacks of the coefficient is that it does not take into consideration the structural
changes in a population. Such changes can significantly influence the economic inequality in a
population. Generally, the situation arises because young people tend to earn less relative to older
people.60
Is a less equal distribution of income good or bad for a country’s development? There are
different opinions about the best pattern of distribution—about whether, for example, the Gini index
should be closer to 25 percent (as in Sweden) or to 40 percent (as in the United States). Consider the
following arguments. An excessively equal income distribution can be bad for economic efficiency.
Take, for example, the experience of socialist countries, where deliberately low inequality (with no
private profits and minimal differences in wages and salaries) deprived people of the incentives
needed for their active participation in economic activities—for diligent work and vigorous
60
Gini Coefficient. A statistical measure of economic inequality in a population.
https://corporatefinanceinstitute.com/resources/knowledge/economics/gini-coefficient/
53
entrepreneurship. Among the consequences of socialist equalization of incomes were poor discipline
and low initiative among workers, poor quality and limited selection of goods and services, slow
technical progress, and eventually, slower economic growth leading to more poverty. In many high-
income countries relatively low inequality of incomes is achieved with the help of considerable
transfer payments from the government budget. However, economists often argue that mitigating
inequality by increasing the burden of government taxes tends to discourage investment, slow
economic growth, and undermine a country’s international competitiveness. On the other hand,
excessive inequality adversely affects people’s quality of life, leading to a higher incidence of
poverty, impeding progress in health and education, and contributing to crime. Think also about the
following effects of high income inequality on some major factors of economic growth and
development:
• High inequality reduces the pool of people with access to the resources— such as land or education
—needed to unleash their full productive potential. Thus a country deprives itself of the contributions
the poor could make to its economic and social development.
• High inequality threatens a country’s political stability because more people are dissatisfied with
their economic status, which makes it harder to reach political consensus among population groups
with higher and lower incomes. Political instability increases the risks of investing in a country and
so significantly undermines its development potential.
• High inequality may discourage certain basic norms of behavior among economic agents
(individuals or enterprises) such as trust and commitment. Higher business risks and higher costs of
contract enforcement impede economic growth by slowing down all economic transactions.
 High inequality limits the use of important market instruments such as changes in prices and fines.
For example, higher rates for electricity and hot water might promote energy efficiency, but in the
face of serious inequality, governments introducing even slightly higher rates risk causing extreme
deprivation among the poorest citizens. These are among the reasons why some international experts
recommend decreasing income inequality in developing countries to help accelerate economic and
human development. But the simple fact that high levels of income inequality tend to strike many
people as unfair, especially when they imply starkly different opportunities available to children born
in the same country, also matters for sustainable development. After all, how can people care about
the needs of future generations if they don’t care about people living today?61
61
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55

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1.

INTRODUCTION TO SUSTAINABLE DEVELOPMENT (4 hours)

1. The notion of sustainable development.

3. The dimensions of sustainable development.

4. Principles of sustainable development.

5. Strategies of sustainable development.

6. Sustainable development goals.

2. Importance of sustainable development indicators.

Example of indicators of sustainability:

Smart city indicators:

3. Systems of sustainable development indicators.

The Green Dandelion

1. Gross domestic product (GDP). Methods for calculating GDP.

2. GDP, employment and sustainable development.

3. Real GDP and quality of life.

4. The limits of GDP as an indicator of sustainable development.

IV. WELL-BEING AND SUSTAINABLE DEVELOPMENT (4 hours)

1. The concept of well-being.

2. Mechanisms of welfare production in the market economy.

4. The concept of poverty and sustainable development. Poverty level indicators.

5. Economic inequality and sustainable development.

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