“We need to escape the handcuffs of GDP” - Main contents

European Commission

[Check Against Delivery]

Janez Potočnik i

European Commissioner for Environment

“We need to escape the handcuffs of GDP”

Conference "Moving beyond GDP in European economic governance"

Brussels, 10 October 2014

Ladies and gentlemen,

Thank you Laszlo, and thanks also to the Italian Presidency and all involved in the organisation of this event for bringing together both policy makers and statisticians in a common reflection.

Robert F. Kennedy famously said ¹ that Gross National Product "measures everything, except that which makes life worthwhile".

Economic indicators remain important, but there is widespread recognition that indicators of environmental and social progress are more and more relevant when designing policies.

This subject is very close to my heart for two reasons:

Firstly, as an economist and former Director of the Macroeconomic Institute of Slovenia, I know about the importance and limitations of economic indicators such as Gross Domestic Product, Net Domestic Product, Gross National Product and Net National Income. All these indicators provide important information - but only partial information - about the state of a society.

And secondly, as a believer in transforming the European Union into a resource‑efficient, low‑carbon, inclusive and sustainable economy, I know that measurement of real progress requires something more.

Yes, economic progress is vital,… but it has to be balanced with the social and environmental pillars of the well‑being our society is built upon.

Not only that,… economic growth itself will simply not endure in the long term unless it is based on environmental and social sustainability from the beginning.

We have been through testing times in the last 5 or 6 years. But let's be clear, we already had problems before the economic downturn. We already had significant underlying structural and competitiveness concerns. Economic growth in Europe has been slowing down for decades. According to OECD data, GDP growth was 5.4 % in the sixties, 3.8 % in the seventies, 3.1 % in the eighties, 2.3 % in the nineties and 1.4 % in the first decade of this century.

And even though we might wish to go back to the way we were in 2007, the world has moved on in the meantime. As we exit the crisis, we will not return to the "old normal" of 2007. We have to confront a "new normal":

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  A world in which increasing global populations, millions of new middle-class consumers in emerging economies, and globalising markets for inputs and for products have led to pressure on resources.
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  A world in which Europe's comparative advantage has shifted.
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  A world in which our future competitiveness will be determined by our ability to channel investment to those areas where we have such an advantage, and by our ability to add as much value as possible to the factors of production at our disposal - whether they be land, labour, capital or knowledge.

Europe's long‑term competitiveness will be determined by how well we manage limited resources. Unless we transform our economies into resource‑efficient, low‑carbon, inclusive economies, we will find ourselves in much deeper economic trouble over the coming decades. If there is to be GDP growth, it will have to be Sustainable Growth. This was to some extent already recognised 5 years ago as the Barroso 2 Commission set up it's stall.

It was significant that the Europe 2020 Strategy adopted in 2010, embodied the notion of " smart, sustainable and inclusive growth", with a cluster of targets and headline indicators setting out the direction and enabling monitoring of progress. This was an important advance on the previous "Lisbon strategy".

Having secured the inclusion of resource efficiency as a flagship of the Europe 2020 Strategy at the beginning of my mandate, I have worked ever since to integrate it across all relevant policy areas, and to put it at the heart of economic co‑ordination process with Member States - the European Semester.

This has moved environment policy into the centre of economic policy making. But without established and agreed top-level targets and indicators this process will be difficult to continue at both European and national levels.

The challenge for the Juncker Commission will be to define the right growth path for Europe for the coming five years and beyond, beginning with the review of the Europe 2020 strategy.

In order to give a clear and common overarching objective to all private and public sector actors;… in order to ensure co-ordinated and appropriate action at national and European levels;… in order to engage with the mainstream political debate;… we need to have a clear and communicable target for resource efficiency within the Europe 2020 Strategy.

And the Commission already proposed the best candidate for such a proxy target in July in the Circular Economy Package. We argued that resource productivity, measured on the basis of Raw Material Consumption to GDP is the missing link in our array of headline targets. But it will be for the next Commission to decide whether or not to incorporate this proposal - along with second-level emissions -into the Europe 2020 Review in May next year.

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Ladies and Gentlemen,

John Meynard Keynes said "The difficulty lies not so much in developing new ideas as escaping from old ones". Today we have ideas about the transformation needed to put Europe's economy on a sustainable growth path, but for as long as we measure, assess and develop our policies primarily on the basis of GDP, we will never really escape from a resource intensive growth model that is no longer fit-for-purpose. We need to escape from the handcuffs of GDP.

¹ :

during a campaign speech in 1968.