March 29. 2024. 6:46

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EU Commission chief: Growth model based on fossil fuels ‘simply obsolete’


European Commission President Ursula von der Leyen criticised the current economic model’s focus on GDP growth on Monday (15 May), the same day the Commission announced higher-than-expected GDP across the bloc.

Speaking at the Beyond Growth conference at the European Parliament, von der Leyen invoked the ‘Limits to Growth’ report published by the Club of Rome in 1972, warning that eternal economic growth would not be possible on a finite planet.

“I today want to concentrate on one point that the report got right beyond any doubt: The clear message that a growth model centred on fossil fuels is simply obsolete,” she said to an audience that was receptive for such a message.

The Beyond Growth conference, that takes place form 15 to 17 May, is organised at the European Parliament under the lead of Philippe Lamberts, the co-president of the green group in the Parliament. It unites NGOs, academics, and mostly progressive political groups.

The centre-right Commission president tempered her criticism of the current economic model by praising the EU’s “social market economy” and the Green New Deal.

Should GDP be replaced?

Nevertheless, von der Leyen criticised the current focus on economic growth and the way it is commonly measured.

“We know that our children’s future depends not only on GDP indicators but on the foundations of the world we build for them,” the Commission president said. Quoting Robert Kennedy’s criticism of GDP in the 1960s, she said that “today, on a very fundamental level, we understand Kennedy’s wisdom”.

While she carefully avoided an outright rejection of GDP as a measure of societal progress, the Commission president said that “economic growth is not an end in itself.”

Jakob Hafele, executive director at the economic policy thinktank ZOE Institute and participant at the Beyond Growth conference challenged the Commission president’s reluctance to take her criticism further.

“President von der Leyen has acknowledged the limits to growth, but only up to a point. Her support for moving ‘beyond fossil fuel growth’ only is too narrow, it is not the truly transformative economic vision Europe needs,” he said.

Moreover, he argued that moving away from GDP growth as the dominant driver of economic policy was “the only way to go for a sustainable prosperous future”.

Proponents of the use of GDP as an adequate measure of economic well-being point to the fact that GDP per capita often broadly correlates with other measures of human progress like health and life expectancy.

More growth for 2023 and 2024

For now, the EU is not moving away from GDP as its guiding figure. This was made evident by the Commission’s spring economic forecast that, in a timing coincidence, was presented only about an hour after von der Leyen’s speech.

In a statement, the Commission welcomed a “better-than-expected start of the year” as the economic growth outlook for the EU increased from 0.8% to 1.0% of GDP for this year, and from 1.6% to 1.7% for 2024.

During the presentation, Economy Commissioner Paolo Gentiloni did not present any environmental indicators, focusing instead on GDP and inflation figures.

Asked by EURACTIV whether the Commission was going to change its approach to economic reporting based on von der Leyen’s criticism, Gentiloni responded cautiously, saying that the Commission was considering a stronger role “not only [for] the environmental dimension, but the social dimension” in its recommendation and policies.

He argued for a “gradually” stronger inclusion of sustainable development goals in country-specific recommendations and the European semester packages, as the EU’s economic policy oversight process is called.

“We encourage green budgeting,” Gentiloni said.

The power of internationally recognised indicators

“This is a work in progress, I think we have to improve it,” Gentiloni said, arguing that different dimensions of economic well-being had to be included in the measurements.

“But then at the end of the day, when we look at the IMF [International Monetary Fund], the OECD [Organisation for Economic Cooperation and Development], European Union forecasting and outlook, most of the attention is on the internationally-recognised indicators that we presented this morning,” he said.

It will not be easy to challenge the pre-dominance of GDP, which is used as a reference, not only in economic textbooks and financial analysis, but also in EU law, e.g. in the Union’s debt and deficit rules.

“Now the challenge is to figure out the detail of what comes next,” the ZOE Institute’s Jakob Hafele said.

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