[ Nippon Keidanren ] [ Journal ]
Messages from "Economic Trend", December 2007

From GDP to "gross welfare product"

Nobuo KUROYANAGI
Vice Chairman of the Board of Councillors, Nippon Keidanren
President & CEO, Mitsubishi UFJ Financial Group, Inc.

The clock is ticking for environmental issues. Humans have prospered so much that the earth's resources and environment are starting to signal limitations in their capacity to accommodate it.

It is quite astonishing that humans have prospered this much as a species, considering it only has a history of two hundred thousand years or so in the five billion years of the earth's existence. There are various theories to explain this, and I personally believe there are two essential factors.

The first and foremost, is technological innovation. From the discovery of fire and invention of hunting and agricultural technologies in the earliest of times, the industrial revolution centered on technological breakthroughs in motive power, and the recent IT revolution, innovation has been the driving force of human prosperity.

Innovations in social production systems should also not be forgotten. The division of labor which evolved through the transition from self-sufficient economies to economies based on barter exchange and currency circulation raised efficiency and production volume on an enormous scale. And via transitions in political systems such as the collapse of social communism, the uncompromising global pursuit of the advantages of division of labor has brought us to today's globalization which seems optimal for generating innovations in technology. In particular, the progress of globalization after the fall of the Berlin Wall realized economic growth going beyond people's expectations.

Due to the very success of material prosperity, our species is quickly facing the critical limits of the earth's environment and resources. We have no choice but to review our whole concept of measuring success through production output and population increase. What we must consider here is how these new directions should be set. In other words, what should technological innovations needed for human prosperity and the social production systems brought by them aim to achieve? While developing economies will need to continue pursuing output volume to some extent, advanced economies must change the goals of technological innovation from quantitative expansion to qualitative betterment, or "improving the security of our daily lives." A new system must be built into the mechanism of the market economy -- the driver of today's technological innovations and origin of our free market-based capitalism --, where competition is based on quantitative indicators that incorporate the concept of obtaining "security" and "welfare" in addition to the idea of seeking "profit". This transition, from GDP to "gross welfare product", will be a test to human wisdom and does not allow for any delay.


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