Quality of life 'hit by decline in environment': Flawed economics blamed for ignoring pollution costs 'Quality of life' index shows decline since Fifties

Gains in personal income since the Fifties have been largely cancelled out by increasing social and environmental damage, according to a study published today. People are spending more - but much of their expenditure has been forced on them by the rising toll of economic growth.

The cost of water, air and noise pollution is estimated at more than pounds 22bn, about 6 per cent of gross national product, according to a 'quality of life' index produced by the New Economics Foundation and the Stockholm Environment Institute.

The study suggests that GNP, despite having increased from pounds 138bn to pounds 360bn at 1985 prices between 1950 and 1990, has not brought corresponding social benefits. It is 'highly misleading' if taken as a measure of real economic welfare.

Over the last 40 years, despite a 230 per cent increase in GNP and a near-doubling in consumer expenditure, the costs of commuting, pollution, policing and cumulative environmental damage have all risen, according to the United Kingdom's first index of sustainable economic welfare.

Commuting cost an estimated pounds 2bn in 1950. By 1990, this had risen to pounds 9.6bn. So- called 'defensive' private expenditure on health and education - treatment for the huge rise in asthma cases, linked by some to rising traffic volumes, for instance - have increased from pounds 571m to pounds 3.5bn.

The accumulated bill for the loss of farmland and the costs of soil erosion is now pounds 1.5bn, three times that for 1950. There is also a pounds 58bn bill for the depletion of natural resources, such as oil. The comparable figure for 1950 was less than pounds 12bn. One-third of this loss occurred in the Eighties, when North Sea oil came on stream.

The index is the first application to the UK of 'green' accounting methods developed by two United States academics, Herman Daly and John Cobb. It concludes that quality of life increased from 1950 to the mid-Seventies, but has since declined.

The reason for the decline, it argues, stems from a fundamental flaw in conventional neo-classical economics. This externalises costs such as pollution or crime: society or the environment picks up the bill. The study says that such externalities 'are increasingly reflected as real losses in terms of welfare . . . (they) are coming home to roost'.

One important finding is that the gap between what people spend on consumer goods and the benefit they get from them has widened hugely since 1950 - because products may be less durable, for example.

Income distribution is viewed as another key factor in the health of a society. Differentials remained static throughout the Fifties, narrowed in the Sixties and early Seventies, but widened sharply in the Eighties. By 1990 they were more than 25 per cent 'worse' than in 1950.

Dr Tim Jackson and Nic Marks, the study's authors, conclude: 'It is intuitively obvious that a society which looks after the interests of a few, at the expense of the welfare of the majority, is likely to incur real economic costs in terms of policing, security and damage resulting from civil unrest.

'It is also to be expected that a growth in per capita consumer expenditure is less likely to be a growth in per capita welfare if it applies more to the rich than it does to the poor.'

Measuring Sustainable Economic Welfare - a Pilot Index: 1950-1990; New Economics Foundation, 88-94 Wentworth Street, London E1 7SA; pounds 12, plus pounds 1.20 postage and packing.

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