For decades now, exports and import have grown more rapidly than domestic production. This is a strong indication that, besides the rapid growth of foreign trade in final goods, trade in intermediates is becoming increasingly important. For this reason, an input-output ap-proach is more appropriate for any analysis of diversification than a traditional approach based purely on macroeconomic data.
This article analyses economic diversification in Gulf Cooperation Council (GCC) countries using data from input-output tables which are an integral part of the national accounts. We compare the performance of the GCC economies with that of a reference case, Norway, which is considered to have successfully diversified its economy despite having a large oil resource base. It also assesses these countries’ relative progress on sustainable development using a measure of the World Bank, adjusted net savings, which evaluates the true rate of savings in an economy after accounting for investments in physical and human capital, de-pletion of natural resources, and damage from environmental pollution.
The article concludes that GCC countries have, contrary to expectation, collectively per-formed relatively well on diversification, but their performance on sustainable development varies.
Industrial growth and a rapidly growing world population have large impacts on the global environment and allocation of material resources. Most changes in the environment are brought about by human activities and these activities result in a flow of materials. The flows of resources from the natural environment to the economy are a prerequisite of production while flows of residuals from the economy to the environment are the consequence of production and consumption. A full understanding of these processes requires a complete description of the physical dimension of the economy and its interaction with the environment.