What makes you feel as though you are progressing in life? Do you measure your success by the dollars in the bank? Perhaps you count the amount of cars you own, or boats, or socks, or elephants? Here’s a radical idea — do you measure progress by the life you live? I mean, the experiences, the knowledge, the family, the friends, and the community?
I would venture a guess that all of these things add together to create a more appropriate ideal of development — the dollars, the elephants, the community, the experiences. Unfortunately our governments insist on equating progress with growth in economic activity. Even more unfortunate, the metric used to measure this growth, GDP, is a failure at best and a gross misrepresentation at worst.
The failure that is GDP
The Gross Domestic Product was created to measure economic activity. It was not originally intended to be used as a metric of national progress, yet consumerism prevailed in this department and it became the accepted means to gauge national progress and development. The problem with GDP, as the kids on the street call it, is that it accounts for everything. (well, everything that can be put in dollar terms)
When a plain crashes into mountain and it takes months to recover everyone and clean up the wreckage, the local economy “booms” from the inflow of emergency personal, investigators, and clean up crews. In the eyes of GDP this is seen as growth, as a positive thing. GDP also fails to take into account other negatives like environmental degradation and resource depletion; and just as callously ignores positives like volunteer and household work because they often have no monetary exchange or means of valuing in such a way.
Those who still wish to conflate welfare and GDP argue that high consumption by the wealthy improves the lot of the world’s poor. Perhaps, but it’s a very clumsy and inefficient instrument. After some 60 years of this feast, 800m people remain permanently hungry. Full employment is a less likely prospect than it was before the frenzy began.
Prosperity is the name, measuring is the game
There are several different means of measuring prosperity and progress of nations. The new economics foundation NEF) released their Happy Planet Index, which “shows the relative efficiency with which nations convert the planet’s natural resources into long and happy lives for their citizens.”
Redefining Progress has created the Genuine Progress Indicator (GPI). As Redefining Progress explains, GPI starts with consumption just as GDP does, but “adjusts for factors such as income distribution, adds factors such as the value of household and volunteer work, and subtracts factors such as the costs of crime and pollution.” Other ideas include the Index of Sustainable Economic Welfare and the Index of Social Health which both take into account multiple factors of health and well-being.
Alternatives to GDP are not that radical and more countries are beginning to research the topic, if not adopt new gauges of prosperity. Bhutan, the small Himalayan nation, adopted one such metric with their Gross National Happiness index. The French have spent some time thinking about the subject and their President Sarkozy endorsed a shift in emphasis “from a ‘production-oriented’ measurement system to one focused on the well-being of current and future generations.”
Even China has given alternative metrics a shot with it’s “ Green GDP,” which measures economic growth and factors in environmental consequences. The US has also given the okay for some research on “ green accounting,” which is a step in the right direction if only a show — only time will tell. One thing for certain, it is only a matter of time until we adopt a better means of measurement, whatever it might be.
Originally published in January 2010 on the Post Growth Institute (PGI) blog. Find out more about the PGI on our website.