GDP hits retirement age
2014 marks an important, if unnoticed, anniversary. Gross Domestic Product (GDP) is now eighty years old. Born in 1934 and in active service until 1944, GDP is an elderly pensioner. The measurement has had a venerable career; having originally been devised to provide information about economic activity during the Great Depression, GDP is now an unrivalled authority for measuring national progress across the world.
Yet, the limitations of GDP are well known. GDP tells us little about our communities - and whether they have access to adequate healthcare, or good schools or decent homes. It reveals little about the distribution of income or the quality of our jobs. It also tells us nothing about the state of our environment on which our economies depend. GDP can increase as a result of decimating our rainforests, polluting our waterways or releasing carbon into the atmosphere. As such, GDP is a limited lens by which to measure complex and urgent problems. So has the time finally come for GDP to step down quietly and retire? Or, is it still in rude health and fending off other indicators of national progress?
A growing movement
As part of our Measure What Matters programme I recently attended Brainpool’s final workshop, a three year EC funded project researching and discussing how to go ‘beyond GDP’. The good news is that the movement for alternative indicators is alive and well. Building on the work of the Stiglitz-Sen-Fitoussi Report (2009), a network of practitioners and policy makers at local, national and global levels are mobilising around this agenda. This is exciting and the GEC is committed to the campaign. But, if we have long had super-star economists, policy makers and civil society all agreeing that GDP is no longer a sufficient measure of national success, then why is it still so dominant in all economic and political decision making?
Brainpool’s research suggested that our reliance of GDP does not come from a lack of choice of indicators. There are hundreds of sustainability indicators, metrics and datasets, and that is part of the problem. Policymakers do not know which ones are legitimate, accurate or useful. There are now some valiant efforts underway to try and map all of these different indicator sets via projects such as Netgreen, a project we are involved with, and the Earth Institute, Colombia University.
We do not need yet another indicator set. Rather, we need to focus on finding the connections, the overlaps and disconnections between indicators in use at different levels of operation and in different contexts. We are finding through our Measure What Matters work that there are some glaring disconnections between indicators at use at different levels. It is near impossible to track issues such as water or carbon use or labour rights across corporate, national and global levels. We urgently need to bridge these gaps so that we can make global goals (and limits) operational at a national, corporate or community level, and vice versa.
A new narrative
To date, the campaign to go ‘beyond GDP’ has struggled to reach beyond the walls of UN buildings or statistical offices because it does not connect to people’s lives, fears and aspirations. We need to build a strong and positive narrative about the benefits of a different approach. This narrative needs not only to inspire communities but also be relevant and useful to other stakeholders including labour groups, educators, and business.
But is it possible to have one narrative that appeals to so many diverse interests and needs? One thing that we have learned through our series of green economy multi-stakeholder dialogues in diverse countries is that there is often a common theme – and that is for greater resilience. Resilience to economic shocks and changes in the labour market (job security, access to pensions, social safety nets); resilience to political upheaval (feeling empowered, being listened to); and resilience to environmental change (protection against flooding, droughts etc.). Perhaps this quest for resilience should be the starting point for our narrative. This is about being better prepared for an increasingly unpredictable future.
So what next?
Here at the GEC we see that there is a frenzy of activity happening at the corporate level to start to measure progress beyond profit alone through initiatives such as the International Integrated Reporting Committee. At the same time as national policy makers are discussing ‘beyond GDP’, governments and the UN system are all discussing the role of the global Sustainable Development Goals.
Our project, Measure What Matters, is seeking to join the dots between all of these different indicators of progress – global, national and corporate – to see if there are core indicators that can be shared across all levels. Our mission is to see how global environmental and social goals can be made relevant, and operationalised, at the national, business and community level. We need your help, insights and commentary – please do get in touch with us and become part of our growing community.
So is GDP ready to retire? GDP still performs an important function but it is only a very narrow lens by which to see increasingly complex problems. It's sight is poor, it's body is no longer fit for purpose. We need a dashboard of indicators that, when taken together, give us 20:20 vision and 360 degree perspective of what is happening to our communities and our environment. We need to start measuring what matters.
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