The aim of many governments is to support the growth of Gross Domestic Product (GDP) ahead of environmental and social values. GDP comparisons are made between countries, and these are the basis on which we judge how well each is doing over the years. Yet GDP measures only economic activity and the goods and services produced, not the welfare of people or the state of the environment, both of which ought to be important for governments. For instance, a car accident would contribute to the growth of GDP – counterintuitively, perhaps – since the vehicle needs repairing and people need hospital care, both of which require money and work.
This problem has been raised for several years by economists who are aware of the importance of welfare and the environment. Our questions now are: why are many governments unaware of this, or if they are aware, why are they neglecting it? And how can the system be changed?
Since the GNH (Gross National Happiness) indicator was developed in Bhutan in 1972, there have been several proposals about how to measure what is good for people and the planet.
At the United Nations there has for many years been a System of Environment Economic Accounts (SEEA). It involves studies of environmental and economic benefits and damages of just about any human activity.
The OECD (Organisation for Economic Co-operation and Development) has conducted another interesting study and has produced the Better Life Initiative (BLI) index. This has been used to compare many countries from the point of view of people’s wellbeing. The ecological footprint is considered when it affects or worries people. The Nordic countries, Australia, Canada and New Zealand rank high on the BLI scale.
One relevant study was made in England by the New Economics Foundation, developing a Happy Planet Index (HPI). Comparing different countries it measures positive and negative issues, like life expectancy, experienced wellbeing, inequality of outcomes and ecological footprints. The countries that received the highest HPI scores were Costa Rica, Mexico and Colombia – in all of which the residents are very satisfied with life and the ecological footprint is relatively low.
During the 1990s a number of countries adopted the Index of Sustainable Economic Welfare (ISEW), originally developed by Daly and Cobb (For the Common Good, Boston 1989). Attempts were made to use this index in the USA, UK, Netherlands, Austria, British Columbia, Sweden, Chile and Finland, but it never replaced GDP. The ISEW was later extended into the Genuine Project Indicator (GPI), which measures 26 different components of environmental, social and economic importance. Some of these measure positive values, others take negative effects into account.
The components of GPI were described by Clive Hamilton from the Australia Institute, and in several papers by Professor Philip Lawn. Lawn recently spoke at a NENA meeting, describing his work on calculating GPI for a number of countries and aiming to make meaningful comparisons between them.
In order to work towards an alternative to GDP, the time has come to choose between the alternative measures that have been proposed. GPI should be the preferred choice because:
- It is comprehensive, measuring 26 different components of environmental, social and economic importance;
- It takes into regard positive values for people and for the environment as well as negative effects;
- It has already been applied by many countries; and
- It has been studied and found to be feasible by Professor Lawn and other senior economists.
Work in Progress
A number of states in the USA are already incorporating GPI in their budget discussions, and several other countries are also considering using GPI to look at social and environmental issues when making budget decisions. In New Zealand, the latest budget is a “Wellbeing Budget” focusing on five key social and environmental issues. The ACT government is currently considering introducing various indicators in a future Wellbeing Budget as well.
For alternatives like GPI to be promoted it is important to discuss these issues inside political parties. Policy platforms should be based on what is valuable for people and for the environment.
My own experience comes from working with the Greens. Alternatives to GDP were discussed at the Global Greens Congress in Liverpool in 2017, where I conducted a workshop attended by about 50 Greens from several different countries. A common view was that GPI is the most promising alternative to GDP. In several countries, Green parties are in coalition or have influence from the floor of the parliament.
It is important to make GPI well known so that it can be used by governments when making budget decisions. This must start by making the voting public aware, so the media has a big role to play. Reporting the state of GPI in financial reviews on television and in newspapers would be an important step on the way. It would be very valuable if experts like Alan Kohler or David Chau included changes in GPI in their financial presentations. With sufficient publicity, levels of GPI would be reported in the media parallel to those of GDP or even instead of GDP. Governments would listen to the voters and make decisions based on GPI to the benefit of the people and the planet.
What can we do?
A new economy for future well-being should be based on measures like those of the GPI. Members of NENA and other ecologically aware people may help to spread the knowledge about these basic matters through political parties and through media.
A Utopian Dream can come true.