Traditionally, a country’s economic health and well-being is
measured by something called the Gross Domestic Product (GDP) or its cousin, the
Gross National Product (GNP). The media eagerly report the number on a monthly
basis and its rise or fall is used as an indicator of how well things are
progressing or not. A recession, for instance, is defined as two consecutive
quarters of negative GDP growth.
But GDP is really just a measure of national spending with no distinctions
made between transactions that add to well-being and those that diminish it. As
long as money changes hands, the GDP increases.
The fact that this indicator is based upon economic growth is not surprising.
The collection of the statistics underlying GDP and GNP, which is called the
System of National Accounts (SNA), was created in the United States in the 1930s
to kick start the economy out of the Great Depression by maximizing production
and consumption of manufactured goods in a wartime economy.
Seventy-some years later, however, the GDP’s faith in unbridled growth and
efficiency is not as useful. Our current worldwide economic and environmental
crises suggest that we need a new definition of progress and a new way of
accounting for the costs generated by economic activity. For instance, under the
GDP, environmental pollution ends up being a positive because it creates
economic activity – and is even counted positively twice: once when it’s created
and again when it’s cleaned up. And the result of that pollution, which is often
illness such as cancer, also ends up on the plus side of the ledger because it,
too, creates economic activity.
Another area that isn't accounted for in the GDP method of measurement is
unpaid care-giving work in the home, which is often performed by women, either on
a full-time basis or before and after time spent at a paid job. This includes
billions of dollars worth of housework, child-care (and education in the case of
unschoolers), and homecare of the sick, disabled and elderly. Because this work
is unpaid, it – like all other so-called "volunteer" work – is invisible to our
public accountants.
Shouldn’t a true set of indicators adjust for factors such as the value of
household and volunteer work, which are invisible in the GDP because no money
changes hands?
In order to paint a more accurate picture of what life is like in our families
and our communities, a number of alternative economic indicators are being
developed by progressives around the world.
A think tank called Redefining Progress, founded in California in 1994, puts it
this way: “We believe that progress is not measured by the quantity of goods we
consume, how fast our economy is growing or how much financial wealth is being
amassed. We believe progress is measured by how well we equitably distribute
wealth, income and access to cultural amenities; diversify and stabilize our
economic base; protect and restore native ecosystems; and advance social,
economic, and environmental sustainability.”
So Redefining Progress created the Genuine Progress Indicator (GPI) as an
alternative to the GDP. The GPI enables policymakers to measure how well
citizens are doing, based on economic, health, social and environmental factors.
In effect, the GDP could be seen as gross profit of a company and the GPI as its
net profit – or revenue minus the costs incurred. If the costs associated with
our way of life were to equal the financial gains, the GPI would be zero.
A number of countries have used the GPI to recalculate their GDP. And in Canada,
Nova Scotia and Alberta have pioneered its use provincially. In 2000, the
National Roundtable on the Environment and the Economy began a three-year
multi-stakeholder program aimed at developing a small set of indicators to track
whether Canada’s economic activities threatened the way of life for future
generations. The Environment and Sustainable Development Indicators (ESDI)
Initiative marked the first time a federal finance minister acknowledged the
need for such measures.
As increasing numbers of citizens understand that we need to account for the
costs of economic growth, alternatives to the traditional GNP/GDP indicators are
being created and used as tools to help us create well-being rather than borrow
it from future generations...and to recognize the contributions of everyone in
society to our collective well-being.
Learn More
If Women Counted by Marilyn Waring (Macmillan, 1989)
Alternative Economic Indicators by Victor Anderson (Routledge, 1991)
Redefining Progress
Quality of Life Index
