Reforming GDP metrics, an assessment
From an interview by Miren Gutierrez (IPS) of HAZEL HENDERSON, sustainability metrics pioneer, on recent proposals by Joseph Stiglitz and Amartya Sen.
Excerpts:
IPS: French President Nicolas Sarkozy asked award-winning economists Joseph Stiglitz and Amartya Sen, and 20 other experts to find new ways to measure growth. The panel issued a report that says that countries need to find ways to measure happiness and well-being alongside raw economic growth. How would this new way of measuring growth affect poor countries? Bhutan, for example, declares a high “Gross National Happiness”. If a new well-being index is the reference for wealth, Bhutan may need no aid, trade or investment in spite of being one of the poorest countries of the world…
HH: The Stiglitz-Sen report is moving in the right direction but too slowly and is still trapped intellectually in the now-defunct “economics box”.
Complex human societies can never be measured by using a single discipline, especially by economics which was never a science. Economic calculations are blind to most of the social and environmental costs its narrow decisions impose on others, reframed as “externalities,” i.e., costs companies and projects omit from their balance sheets. These uncounted impacts of financial decisions have accumulated unnoticed by economists until they are now crises of poverty, inequality, social exclusion and pollution – culminating in the greatest market failure: climate chaos.
Stiglitz and Sen cannot see that new national indicators of “progress” must be multi-disciplinary and use many metrics as appropriate in the kind of systems approach used in the Calvert-Henderson Quality of Life Indicators, an alternative approach I designed with the Calvert Group, tracking 12 aspects of quality of life.
I am very cautious about “happiness” indicators because they are culturally dependent and too subjective (e.g., people living near a hidden toxic dump or drinking polluted water can say they are “happy” while ignorant of these dangers). Conservative economists and statisticians have seized on “happiness” surveys as an excuse to cut social welfare budgets.
IPS: The report recommends GDP growth be used simply to measure market activity and that new systems take into account environmental health, safety and education. Aren’t MDGs enough as a reference?
HH: The report is in error in recommending that GDP continue to be used to measure market activity because this would perpetuate ignoring the social and environmental “externalities” piling up. These must be subtracted from GDP to calculate a net level of real GDP.
The report also makes the mistake used by statistical offices and the United Nations System of National Accounts (UNSNA): keeping social, environmental, health, education, poverty gaps, etc. which have proliferated but are designated as “satellite accounts” and therefore ignored by media and devalued. Real reform of GDP as I have urged, explicitly covering goals similar to the MDGs, is still needed. The Stiglitz-Sen commission was composed of economists rather than including sociologists, health experts, educators, and environment experts.