New report examines alternate frameworks for measuring national progress
Political willingness essential for societal engagement with new economic ideas
By Eleanor Chen
A nation’s gross domestic product (GDP) is intertwined with its people’s everyday lives, whether they are buying groceries or coping with natural disasters. Economic growth raises the GDP – as do accidents, disaster and war, which all lead to massive reconstruction – whereas a recession lowers it. Likewise, the causes of environmental degradation and deep social inequities more often result in additions to the GDP rather than reductions.
The GDP, which measures Growth as Usual – the union of physical expansion with monetised economic growth – disregards qualitative, good-or-bad distinctions among the kinds of growth, and gives no consideration to the systemic limits to growth. Growth as Usual is, in fact, so well epitomised by the GDP that these two terms have become nearly synonymous in use.
As far back as in 1972, however, a pioneering study titled The Limits to Growth had posited that humanity’s growing presence on Earth would eventually lead to global problems such as shortages of water and other resources, depletion of fisheries and global warming. Although harshly criticised then, some of the study’s original critics – including Nobel Prize-winning economist Joseph Stiglitz – have begun calling for new measures to complement or replace the GDP.
Recently, Tokyo-based Institute for Studies in Happiness, Economy and Society (ISHES) commissioned the report Life Beyond Growth to coincide with the 40th anniversary of The Limits to Growth. President of ISHES Junko Edahiro says that with “growing concern as conditions on Earth worsen, more and more people are starting to ask key questions, like ‘What is really important?’ and ‘What kind of economy and society is likely to bring us true happiness?’ ”
Alan AtKisson, author (photo credit: Stefan Nilsson)
The new report, launched in March 2012, looks at “alternatives and complements to GDP-measured growth for social progress”. In it, lead author Alan AtKisson points out that these alternative “New Economic” ideas are more associated with sufficiency than growth, and with respecting the limits of nature rather than with untrammelled expansion. Key differences between New Economics and the older paradigm of Growth as Usual can be traced in the former’s broader, more humane goals, an ethical orientation, clear ecological boundaries and more universal indicators.
Life Beyond Growth describes a range of ideas that progressively shifts from tinkering with the Growth as Usual model. These are: green GDP, green growth, genuine savings, green economy and genuine progress indicators, gross national happiness, sustainable development and the most radical, de-growth.
Life Beyond Growth was commissioned by Tokyo-based Institute for Studies in Happiness, Economy and Society (ISHES) in conjunction with the 40th anniversary of The Limits to Growth by Meadows et al, which many experts regard as an important pioneering work, albeit one with rather Malthusian predictions (photo credit: Karin Jantke)
Most widely accepted by the United Nations (UN) are the green economy and green growth models. The UN Environment Programme (UNEP) introduced green economy, which it defines as one that “results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities”.
Green economy advocates meeting human needs and aspirations within the limits of what the planet can sustain. Nations, corporations, cities, institutions, and households ought to convert their economies to a green one. For example, Japan would have to more than halve its consumption of resources and environmental impact while the US would need to reduce theirs by 75%.
This is defined by the World Business Council for Sustainable Development (WBCSD) as “pursuing economic growth and development while preventing environmental degradation, biodiversity loss and unsustainable natural resource use.”
Asia Pacific countries have recognised that a new approach is needed to avoid the trap of “growing first, cleaning up later”. A top-down approach, green growth is now encouraging the use of participatory assessments that identify the constraints, opportunities and concerns faced by the poor so that these are considered in policy planning and implementation.
Genuine progress indicator (GPI)
This redefines economic measurement in a more integrative way. Calculations of genuine progress attempt to improve on the GDP by subtracting social and environmental costs – many of which cause the GDP to rise – and adding the value of some non-monetised economic activity such as volunteer work.
In contrast to the GPI, this is a more traditional economic indicator – the national “net savings” rate modified slightly to integrate values of natural and human capital. The World Bank uses genuine savings data to demonstrate that traditional economic growth paths, which result in environmental degradation and resource depletion, may actually be rendering poorer nations more impoverished.
This is the conventional Gross Domestic Product, adjusted for the environmental costs of the economic activities that it measures. Green GDPs have been adopted most notably by China and India. Critics say that it is too difficult or impossible to calculate accurately. Economists try to monetise many free, natural resources – including water – using crude estimates for inclusion in GDP-type calculations.
An alternative to GDP that has become the cornerstone of international negotiations and agreement-making is sustainable development – traditionally defined as “[development that] meets the needs of the present without compromising the ability of future generations to meet their own needs”. It has no clearly articulated economic philosophy or strategy that is adhered to across the board, nor a single definitive way of measuring social progress.
Gross national happiness (GNH)
First introduced by Bhutan’s former King Jigme Singye Wangchuck in 1972, GNH represents a complete break with the traditional growth paradigm, both in conceptual and methodological terms. While traditional monetised measures are not included in GNH, it is not anti-growth. Instead, GNH could be said to come much closer to measuring the actual outcome that most people hope will be produced by economic growth: a good quality of life, for as many people as possible.
At the United Nations General Assembly in April 2012, Bhutan sought to convince the world to change global politics and economics, emphasise happiness and well-being rather than growth at the heart of the economy, and establish GNH as an alternate model to measure national progress. Arguing that every nation is a part of a larger world bound together by a common future and fate, Bhutan believes no single country can reap the full benefit of adopting and implementing the new sustainability-based economic paradigm unless all of humanity acts collectively and in harmony as one community. Bhutan also wants to present a new economic plan to the Rio +20 conference in June.
An even more radical alternative to the paradigm of economic growth, de-growth, means nothing less than growth’s opposite: shrinkage. Those in the “de-growth” movement study and promote the idea that aiming for smaller-scale economies will generate greater human well-being, while reducing the pressure on natural resources and ecosystems. This vision of change includes:
• A “radical overhaul” of the capital investment markets
• Ending “unrestrained profiteering at the expense of the customer and taxpayer”
• Dramatic cultural changes to reduce the emphasis on consumerism and materialism.
Likely way forward
Having considered these diverse metrics of progress, AtKisson believes green economy, is the most likely successor to the GDP. It allows for growth that does not result in current or future endangerment of people, and allows for shrinkages (selective de-growth) where necessary, such as the consumption or destruction of irreplaceable resources.
Although he expects adoption and adaptation to new social and economic realities to take some time, AtKisson suggests the green economy concept, especially when applied in tandem with principles of national happiness, offers “a clear and actionable vision for sustainability at the global scale”.
Look out for our interview with ISHES president Junko Edahiro in the July 2012 issue of Green Prospects Asia