Beyond GDP: Measuring progress, true wealth, and the wellbeing of nations

 

Beyond GDP

Measuring progress, true wealth, and the wellbeing of nations

May 2014 newsletter

 

Interview

Quote

In the spotlight

 

In brief

Agenda

On the web

 

In this edition of the Beyond GDP newsletter:

 

Interview

 

Interview with Enrico Giovannini

Enrico Giovannini is an Italian economist and statistician. As Chief statistician and Director of the Statistics Directorate of the OECD (from 2001 to 2009) he established the Global Project on Measuring the Progress of Societies. From August 2009 to April 2013 he was President of the Italian Statistical Institute (Istat). From April 2013 to February 2014 he was the Italian Minister of Labour and Social Policies. As full professor of economic statistics at the University of Rome, he has published many articles and books in economics and statistics.


What are the major insights you have gained from your work at the OECD and the Italian statistical office that have proved valuable working as a politician?

Enrico Giovannini: The way in which we tried to frame the ‘Beyond GDP’ discussion was very useful for my policy work. Let me give you two examples. In Italy there are five million people living in absolute poverty. Not only because poverty is a bad thing, but also because we do not know what degree of social distress may trigger a “political revolution”, I put a lot of emphasis on developing a programme to fight poverty. This work was aimed at reactivating people and promoting social inclusion, both very important elements for people’s wellbeing, beyond the monetary dimension.

The second example relates to the idea of human capital. In Italy, we have a lot of young people who are neither studying nor working. This is a huge loss of human capital and undermines the long-term capacity of a country to grow. For this reason we invested a lot in the development of the so-called ‘youth guarantee initiative’ agreed by the European Union. Also in this case, the issue has to do with the sustainability of our economies and societies.

Could you please explain why the narrative around moving beyond GDP is so important?

Enrico Giovannini: As a government we were only in power for 10 months. We had to push GDP anyway because it is very difficult to have new jobs without growth. For a long-term narrative you need a long-term perspective for your government as well. I always tried to argue that we have to look at both: reducing unemployment in the short-term and making improvements like increasing human capital in the long-term.

ISTAT tried to identify the importance citizens assigned to ten different dimensions of wellbeing in its 2011 edition of the multipurpose household survey. What were the major outcomes and were they surprising?

Enrico Giovannini: The “usual suspects” like health, a good job, etc. were considered very important, but what impressed me was the fact that the possibility of ensuring a future for their children was more important to people than money. This was an interesting result which confirmed that the inter-generational dimension is very strong in Italy.

You have been one of the initiators of the “Commission on the Measurement of Economic Performance and Social Progress” (Stiglitz-Sen-Fitoussi- Commission). Do you think that the main findings of this Commission have had any impacts in policy-making?

Enrico Giovannini: This Commission was extremely important for the Beyond GDP process. In terms of political results, some local initiatives used the outcomes of the Commission as a framework. Other impacts can also be observed such as the Cameron wellbeing initiative in the UK. And I hope that it will have even more impact on the mid-term review of the EU 2020 Strategy next year. With a new European Commission and Parliament those ideas could be taken up better than five years ago.

Are there concrete signs?

Enrico Giovannini: The 2013 European Commission staff working document on Progress on ‘GDP and Beyond’ actions shows that the topic is still under consideration, while the recent report on Employment and Social Developments in Europe contains an interesting chapter on wellbeing indicators. The political discussion in preparation for the elections in the European Parliament is stressing the need to show the “social face” of Europe. This is why I am confident that a new “Beyond GDP” policy could be developed after the elections.

You said that you actually see more impacts on local policy-making. Is this due to the simple fact that things become less complex on the local level?

Enrico Giovannini: There’s also a second reason. On the local level you can engage citizens and civil society much more easily than at a national level. Therefore it’s easier to use this narrative to build a new development model for a specific territory or to take decisions that may have an immediate impact on people’s quality of life. Nevertheless, the national and the global dimensions are extremely important as well (consider the forthcoming Sustainable Development Goals that the United Nations will establish in 2015, for example).

Therefore is the availability of indicators at the local level very important?

Enrico Giovannini: Yes, indeed, and the development of new territorial development projects financed through the EU Cohesion Policy could be a great opportunity to improve the geographical breakdown of environmental and social indicators.

What about the national level, do you think every country should develop its own indicators or does it make more sense to focus on standardized measures that can be used across the board?

Enrico Giovannini: I think we need a two-step approach to gain legitimacy. Initially you should put more emphasis on the nationally-driven indicators that precisely reflect the values, needs and priorities of a country. And then you can try to build a homogeneous set of indicators together. You can actually do both at the same time because the international statistical world is very well connected and consequently new ideas can spread around very quickly.

You have criticised the concept of sustainable development and argue for replacing it with the concept of vulnerability, why?

Enrico Giovannini: You might know the famous sentence by Woody Allen “Why should I care for future generations? What did they do for me?”. The concept of sustainable development is about the future, which is problematic for policy-making because future generations do not vote today. Vulnerability means that the future may become real now, bringing people (i.e. the current voters) a sense of risk. This is why we should try to develop risk indicators in order to show that policies which may obtain high outputs now are putting the future at risk. In this perspective, concepts like vulnerability or resilience are more useful in obliging our societies to make choices.

Do you have an example?

Enrico Giovannini: Developing econometric models which are able to make simulations integrating economic, social and environmental dimensions could help to show the medium to long term impacts of proposed policies. Risk indicators associated with these simulations about future developments could be used as we currently use statistical data referring to previous years. Some experts think that recent debates on statistical indicators might overshadow the much more relevant debate on the limits of our planet.

What is your opinion on this issue?

Enrico Giovannini: We have to create more risk indicators, not only regarding environmental risks but also social risks. As already mentioned, we do not have a theory of revolution, thus we don’t know if a certain unemployment rate will initiate an Arab Spring. Looking at the macroeconomic indicators of the Arab countries you would never have been able to predict the Arab Spring. But if you had looked at their hopes for the future you might have understood that there was something going wrong.

So far, the Beyond GDP debate has had relatively little impact on decision makers. In your opinion, what is the reason for that?

Enrico Giovannini: One big difficulty is that in order to make policies based on the multidimensional concept of wellbeing you need strict cooperation among different policy departments, which is very complicated. Ideally these kinds of projects should be carried out by the prime-minister’s office. The head of government is the only one with the authority to place all the different actors around the same table.

Another problem is that the Beyond GDP initiative was often seen as just an environmental issue, which it isn’t, of course. Secondly, the governmental advisors were trained with old models. As we don’t have enough econometric or simulation models based on this new political concept it’s difficult to show that something different can be done. That’s why we need to invest much more in models. That is the weakness we still have now. If we had models through which we could simulate alternative policies that would take into account the different components of wellbeing it would be easier to go to a politician and say “look, if you make this decision you may have these or those results”. But if we do not have models – and we have very few of these models – it will be very easy for them to decide whatever they want.

There is so much money spent on scientific research at the European level. Why don’t we have those models?

Enrico Giovannini: This is a good question. Several years ago, I recommended to the Commission to establish research projects to develop these kinds of model. When I was at the statistical office in Italy, we started to integrate our macro-economic model with the micro models to evaluate distributional issues, or to incorporate environmental data.

Personally, what is your idea of a good life?

Enrico Giovannini: Being an active part of society is a fundamental aspect. To do this, of course you need a good job and sufficient earnings to take care of your family and relatives. For me, it’s also crucial to be part of a society that is able to leave a better world for future generations. And finally of course being surrounded by friends and people with whom you have a good relationship.

We would like thank Enrico Giovannini for this insightful interview.

Quote

 

Wayne Visser

“If you compare the ecological footprint of countries with the human development index it becomes very obvious that we have a development path which successfully takes countries out of poverty but it is at the expense of the planet. We really haven’t figured out how to do development or how to do Quality of Life improvement without taking more resources than we actually have available to us”

Wayne Visser (writer, academic, social entrepreneur and futurist focused on sustainable development, corporate social responsibility and creating shared value) in 2013.

In the spotlight

 

Using beyond GDP indicators in policy-making

The last decade has seen the development of various measures of progress that could complement GDP, aiming at a more inclusive measurement of progress and wellbeing. Although the use of such alternative indicators has not been widely taken up in policy-making, progress is being made to develop ways to make Beyond GDP indicators more accepted and enable them to influence policy.

Latest research (see e.g. the Brainpool project) suggests that politics, narratives and policy-making techniques are the main barriers to the use of these indicators. The growth discourse remains predominant in policy arenas. What appears to partially explain GDP’s continued supremacy despite its widely recognised flaws is that there is still no single alternative indicator available reflecting the complexity and uncertainty that arises from measuring multi-dimensional concepts such as progress. This presents a communications challenge, giving rise to unfamiliarity or confusion over alternative indicators and the lack of a convincing narrative. Indicators are not necessarily in line with policy processes because of a lack of cooperation between different policy departments. The problem often lies in the fact that there is no body with a broad mandate concerning such indicators, or that data and standards are not sufficiently compatible across different scales and territories. On a more practical level, budget constraints, data availability and a shortage of expertise in the usage of indicators may also form obstacles to the development and use of robust Beyond GDP indicators.

Research however also suggests that the current economic and social situation is more conducive than ever to the use of these types of indicator. Crucially, the concept of wellbeing (and the use of indicators to measure it) provides an important means to counteract the loss of confidence in politics. With strong leadership to build momentum and broad engagement from civil society, citizens and the media, it would be possible to get the population on board, develop a stronger narrative and ensure the effective use of alternative indicators on wellbeing in policy-making.

The Canadian Index of Wellbeing illustrates the important role civil society plays in driving forward a wellbeing approach: by consulting the broad public on the selection of indicators, the programme was able to quickly gain a high level of legitimacy. The successful application of the same framework in the City of Guelph, Ontario, has illustrated that measuring wellbeing can also inform policy-making at the local level. Based on the findings of a wellbeing survey and an extensive community engagement process, a community profile and a new community wellbeing strategy have been developed for the city, aiming to improve services and facilitate community-wide action to improve wellbeing.

Similarly, the Italian initiative on “Equitable and Sustainable Wellbeing” (Benessere Equo e Solidale, or ‘BES’) involved major experts in different domains (including health, environment, employment and economic conditions) and Italian civil society (citizens, institutions, social partners and NGOs). The first BES report, released in 2013, illustrates the Italy’s state and progress in 12 dimensions of wellbeing.

The WAVES partnership (Wealth Accounting and Valuation of Ecosystem Services) provides a promising example of incorporating environmental aspects into the measurement of wellbeing. The World Bank-led initiative promotes the representation of natural capital in countries’ national accounts, and they have developed a common System of Environmental and Economic Accounting (SEEA) to ensure the compatibility of indicators. So far, only 5 countries have implemented Natural Capital Accounting, but the global partnership comprises more than 60 countries, and a recent dialogue of 25 ministers and vice-ministers making commitments to scale-up and mainstream nature gives cause for optimism regarding the use of more comprehensive wellbeing measures in decision-making.

In brief

 

April 2014

First provincial index report on Ontario wellbeing published

The Canadian Index of Wellbeing (CIW) at the University of Waterloo has recently published its first provincial index report, evaluating quality of life in Ontario. The study uses the same approach applied for CIW’s national index. According to the report commissioned by the Ontario Trillium Foundation, between 1994 and 2010, GDP in Ontario has increased almost four times more than overall wellbeing. The report assesses various domains of wellbeing and draws comparisons with the rest of Canada. Based on the evaluation of strengths and areas of concern, innovative policy options are provided.


March 2014

Environmental and Social Criteria used to evaluate Chinese Cadres

Environmental and social issues are becoming more important within the Chinese Communist Party and a shift away from the sole policy target of economic development, towards environmental protection and social stability can be observed. Until now, the promotion of economic growth has been the core strategy of local officials. More recently, other criteria, such as air quality or combating social problems, are being used to assess party cadres. In at least seven Chinese provinces, this year’s growth targets are lower compared to 2013, as environmental protection has been taken into consideration. For decades, the growth objective has been legitimized by successful eradication of poverty and the massive provision of jobs. Now aspiring leaders are being judged on a broader array of issues including how they tackle the environmental degradation and improve people’s lives. These changes of the economic growth model are in line with the request of Christine Lagarde, chief of the International Monetary Fund, that China should carry out reforms to achieve a more inclusive, cleaner and sustainable economic growth.


February 2014

Official publication of the SEEA 2012 Central Framework has now available

After a multi-year process of revision the United Nations Statistical Commission adopted the System of Environmental-Economic Accounting (SEEA) 2012-Central Framework as an international statistical standard at its forty-third session in 2012. Now, the final publication of the SEEA 2012 Central Framework is available.

The SEEA is a measurement framework that contains the internationally agreed standard concepts, definitions, classifications and accounting rules for producing internationally comparable statistics on the environment and its relationship with the economy. Its development was motivated by the fact that economic prosperity is dependent on the ability of the environment to supply natural resources and to absorb pollution, and that environmental policies impact on economic activity.

 

Agenda

 

Upcoming events

Web-based course: “Statistics, Knowledge and Policy: Understanding Societal Change (2014)”
12 May – 13 June 2014.
More information

WAVES Fourth Partnership Meeting
Washington D.C., 14 – 15 May 2014.
More information

UN DESA and EESC conference on SDGs and follow-up processes
Brussels, 28 May 2014.
More information

EESC Conference on “Let’s talk hapiness – beyond GDP”
Brussels, 10 June 2014.
More information

2nd International Conference on Governance, Crime and Justice Statistics
Mexico City, 17 – 20 June 2014.
More information

 

 

 

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The Beyond GDP newsletter is issued up to 4 times a year by the European Commission, DG Environment and DG Eurostat.
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