A publication from The Economist
Economic futurist Hazel Henderson offers alternative
A growing number of economists and policy makers argue that statistics such as gross domestic product (GDP) and gross national product (GNP) may be useful as snapshots of a nation’s total economic activity, but they are limited in scope. Critics advocate for a new metric that calculates the overall standard of living in a country by factoring in environmental and public health, social welfare, infrastructure, and
other quality-of-life factors.
While there has been much talk around the issue, little reform has actually occurred at the national level, says economist and futurist Hazel Henderson. The United Nations’ Human Development Index,
which includes education, health, and income, is perhaps the best-known and most widely cited alternative.
Henderson, author of Ethical Markets: Growing the Green Economy (Chelsea Green, 2006) and president of Ethical Markets M e d i a , t e l l s T H E FUTURIST that a revamping of GDP hasn’t happened for a number of reasons. Chief among them is the potential drawback that factoring in social and environmental costs “would lower the apparent performance, both of companies and of a country,” she says.
Nonetheless, a majority of people around the world agree that a new
model is needed, according to Ethical Markets’ research. “Health, social, and environmental statistics are as important as economic data, and the governments should also use those to measure national progress,” according to more than two-thirds of the approximately 12,000 individuals in a dozen countries surveyed in 2010 by Ethical Markets
Media and the international polling firm GlobeScan. Less than a quarter of respondents identified most strongly with the second statement—that national progress is best gauged by “money-based economic
statistics” such as GDP and GNP.
These findings update the initial GlobeScan–Ethical Markets public opinion survey, which was undertaken at the behest of the European Commission as part of the 2007 Beyond GDP conference. (The followup
survey was conducted independently, Henderson says.)
However, in some countries, support for the traditional GDP/GNP methodology has risen slightly during the three-year interim.
These include the United States and several European countries. Furthermore, people in emerging economies such as Kenya were less likely overall to side with GDP reform than those in developed countries.
Henderson believes that this may be due to financial concerns brought about by the recession—and overall financial well-being in general. The executive summary of the report notes: “The stronger support
in developed countries for this expanded measure suggests that, once a level of material well-being has been attained, many people feel that it is critical to take other measures of life quality and sustainability into account, and that these are a valid way of expressing national progress.”
Henderson emphasizes that significant numbers in all 12 countries included in the survey expressed interest in reforming traditional economic metrics to incorporate long-term quality-of-life indicators. She
hopes that the survey contributes to a growing awareness of GDP’s limitations in terms of depicting a country’s overall quality of life. Purely economic statistics neglect countries’ genuine wealth, she says:
“Well-educated workforces, efficient infrastructure, and productive ecosystems and resources … all [are] ignored and missing from GDP.
“The good news is that we no longer need to have macroeconomists control the GDP model,” she continues. “We can now use the Internet and Web sites to unbundle these indicators (as we do at Calvert-Henderson.com) and display these 12 indicators of quality of life on a ‘dashboard.’ This is the new approach and it simply bypasses
the current formulations of GDP and makes them politically transparent
and available to all who are interested.”
Another Ethical Markets project is the Green Transition Scoreboard, which tracks private investment in green businesses around the world. The latest Scoreboard reveals a growing economic emphasis on environmental sustainability. It also shows that interest and speculation continue to rise. By mid-2010, total private investment in the so-called “green economy” had surpassed $1.6 trillion, which represents an increase of approximately $400 million since the end of 2009. Henderson projects that there could soon be a cumulative $1 trillion annual investment in green businesses.
—Aaron M. Cohen
Sources: Hazel Henderson (interview), Ethical Markets
Beyond GDP International Initiative, www.beyond-gdp