The gross domestic product (GDP) has served as the standard measurement for economic growth for so long, until recently questioning its reliability as an indicator of either economic activity or human progress was considered radical. However, lately some very prominent economists and world leaders have begun to do just that.
George Monbiot put the problem with the GDP fairly succinctly in one of his recent blog posts. After citing a recent paper on the problems with the GDP he summed it up this way:
There are no deductions involved: all economic activity is accounted as if it were of positive value. Social harm is added to, not subtracted from, social good. A train crash which generates £1bn worth of track repairs, medical bills and funeral costs is deemed by this measure to be as beneficial as an uninterrupted service which generates £1bn in ticket sales.
I doubt many would argue any measure of "progress" which, all things being equal, views a train wreck and a train that runs consistently on time as both having identical value isn't seriously flawed. Of course, should the train wreck generate more economic activity it will be reported as "economic growth", which under the GDP model is rarely if ever reported as anything but good. Any measure of progress relying even in part on economic activity derived from human suffering should strike most people as not merely flawed, but disturbing.
Fortunately, the GDP isn't the only game in town any longer. Nobel Prize winning economists and world leaders as prominent as French President Sarkozy are proposing changes to the way we measure growth that take into account human well being and don't simply assume increased economic activity always means human progress. In a country like the US where most of the wealth is now concentrated in the hands of less than 10% of the population, increases in GDP can be taking place while 90% or more of the population receives no benefit or is actually seeing wages and benefits like health insurance coverage decline. As proof I point to the last ten years.
Yesterday I had the privilege of speaking with Wayne Martinson of the Utah Population and Environment Coalition. His group is working on a Utah Genuine Progress Indicator (GPI) that has the very real potential of better assessing our well being and quality of life than simple statistics reflecting ups and downs in economic activity within our state.
The initial draft of the Utah GPI will probably be out sometime this spring and will be something Utah policymakers should take a serious look at when it becomes available. The GPI certainly holds the promise of at least beginning a discussion about what values we should be using beyond just the number of dollars changing hands when determining the true state of our quality of life in Utah and the nation. I for one look forward to reading the report the Utah Population and Environment Coalition comes out with and praise their efforts to tackle the question of what truly constitutes progress.