Tuesday, October 30, 2012

Measure for Measure
– the Death of GDP and “Growth”?

Sometimes things seem so embedded in our culture (accepted conventional wisdom) that one could be forgiven for thinking they have been around since civilisation began. One such is GDP (Gross Domestic Product) the mantra of all Chancellors I can remember. But this magic economic tool was only adopted as a temporary measure during the great depression back in the 1930s – less than 100 years ago.

Like the temporary measure of Income Tax, introduced in the UK in 1842, it has stuck fast despite its obvious limitations and the many warnings we have had during its tenure. It was only 30 or so years old when Senator Robert Kennedy gave this speech …


For him GDP measured everything except that which makes life worthwhile. And the big problem is that “what gets measured gets done”. However, GDP and “growth” are now coming under some pressure and scrutiny again and this time they may just have had their day?

The Guardian: Extract
It took 40 years for Kennedy's words to reach Washington DC: in March 2008 a US Senate committee discussed GDP's failure to measure environmental damage, poverty, income inequality, health and the quality of life. Two years later, Obama's healthcare bill allowed $70m over eight years to develop a new system of US national indicators. Economists from the group the State of the USA are now working to generate 10 to 15 key measures from a set of some 300 indicators, including health, education, crime and justice, art and culture, the environment, and the economy. These new, more comprehensive measures are designed to guide US policy in an era of environmental destruction and economic downturn.
GDP has been similarly challenged and deconstructed in Europe. In 2009, the then French president Nicolas Sarkozy recruited a team of economists "to tear the GDP apart as they saw fit". They too found that GDP should be replaced and that other indicators should be introduced to monitor social and environmental, as well as economic, change.
Worldwatch Institute: Extracts
Fixation with economic growth and increasing levels of consumption contributes to debt burdens, long working hours, increased rates of obesity, dependence on pharmaceuticals, social isolation, and other societal ills. ….
In response to the destructive impacts of the growth-centered global economy, degrowth has begun to gain traction as an economic strategy in recent years. In Italy and France, there are now degrowth political parties, and worldwide, the third bi-annual International Degrowth Conference recently concluded in Venice with over 700 registered participants. More broadly, there is growing recognition that an end to or reversal of growth will be an essential rite of passage for global civilization as humanity comes to understand that climate change and natural resource scarcity are rooted in the impossibility of perpetual human growth in a finite biophysical environment…..
“Moving toward degrowth will involve redefining prosperity altogether—resurrecting traditional understandings of what this word means with regard to health, social connectedness, and the freedom to work less while still earning a livable wage,” said Assadourian. “Degrowth offers a new vision of prosperity focused on living well with less, instead of maximizing growth and consumption. It strives to establish a stable economic system that no longer transcends Earth’s limits.”
Footnote: Being the cynic that I am my guess is that GDP as a measure of success has only lasted this long simply because it was giving the right answer. Now that our politicians are finding it rather more difficult to show they have been successful it is only reasonable to expect them to come up with an alternative measure that does – pronto!

2 comments:

  1. I think you'll find GDP figures are notoriously inaccurate, both in the here&now, and when adjusted after 3 months up to at least 12 months.

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    1. All measures are inaccurate, see the uncertainty principle, but some are more accurate than others ...

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