Draft GPUS Platform Amendment Measuring Economic Progress
SECTION TITLE: MEASURING ECONOMIC PROGRESS
SECTION SUBTITLE: Improving the measure of our economy
OUR POSITION: Our current principal measure of economic heath -- the gross domestic product -- is fatally flawed and must be replaced.
Mainstream economic policy in the United States and much of the world is premised on the notion that our country becomes richer and better to the extent that we increase our gross domestic product. But there are a wide variety of social and environmental ills that boost our GDP. For example, car crashes, the dumping of toxic waste, divorce, obesity, stress and misery are all great for the GDP, because they impel the purchase of more goods and services. Meanwhile, the best things in life are free, of course, and that also means that they do not increase the GDP.
G.D.P. does not take into account some of the negative effects of economic growth, like pollution. It does not factor in leisure time, or parts of the “informal economy” (like parents’ unpaid care for their own children) that have value but not necessarily measurable, marketable value. It does not give any sense of how equitably distributed a country’s wealth is; a country could theoretically have both the world’s highest G.D.P. and the world’s highest poverty rate simultaneously. It also does not reflect quality of life or happiness in any given country.
The Index of Sustainable Economic Welfare is an economic indicator intended to replace the gross domestic product. Rather than simply adding together all expenditures like the gross domestic product, consumer expenditure is balanced by such factors as income distribution and cost associated with pollution and other unsustainable costs. It is similar to the Genuine Progress Indicator.
Index of Sustainable Economic Welfare (ISEW) is roughly defined by the following formula. ISEW = personal consumption + public non-defensive expenditures - private defensive expenditures + capital formation + services from domestic labour - costs of environmental degradation - depreciation of natural capital
The Gross National Product (GNP) measures the welfare of a nation’s economy through the aggregate of products and services produced in that nation. Although GNP is a proficient measurement of the magnitude of the economy, many economists, environmentalists and citizens have been arguing the validity of the GNP in respect to measuring welfare. Joseph Stiglitz, Nobel Prize winning economist, states that this standard measurement for any national economy has become deficient as a measure of long-term economic health in our recently resource-driven and globalizing world . Critics suggest that GNP often includes the environment on the wrong side of the balance sheet because if someone first pollutes and then another person cleans the pollution, both activities add to GNP making environmental degradation frequently look good for the economy . Critics of mainstream economics complain that GNP compiles spending that makes us worse off, spending that allows us to stay in the same place, and spending that makes us better off all in a single measure, giving a nation no clue if they are making progress or not . Manfred Max-Neef, Chilean economist, explains that politicians feel that it is irrelevant whether the spending is productive, unproductive, or destructive . In this sense, it is common to see political policies that call to depredate a natural resource in order to increase the GNP. To take into account the environmental depredation and resource depletion there is a call to shift away from the traditional GNP and construct an assessment of national product that takes into account environmental effects.
In addition, the GDP does not count so many of our nation's greatest goods and services, such as the work of mothers and volunteers. Nor does it count such costs as environmental pollution, the decline of neighborhoods, erosion of topsoil, loss of biodiversity or other externalities.
We must set our nation on the right economic and environmental track. That means we will need new indicators to gauge our progress.
1. End the use of the Gross Domestic Product as the principal measure of the heath of the U.S. economy.
2. Create a broader measure of economic progress that takes into account our quality of life, and indicators of social, economic and environmental health, as well as the value of non-monetary goods and services.
2004 PLATFORM ON MEASURING ECONOMIC PROGRESS
Economic growth has been a primary goal of American policy. Corporations, politicians beholden to corporations, and economists funded by corporations advocate a theory of unlimited economic growth stemming from technological progress. Based upon established principles of the physical and biological sciences, however, there is a limit to economic growth.
American economic growth is having negative effects on the long-term ecological and economic welfare of the United States and the world. There is a fundamental conflict between economic growth and ecological health (for example, biodiversity conservation, clean air and water, atmospheric stability).
We cannot rely on technological progress to solve ecological and long-term economic problems. Rather, we should endeavor to make lifestyle choices that reinforce a general equilibrium of humans with nature. This requires consciously choosing to foster environmentally sound technologies, whether they are newer or older technologies, rather than technologies conducive to conspicuous consumption and waste.
1. Economic growth, as gauged by increasing Gross Domestic Product (GDP), is a dangerous and anachronistic American goal. The most viable and sustainable alternative is a steady-state economy. A steady-state economy has a stable or mildly fluctuating product of population and per capita consumption, and is generally indicated by stable or mildly fluctuating GDP. The steady-state economy has become a more appropriate goal than economic growth in the United States and other large, wealthy economies. A steady-state economy precludes ever-expanding production and consumption of goods and services. However, a steady-state economy does not preclude economic development – a qualitative process not gauged by GDP growth and other measures that overlook ecological effects.
2. One way to measure the economy is to assess the value of non-monetary goods and services and measure the rate of infant mortality, life expectancy of people, educational opportunities offered by the state, family stability, environmental data, and health care for all people. Another measure is to quantify human benefit (in terms of education, health care, elder care, etc.) provided by each unit of output. Measuring the gap between the most fortunate and the least fortunate in our society, for example, tells us how well or poorly we are doing in creating an economy that does not benefit some at the expense of others.
3. For many nations with widespread poverty, increasing per capita consumption (through economic growth or through more equitable distributions of wealth) remains an appropriate goal. Ultimately, however, the global ecosystem will not be able to support further economic growth. Therefore, an equitable distribution of wealth among nations is required to maintain a global steady-state economy. A global economy with inequitable wealth distribution will be subject to continual international strife and conflict. Such strife and conflict, in turn, ensures the economic unsustainability of some nations and threatens the economic sustainability of all.