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Trevor Hancock: There’s more to progress than the GDP

How we measure progress hinges on what we mean by progress, and what business we think we are in, as a society and as governments. Too often, it seems the central purpose is to grow the economy, but I believe there is more to life than that.

How we measure progress hinges on what we mean by progress, and what business we think we are in, as a society and as governments. Too often, it seems the central purpose is to grow the economy, but I believe there is more to life than that.

We are — or should be — in the business of growing people, on maximizing human rather than economic development. The economy, we need to understand, exists to serve human needs and human ends, not the other way around.

Last week, I critiqued two of our main yardsticks for measuring progress: The GDP, which fails to distinguish between “good” expenditures — things that add to human well-being, social development and ecological sustainability — and “bad” expenditures that harm these outcomes; they are treated as the same. And life expectancy, which tells us a lot about those who die this year but nothing about the possible length of life of those born this year.

Consequently, we are navigating with the rearview mirror (because things improved in the past, they will in the future) and with misleading gauges.

So what are the alternatives? Here I will focus on alternatives to GDP.

There are several leading contenders, with the Genuine Progress Indicator, the Happy Planet Index and the Canadian Index of Well-being as some of the better options.

The Genuine Progress Indicator starts with the same personal consumption data that the GDP is based on, but then makes some crucial distinctions. It adjusts for factors such as income distribution, adds factors such as the value of household and volunteer work, and subtracts factors such as the costs of crime and pollution.

A 2013 report by Redefining Progress (the Seattle-based organization that created the GPI) compared the GDP and GPI for 17 countries (most of them high-income) for the period from 1955 to 2003. It found that while global GDP has increased more than three-fold since 1950, the GPI has actually decreased in those countries since 1978.

So while the GDP tells us we are doing better, the GPI tells us that is not so. What’s more, the study found that beyond about $7,000 GDP per person (Canada’s GDP per person was more than $50,000 in 2013), further increases in GDP per capita are negatively correlated with GPI. In other words, further growth in GDP does more harm than good.

The Canadian Index of Well-being tells a similar story. It tracks changes in eight quality of life categories. In the period from 1994 to 2010, while Canada’s GDP grew by 29 per cent, our quality of life improved by only 5.7 per cent. So increased GDP does not translate into better quality of life.

Perhaps the most interesting of the alternatives is the Happy Planet Index, developed by the New Economics Foundation in the U.K. They describe it as “the first index to combine environmental impact with well-being, ranking countries on how many long and happy lives they produce per unit of environmental input.” It measures the number of “happy” life years, which is life expectancy adjusted for life satisfaction, and divides it by the ecological footprint.

The top three countries on the 2012 HPI are Costa Rica, Vietnam and Colombia. By comparison, Canada places 65th, with a life expectancy and level of experienced well-being not much higher than that of Costa Rica, but an ecological footprint more than 2.5 times as large.

While provincial and federal governments and international organizations still largely use GDP as their main way of measuring progress, municipal governments do not.

Municipal governments seem to understand that measuring progress is about much more than the economy, that it’s about the lived experience of people in their communities. So they almost always use some version of a measurement of quality of life. In fact the Federation of Canadian Municipalities has had a Quality of Life measuring system for 20 years or more.

Here in Victoria, the Vital Signs report from the Victoria Foundation is an example of this approach, and is based on the CIW.

It is time the higher levels of governments took a lesson from municipal governments, and from the knowledge we now have, and started measuring progress in more all-encompassing and realistic ways.

Dr. Trevor Hancock is a professor and senior scholar at the University of Victoria’s school of public health and social policy.

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