The fundamental function of the economy as a social institution to serve people and the planet has been forgotten in the quest for efficiency and to maximise returns. Given the economic and financial crises in recent history and the threat of more to come, it is essential to reorient the economy to fulfil its core functions.
Why should we go beyond GDP?
The systems and models which rule our lives have been shown to function in the interests of only a few and to be unsustainable and even destructive in the longer term. They are based largely on creating continuous growth (as measured by a country’s gross domestic product, or GDP) and ever-more profit. However, these come at the expense of people and planet, as an increasing number of recent reports are showing.
The mantra of economic growth as the overarching objective for progress – even if latterly renamed ‘inclusive economic growth’ or ‘sustainable, inclusive growth’ or even ‘green growth’ – must be questioned for two reasons. Firstly, permanent economic growth is simply impossible within the ecological planetary boundaries.Secondly, GDP is a measure of consumption and production and therefore an increase in GDP only signals an increase in consumption and production and ignores any consideration of sustainability. The desire to see an increase in GDP as a measure of progress and a healthy economy only encourages the rise in consumerism and unsustainable use of resources.
However, there is a growing realisation that the benefits of growth and globalisation are unevenly distributed as a result of unequal power relations both between and within countries and those benefits don’t ‘trickle down’ to the most marginalised people in a population. Growth does not therefore necessarily lead to reductions in poverty or inequality or to improved well-being for the vast majority of people. So GDP per capita can send highly misleading signals.
But if GDP has become synonymous with the overall progress of a country and if the benefits of growth are not reaching the majority of people, that begs the question, therefore, as to what is equitable, sustainable progress and how would we know if we are making progress which benefits everyone, and our planet. Because clearly, GDP-measured growth is not up to the job!
The flaws of GDP make rather a long list, but key among them are the fact that GDP does not tell us anything about equality, it is gender blind, it masks environmental degradation – GDP actually increases when pollution has to be cleaned up – and it is not able to measure many things of value – for example, the Internet provides valuable information to millions of people, but adds no value to GDP… nor does volunteering for charity. GDP is simply a measure of the goods (and some services) passing through the economy, adjusted for inflation. However, it fails to measure the results of the fourth industrial revolution, namely the digital economy. And it definitely likes quantity more than quality.
As long as the focus of attention is on GDP, politicians will prioritise policy objectives that aim to increase economic growth. CONCORD is arguing that given the clear weaknesses of GDP as a measure of progress, GDP should be complemented by and eventually be replaced by other measures which really do show progress for people and planet. These ‘genuine measures of progress’ might be contained in, or contribute to, a well-being index, which going forward would be the measure by which we rank countries and determine their progress. Many countries including in Europe already have well-being indicators in place but they are not used in a consistent way in political decision-making: they are under-known and under-utilised.
Member of the European Parliament
Olivier de Schutter
Member of the UN Committee on Economic, Social and Cultural Rights and former UN Special Rapporteur on the right to food
Professor of Economic Statistics at the University of Rome ‘Tor Vergata’, Former Director of Statistics at the OECD
The Democracy Collaborative
Professor of Political Arithmetic, University of Amsterdam
Carnegie UK Trust
Marco Mira d’Ercole
Head of Household Statistics and Progress Measurement Division – OECD Statistics Directorate
Wellbeing advisor, Happy City
CONCORD convenes experts
Building on our work and policy recommendations on the 2030 Agenda for Sustainable Development, CONCORD has been exploring ways to make the global commitment to develop genuine measures of progress a reality at EU level. On 5th September 2017, over 20 experts gathered in the “Genuine Measures of Progress – Beyond GDP” Seminar, at the end of which they call on the EU to move beyond GDP and establish measurements of well-being.
Genuine Measures of Progress: if it makes more sense, why not?
GDP is practical: a single number, easy to read, easy to rate. But that is not a good enough argument to prevent a move towards using a far more appropriate range of social, economic, environmental and governance indicators which really do say ‘how people are doing’ and whether we are still destroying our planet. Any new measure – which inevitably will be a composite indicator – must reflect the three dimensions of sustainable development and key governance components. And it must be developed from a ‘well-being’ perspective, not one of fuelling a rat race. GDP is past its sell-by date.
So what is CONCORD’s role?
We are not going to reinvent the wheel. There is a large and growing amount of research and ideas on this topic; some even offer concrete proposals. CONCORD aims to contribute by offering a simple, positive and convincing narrative for change that ordinary people and politicians alike could buy into. We will try to bust some of the myths of GDP growth and increase the pressure for change. We will act as a bridge between people working on this topic and as a convenor so as to create a greater momentum for change towards EU Institutions.
What do others say about this?
“What we measure informs what we do. And if we’re measuring the wrong thing, we’re going to do the wrong thing.”Joseph Stiglitz
Daniel Mügge, Professor of Political Arithmetic, University of Amsterdam
Olivier de Schutter, Member of the UN Committee on Economic, Social and Cultural Rights and former UN Special Rapporteur on the right to food
Enrico Giovannini, Professor of Economic Statistics at the University of Rome ‘Tor Vergata’, Former Director of Statistics at the OECD
Sarah McKinley, The Democracy Collaborative
Heidi Hautala, Member of the European Parliament
Aideen McGinley, Carnegie UK Trust
Damie Demailly, IDDRI
“GDP tells you nothing about sustainability”Joseph Stiglitz