This material is copied from the book Life, Money & Illusion; Living on Earth as if we want to stay.
Genuine Progress Index
Making decisions primarily on the information provided by GDP is like driving a bus using only the speedometer. The GDP "speedometer" has its place, but it doesn't explain some matters of consequence. With the Northern Cod fishery, for example, the industry's contribution to GDP was rising steadily until just before it disappeared. Another instrument on the dashboard - one that measured changes in fish stocks - could have provided information that would have cautioned those driving to steer clear of the "overshoot and collapse" disaster that followed.
Several "instruments" that should be on the dashboard of our proverbial bus, are described below. Their purposes would be to: end the confusion between constructive and regrettable expenditures; recognize unpaid work for the benefits it provides to families and communities; keep a closer eye on the adequacy of employment opportunities; provide a "balance sheet" type account of natural resource stocks; record, for comparison, the amounts of various pollutants released into the environment, their levels of accumulation and their effects; and monitor other factors that people feel might affect our well-being.
When the opportunity arose for me to work with a Member of Parliament promoting a Genuine Progress Index (GPI) for Canada, the people already involved in such work quickly offered me their wholehearted cooperation. These included Ron Colman of the GPI Atlantic, Mark Anielski of the Alberta GPI and Sandra Zagon with the Canadian Policy Research Networks to name a few of the most active in Canada. Perspectives were shared, understanding grew, techniques were proposed, and after numerous drafts and revisions we had a proposal for national legislation.
The result was the Canada Well-Being Measurement Act, which will be discussed here following an explanation about measuring genuine progress.
Separating Constructive and Regrettable Expenditures
The value to society represented by the amount of money spent producing food, shelter and tools, providing education and creating works of art, differs substantially from the value we receive from money spent on medical assistance for people with avoidable diseases, replacing stolen property, treating people for addictions, or cleaning up oil spills. The former, constructive expenditures up to the point of comfortable sufficiency, contribute directly and positively to human well-being. The later, called regrettable expenditures, are only necessary because we have failed to avoid problems. While remedial work is important when problems are identified, increasing regrettable expenditures should not be mistaken for progress.
Increasing activities that provide for human needs and enrich our lives has a generally positive effect, as long as the things produced get to those who need them. The negative repercussions of resource depletion and pollution from excessive consumption are accounted for in subsequent categories below.
Food consumption illustrates the line between constructive and regrettable expenditures. When people are truly hungry, more food is distinctly positive. However, when people are becoming obese from over-eating, additional consumption of food can contribute to costly medical problems that degrade their lives. The diabetes industry thrives on such over-consumption. Cases of Type 2 Diabetes have climbed in unison with the expansion of the fast food industry. Worldwide, approximately 30 million people had the disease in 1985. The number is in the range of 150 million today. The World Health Organization expects 300 million cases by 2025. While fast food outlets do offer salads and other non-problematic dishes, most of their customers hunger for sugar, salt and fat. Type 2 Diabetes is largely preventable, but the excessive consumption of fat and sugar, the major contributing factors, create complications that add substantially to GDP.
The direct health care costs for treating diabetes attributed to obesity is over $400 million annually in Canada. Eli Lilly and Company, manufacturers of the synthetic insulin needed by diabetics, sold $901 million worth of the drug internationally in 2001, a substantial contribution to GDP. The announcement that Lilly will be constructing over 80,000 square metres of new production space, at a cost of $1,383 million, has been presented as an economic boom. If it were not for the enormous amount of human suffering that makes it necessary, it might be so. However, with the disease in the U.S. contributing to the deaths of 200,000 people annually, news of the expanding industry is more accurately described as an unfolding disaster.
The costs of avoidable health problems, crime, family breakdown, traffic accidents, natural disasters and wars all contribute to increased GDP, but, to a large extent, are indications of trouble rather than progress. By separating such regrettable expenditures from positive ones, a Genuine Progress Index can provide policy-makers with much better information upon which to make decisions.
Accounting for the Value of Unpaid Work
Imagine the state of society if people didn't take out the garbage, do the dishes, or clean and repair their homes; if parents didn't care for their children and no one took the time to look after people who are sick or aging, unless they were paid for each hour. Chaos and discomfort would result very quickly. Civilization could grind to a halt within a generation. The work that people do for their families and for their communities provides enormous benefits to the well-being of society. Yet, because money is not exchanged for this essential work, it is considered worthless by the GDP measure. Other voluntary work that goes unaccounted for by GDP includes Guides, Scouts, Big Brothers and Big Sisters, service clubs, soup kitchens, and a great deal of the activities that make community events, like amateur sports, theatre, fairs and festivals, possible.
The absence of these would greatly diminish the quality of many lives. Much of the work that is done for free is also done in other circumstances for pay. A GPI would establish the value of unpaid work by taking the average pay rates for the various activities and multiplying those rates by the approximate number of volunteer hours spent at each sort of task. The sum total would provide a measure of the contribution unpaid work makes to well-being in society. If circumstances arise, or decisions get made that reduce the amount of unpaid work taking place, GPI accounts would be able to compare the loss against the benefits those changes brought about. Such comparisons would make it possible to determine if progress was, in fact, being made.
A Balance Sheet for Natural Resources
Balance sheet accounting has been standard practice in business since the late 1700s. If a business is making clothing out of cotton cloth, for example, and 100 pairs of pants and 100 blouses are made, the new stock of finished goods will be accounted for as inventory worth a certain amount and available for sale. At the same time, the amount of raw cloth that was used up in the production process will be subtracted from the material stock inventory. The value of the clothing is worth more than the value of the cloth, so money is being made. But, if the company does not account for the reduction in the raw materials presently in stock, they may be caught without sufficient inventory to produce the next run of garments. By the same reasoning, when natural resources are extracted from the Earth it is worthwhile to account, not only for the value of the materials brought into the human economy, but also for the reduction of those resources in the natural world.
Understandably, our economic system emerged without such balance sheet accounts. Just a few centuries ago, human numbers and the extent of our actions were relatively inconsequential. With vast, sparsely populated frontiers, the Earth seemed to offer a limitless supply of raw materials. It is no wonder that we did not bother to compare our consumption with overall supply; we had no concept that the Earth itself was finite.
This is no longer the case. We have extensively mapped available natural resources around the globe, and our level of consumption has grown exponentially to where mathematical projections predict serious supply problems for fresh water, forests, fish, fossil-fuel and soil fertility, among others. If we hope to make decisions that will not leave our offspring holding an empty bag, balance sheet accounts of natural resources use are critically important.
There are three types of accounts needed: renewable resources, non-renewable resources that can be recycled, and non-renewable resources that are destroyed when they are used.
The use of renewable resources would be accounted for in comparison to their rate of renewal. Fish, trees, crops and water flows are like money in the bank. They produce a certain amount of "interest" on a regular basis. As long as we need and consume only the annual production, we can do so forever. If we consume living resources at a rate faster than they can grow, we diminish the "capital stock," thereby reducing the amount that can grow from it in future years. Over-exploitation can also depress the quality of capital stocks. Where forests are clear-cut, the soil, no longer protected from the elements by vegetation, can erode, leaving it unable to grow trees as well as before. All the commonly used renewable resources have been studied thoroughly enough that, given the political will to act responsibly, rates of renewal and safe maximum levels of extraction could be established. Balance sheet accounts could then keep track of the amount of the various resources "in stock" and the various rates at which we are extracting resources from those stocks.
Recyclable Non-renewable Resources Two accounts would be required to monitor the use of non-renewable resources that can be recycled - metals and minerals. A balance sheet, would keep a record of how much of each resource is being extracted relative to known reserves. Another account would track the rate at which each resource was being recycled. Together these figures would tell us when rates of consumption approach the edge of what can be sustained. Much of the necessary information is already being collected.
Non-renewable Resources that are Lost when Used
The final type of balance sheet account would be for non-renewable resources destroyed when used. This refers primarily to fossil-fuels - coal, oil and natural gas. Since the rate at which fossil-fuels are formed is negligible compared to the rate of use, we have to consider the present resource as being all that will ever be available. Any use, with the exception of some recyclable plastics, decreases overall supply. Balance sheet accounts for these resources would compare consumption with increases in the efficiency with which we use the resources and the amounts of energy-generating capacity that are developing from renewable energy sources. This would provide critical information about how much energy we presently need, how much of that we can provide from renewable sources, and how much time we have to develop the renewable sources and energy efficiency that will be necessary as fossil-fuel produced energy is used up.
The other side of resource consumption is waste. A great deal of waste is created in the process of making products and because very few products are kept around for long, almost all products become waste. With the exception of some art, furniture and architecture, everything we use is eventually considered waste and thrown away. Some of this "waste" is recycled, some is effectively isolated at landfill sites, and the rest escapes into groundwater flows or is released into the air and surface water. Natural processes can absorb some of these releases. But, while some of it is harmless, some of it is disruptive to ecological systems and poisonous to living things.
A GPI would account for pollution by volume and toxicity and compare the amounts produced to the capacity of the environment to absorb it. As a civilization, we should know how much pollution we create, whether that volume is increasing or decreasing, how much is persistent, how much is effectively absorbed, and how much has negative effects on people, other living things and ecological processes. As with recyclable, non-renewable resources, much of this information is already available for monitoring. A GPI would collect the information in one place and present it in a format that anyone could access to see how we are doing.
Two Perspectives of HealthThe field of health provides an example of how different actions are taken in response to different sorts of measurements. Traditionally, the health of a population has been measured in terms of how many people have been afflicted by various diseases, how many have died and what the average life expectancy is. Another approach would be to measure the circumstances that influence people's health, known as "the determinants of health." These include food quality, community stability, income distribution, education, pollution levels, quality of employment, exercise, stress, participation in decision-making and other such things that make people more or less susceptible to disease. Rather than just providing money for treating people who are already sick, as we try to do in response to information about illness, measuring determinants of health would result in programs aimed at improving the circumstances that cause people to become ill.
Almost by definition, a focus on health determinants in our core measure of progress will shift attention from treatment to prevention. Since an ounce of prevention tends to be worth a pound of cure we might expect expanded measures in the health field to lead toward a healthier population at less cost.
Ron Colman, GPI Atlantic
Other Factors of Concern
Along with the above types of measurement, there are numerous other factors that affect our well-being and quality of life. These include the quality and quantity of employment and leisure time, durability of goods, dependency on foreign investment and on imported goods, levels of violence, quality of health care and education and the costs of crime. These and anything else arising that might be a threat to long-term well-being should be monitored.
If directing the affairs of society while considering only the GDP is like driving a bus using only the speedometer, each of the accounts described above is like an additional instrument on the bus's dashboard. With more instruments to keep track of relevant factors, a rear-view mirror to see how things have changed, and a clear windshield through which to look out for any new obstacles that might arise, we may yet steer our way to a sustainable future. The International Institute for Sustainable Development (IISD) has developed a measure based on the dashboard analogy. For more details, see their web site at: http://www.iisd.org/cgsdi/dashboard.asp
The individual indicators represented by the instruments on the bus's dashboard would themselves be determined by "aggregating" a number of related aspects of the issue in question. For example, an indicator representing the health of a community or country might take into account the following factors: the extent to which people are exposed to toxic substances; job satisfaction; income disparity; involvement in decision-making; levels of stress; and instances of disease and mortality. An indicator for the conservation of nature could look at forest cover, wetlands, habitat loss, threatened and endangered species, nutrients and toxins, alien species, and global environmental change. Economic prosperity, while still including GDP, might be more accurately viewed by working in measures of employment and underemployment, poverty, savings and investment rates, natural resources, and environmental conditions that effect productivity, security, and sustainability.
While each of these encompassing categories might be reported with a single figure, the various components from which they are aggregated should be accessible to anyone who wants to take a closer look.
GPI Sees the World Differently than GDP
In the mid 1990s when the organization Redefining Progress worked out GPI figures for the previous 30 years in the U.S., they discovered a serious trend. A great deal of the GDP growth, which Americans were told meant that all was well, could be accounted for as expenditures aimed at fixing mistakes from the past, borrowing resources from the future, and moving voluntary activities out of homes and communities and replacing them with paid work. The main categories for which they compiled comparative statistics were crime, family breakdown and other regrettable expenditures, household and voluntary work, income distribution, resource depletion, pollution, long-term environmental damage, changes in leisure time, lifespan of consumer durables and public infrastructure, and dependence on foreign assets. What they found was that GDP and GPI were almost the same in 1970. The GPI then began to drop below the GDP by 1% a year over the next 10 years. This increased to a 2% per year decline in the 1980s and 5% per year in the 1990s. This decline in social and environmental well-being answers the question asked in Atlantic Monthly's October, 1995 article, "If the GDP is Up, Why is America Down?" People sense well-being on a far deeper level than just how much money is being made and spent. When the things people value are being lost, they tend not to feel so good.
Developing measures of well-being along these lines bears a similarity to great advances in evolution. In the distant past, primitive organisms had little sensitivity to the world around them. They simply consumed what they could and grew. As time went by, the creatures able to sense light and motion had an advantage over those that could not. They could notice danger and act to avoid it, or sense food and move toward it. As sight, hearing, smell, taste and touch became more and more developed, the organisms that possessed them did better than those without. As a civilization, we are expanding our capacity for sensing the world around us. Most of the measurements discussed above are being made, but until they become a comprehensive sensory system with permanently established "nerves" making the information available to all who might use it, we are, as a society, still in the early stages of evolving the senses we need to succeed in our changing world.
This material is copied from Life, Money & Illusion; Living on Earth as if we want to stay.