GPI: a new way to measure progress

Sanjay Perera

 

"Only when the last tree has died, the last river has been poisoned, the last fish has been caught will we realise that we cannot eat money." -- 19th century Cree Indian saying

 

Hi Folks

Part of changing mindsets of people for the better is to change the way the economy works, and how we view and live in it.

We can do this when each of us does our part in spreading some form of good work.

There are new ways to measure and view economic growth beyond GDP. What's missing are things like GPI (Genuine Progress Indicator) and even GNH (Gross National Happiness).

This is not to say that GDP does not have its uses. But it is a highly inaccurate and misleading way to capture growth and success in an economy.

A GDP valuation includes all money generated by a country including for eg, the cost of a war, car accidents, oil spillage etc.

This means that rather than reflect what is a 'plus' in the ledger, the GDP includes all 'minuses' as well (ie, money lost and spent on wasteful and harmful activites).

For eg, if you have your own firm and you factor in all the money you earn at the end of the month. Then you minus all the debits you have from it, like maintenance costs, cost of education and food for your children etc,

Whatever's then left from your earnings is your profit. That's common sense.

But a GDP, believe it or not, takes all your earnings and expenditure including your minuses and rolls that up to a grand figure and says thats what an economy has made. It's counterintuitive because you shouldn't add your losses as growth, but economies do that. Which is why most growth indicators are misleading.

Expenditure is not equal to growth. Growth is much more than dollars spent/generated.

That is why you can have GDP growth but unemployment/or marginal employment (because you can grow a GDP by expensive government projects which is not the same as getting people decent jobs that allow them to lead a decent life).

Web searches on this and on "Green Economy" will help put many of these things in context. Many of these ideas can also be gleaned from Economia by Geoff Davies and The Economics of Happiness by Mark Anielski.

Check out:

http://www.anielski.com/

Countries like Bhutan use the GNH, and local and even the federal govt. in Canada now use GPIs.

The GPI captures the quality of life. That is what economies are really about.

How it is done is basically to have a plus and debit system for an economy and you do the right thing by subtracting the negative effects of losses to the economy and their negative impact: like building more cars, and creating larger roads to contain them, or demolishing green spaces and community areas for larger shopping malls and more $ banks, or a greater armament industry.

The GPI can be used together with the current GDP as a better and fair basis of capturing economic growth.

One of the measurements used in GPI, and not in GDP calculations, are activities that are not given monetary value but are nonetheless of great value.

For eg, a value is given to what a stay home parent contributes, to social and volunteer workers' contributions, to social and community contributions by companies, or activities by civil and civic society.

If a person takes time off work to look after an ailing parent or family member, or even a good friend, this may be added or captured by GPI.

This is part of the pluses added to the GPI calculation.

If a society becomes less gracious due to rapid urbanisation and harmful economic competition, this would be captured as a minus under GPI.

Studies have shown that since the end of WW2, while the GDP has grown greatly in the US (for instance) its GPI has eroded drastically.

Which explains why material wealth doesn't equate in many people's view to genuine wealth and what gives meaning to their lives.

And on the innovative use of cooperatives in this scheme of things check out Emilia-Romagna in Italy which also produces apart from fine food and wine, the automative industries of Ferrari, Ducati, Lamborghini, and Maserati (perhaps they might go Green...?).

Part of the need for a new economy is due to the failure, increasingly evident, of our current debt based monetary system that is now reeling from corporate malfeasance, priorities given to the banking industry and a near collapse of financial loan institutions: the fallout of which the US and many other countries are starting to face now.

Witness the recent desperate rate cuts by the US Fed and the buying of stakes by Singapore's sovereign wealth funds into international banking organisations -- all a result of a failing debt based economic system.

This impacts all of us: that's why mainly middle class people find that they all have to work harder, longer, get more depressed and stressed and still find that the genuinely rich get only richer, as everyone else slides into more debt, poverty and frustration.

Never mind the lower income groups who are desperately trying to find just breathing space.

The imbalance of things, and unacceptable level of inequity that the current debt based economic system generates is ruining our quality of life.

Part of this has to do with the monetary system we have: eg, a debt based system in which banks issue paper money based quite literally on nothing. They actually do create money out of thin air.

The monetary system of debts and interest rates only create the economic slavery that all hard working people (and increasingly unemployed people) find themselves in.

One of the things we need are interest free banks.

For more information, check out:

Anielski Report

Another way is to also start a split barter system where money is used but in a limited form. These ideas can be read up on and I believe Emilia-Romagna uses some form of this system.

Be well.