CSRwire Talkback

By Hazel Henderson

As part of the Green Economy series

GDP tracks national output using money flows, which its inventor Simon Kuznets warned was never intended to measure overall progress.  GDP reporting in mass media became a "fetish" ("Stiglitz-Sen Moving in the Right Direction, but Slowly").  GDP focuses economic competition between nations, justifying interest rates on their sovereign bonds ("Grossly Distorted Picture: GDP Still Misleading Governments").  GDP obsesses politicians seeking election and all business leaders.  Media amplify GDP in their global echo chambers.  Investors and security analysts follow GDP in benchmarking performance of securities and central bankers. 

GDP still obscures important aspects of national progress: education, health, the state of infrastructure and the environment.  Un-priced "externalities," such as pollution, get passed on to taxpayers and future generations.  Such false accounting, ignoring social and environmental costs, is then reflected in GDP.

It has taken thirty years to make the needed corrections to GDP because it is defended by economists, business leaders, politicians, powerful ministries and even statistical agencies in most countries (Henderson, IPS 2007).  GDP perpetuates the false prices from externalizing costs to societies, such as BP's massive oil well blowout in the Gulf of Mexico.  When societies are blinded to longer-term threats by incorrect prices in stock markets and GDP, then financial crises and social backlashes will worsen.

NGOs, academics and professionals in many disciplines have created new indexes beyond economics.  To correct GDP, they call for inclusion of externalities and for the some 50% of productive work in all societies that is unpaid and ignored in GDP ("Total Productive System of an Industrial Society").  They face opposition from special interests making money by externalizing costs.  Indicators beyond GDP include the UN's Human Development Index (HDI), the Living Planet Index, Ecological Footprint, Bhutan's Gross National Happiness and the Canadian Index of Wellbeing. 

The Calvert-Henderson Quality of Life Indicators, which I co-created with the Calvert Group in 2000, uses a web-based dashboard with 12 indicators.  Britain is developing an Index of Wellbeing, similar to that in Canada.  China's innovative Green GDP revealed environmental costs of its rapid economic growth which should be deducted from its GDP.  It was quashed – in spite of public support ("New Scorecards for Real National Progress").

In 2011, the powerful OECD launched its Better Life Index.  I interviewed chief statistician Dr. Martine Durand on its eleven components: housing, income and wealth, jobs, community, education, environment, governance, health, life satisfaction, safety and work-life balance, all using robust data sets.  Your Better Life Index allows interactive comparisons of some indicators across selected countries, based on users' priorities.  This and their "wikiprogress" site invites the involvement of citizens. 

Most of the new indicators avoid direct confrontation with GDP proponents.  EUROSTAT's 2011 conference did not challenge GDP's false pricing and externalized costs.  Such timidity is understandable in facing the power of special interests and their profits in "business as usual" externalizing costs models.

History is now on the side of OECD's Better Life Index and the growing influence of all the other new indicators mentioned.  The European Parliament voted to approve the Beyond GDP report and a new regulation on Environmental Economic Accounts. 

Examining poverty gaps and inequality is paramount.  OECD's Durand noted that inequality factors will be accounted.  US Secretary of State Hillary Clinton emphasizes the importance of measuring gender inequalities, such as in the UN's HDI and the focus of the US-based Center for Partnership Studies. National security or military indicators are also vital, like those in HDI and in the Calvert-Henderson Quality of Life Indicators, which adds infrastructure and energy-GDP ratios to focus on efficiency. 

The OECD's Global Green Growth program will cover resource efficiency, similar to the TEEB report approach, as well as social standards for global companies.  Most scorecards use objective research rather than subjective approaches to "happiness" which is indefinable and culturally-biased (Exploring Happiness). The Better Life Index and all these better scorecards are in Ethical Markets' focus in our Green Transition Scoreboard®, Transforming Finance initiative and Beyond GDP surveys.

About Hazel Henderson

Hazel Henderson,  D.Sc.Hon., FRSA, founder of Ethical Markets Media, is a futurist, evolutionary economist and author of award-winning Ethical Markets: Growing the Green Economy. She leads the Transforming Finance initiative, created the Green Transition Scoreboard®, tracking global private sector investment in green tech, and developed with Calvert Group the widely used alternative to GNP, the Calvert-Henderson Quality of Life Indicators. In 2010 she was honored as one of the “Top 100 Thought Leaders in Trustworthy Business Behavior 2010” by Trust Across America.

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