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GDP: Still A Grossly Distorted Picture

New survey finds public supports going beyond GDP accounting, but politicians and economists lag.

Submitted by: Hazel Henderson

Posted: Jun 05, 2013 – 09:44 AM EST

Tags: gdp, economy, sustainability, environment, esg, governance, poverty, earth summit, politics, accounting, globescan

 
Hazelhenderson

By Hazel Henderson

Obsolete metrics like GDP not only map vanished territory and back societies into the future looking through their rearview mirror, they cause unnecessary human suffering, as we see in Europe through imposing “austerity” poverty, hardship and soaring unemployment in the real economies of Greece, Ireland, Spain and Portugal while mispricing their sovereign bonds tied to GDP. 

World Bank president Jim Yong Kim, MD, has stated the “quest for growth in GDP has worsened the lives of millions of women and men.”

Ever since the second Earth Summit in Rio de Janeiro in 1992, 171 nations have pledged in Article 40 of their Agenda 21 agreement to overhaul their GDPs to include social, human and environmental assets, recognizing pollution costs, poverty gaps and unpaid work (50 percent of all production seen in industrial societies and up to 70 percent in more traditional developing countries). 

GDP omits all these and other forms of wealth, only accounting for money-based activities, which makes indebted European countries to be in much worse shape than their realities with well-educated workforces, modern infrastructures and productive land and ecosystems.

All those count for zero in GDP.

Deduct the “Bads” From the “Goods”

Why have nations been so reluctant to make the corrections to GDP they promised in 1992 and recommitted to at Rio+20 in 2012? 

I have tracked these issues since the 1960s when Citizens for Clean Air, the NGO I co-founded in New gross national productYork City invited our then Senator Robert F. Kennedy on a helicopter ride to see all the air pollution GDP counted as more “production.”  We called for reforming GDP to deduct such “bads” from the “goods” to show a “net GDP.” Senator Kennedy supported us and gave his memorable speech in 1968.

I learned that economics is politics in disguise and that these “bads,” like pollution and other social costs, were termed “externalities” in textbooks. These claimed such costs could be excluded from company balance sheets, government projects and national accounts like GDP and passed on to taxpayers, future generations or hidden in the environment. 

I found out that faulty economic statistics were actually driving our societies into unsustainable economic growth, inequality, social and ecological breakdown. Ministries, politicians, financiers, statisticians, even academia and business schools could not admit these systemic errors.

Even though many statistics and indicators of outcomes in health, education, poverty gaps and environmental quality proliferated from 1992 onward, these were isolated from GDP as “satellite” accounts and thus deemed less important. The media continued to focus on GDP even after a French study in 2008 headed by prize-winning economist Joseph Stiglitz and Amartya Sen termed this GDP-focus a “fetish.”

GDP Needs Asset Accounting

Meanwhile, others and I pointed to another flaw in GDP: it had no asset account!

So all these tax-supported infrastructure bonds for roads, bridges, hospitals, schools, were recorded only as debt – without acknowledging these long-term valuable public assets! This made all countries Beyond GDPappear twice as indebted as in reality. 

As I wrote books and articles on all these for 20 years to no avail, I was invited by the European Commission [EC] in 2007 to co-organize the Beyond GDP conference in the European Parliament. At last, our Ethical Markets TV program Redefining Success persuaded the EC to allow us to commission Globescan to conduct our Beyond GDP Survey in 12 countries to see if the public understood the need to correct GDP. 

Globescan found huge majorities in all these countries who agreed! We repeated this survey in 2010 with similar results. 

On May 28, 2013, we released the results of our latest Beyond GDP Survey with co-sponsors ICAEW and Tomorrow’s Company. We found similar public backing for going beyond GDP by including broader indicators of health, education and environment. 

It seems, the public is ahead of economists, financiers, politicians and academics in understanding that GDP still gives a dangerous Grossly Distorted Picture of our real human situation in today’s world.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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