The GDP measures the wrong things and conceals destruction of the environment, unhappiness and injustice. Politics tries to force up the gross domestic product. But what if this standard does not measure the right things and leads to a misguided policy?
NEW NUMBERS FOR GROWTH: ALTERNATIVE GROWTH
Criticism of the gross domestic product grows. The GDP measures the wrong things, conceals destruction of the environment, unhappiness and injustice. The German economic wise men hold to the figure.
By Petra Pinzler
{This article published in: DIE ZEIT 50, 12/8/2010 is translated from the German on the Internet, http://www.zeit.de/2010/50/Alternatives-Wachstum?page=all&print=true.]
Nicolas Sarkozy has a talent. Before others, the French president senses popular ideas – and quickly presents them on the great stage with a big fuss. However they often then quickly disappear again in oblivion, often for ever. An old theme captivated him and the German chancellor in early December 2010: the question of the meaning and nonsense of economic growth.
Stimulated by Sarkozy, the two heads of government began this philosophical debate a few months ago. Together they wanted to know whether growth, prosperity and progress must be judged differently than before and whether or not alternatives to the conventional gross domestic product are needed.
For a long while this standard was a synonym for prosperity. Countries gained their place accordingly on the list of successful nations. Governments are judged according to this. Therefore politics tries to force up the GDP, the gross domestic product, as much as possible. But what if this standard does not measure the right things and leads to a misguided policy?
This question haunted the heads of government, not only out of intellectual curiosity. Their interest in the famous number and its foundations had a different background. The economies of their countries collapsed in the middle of the financial crisis. The GDP brutally documented this.
The skepticism of citizens about the economic system grows. More and more people ask whether the growing (or shriveling) has anything to do with their personal well-being. They worry whether the earth will not become poorer in truth through an insidious eco-catastrophe – while they artificially count themselves rich. Therefore the leaders wanted to know: do we have the right policy?
A simple example drastically shows how misguided is the equation of GDP and progress. The economy grows when a car is smashed up and the driver lands in the hospital – since the insurance pays for the injuries and doctors render their services. Through the accident, the man and society are worse, not better.
What is more obvious than experts searching for alternatives? Together Merkel and Sarkozy commissioned their respective economic wise men to seek for new answers. These answers are now presented to them – in a time when the economic collapse is not as burning. For a long while, the GDP in Germany has been growing again and the government is taking a step forward – or backward – according to your perspective. In any case, the government revels again these days in marvelous economic numbers and acclaims “its” upswing. Is growth criticism still needed?
In any case, the economic wise men will not be troubled about this. After long reflection and much discussion, they came to the clear judgment: the GDP is the best standard for judging the economic output or performance of a country. They regard the GDP as imperative for judging the economic development or policy. They refuse any alternative indicator for social progress.
Was it a waste of time and energy? Economists do not make it so simple. A whole series of other figures are discussed as complements. At the beginning of the week, the Bonn sociologist Meinhard Miegel with his Denkwerk Zukunft institute (Think Tank for the Future) presented a similar conclusion though less extensively documented: The “replacement of the GDP by a prosperity-indicator” is wrong. To know how wealthy a country really is, four numbers should be emphasized and proclaimed according to Miegel: growth, distribution, exclusion and ecology. But summarizing this in a new “progress index” is wrong because this prevents the society from developing an awareness for the “importance and course of non-material prosperity indicators.”
Should there be many new numbers, not only one new number? This calls to mind the popular book “Wer bin ich – und wenn ja, wie viele?” Andreas Kraemer from the Ecology research institute regards such proposals as eyewash. For a long while all possible data on the destruction of the earth was published. There were the Global Footprint and the Happy Planet index. However all this accomplished little. Compared to the GDP, these numbers had hardly any political relevance. Therefore Kraemer sees the recommendations and answers of conservative economists as attempts to immunize themselves against criticism from society and the environmental movement.
Kraemer is not alone. In the last weeks, statisticians and researchers of different environmental institutes met in Berlin to discuss their data – and together admit their weaknesses. They do not trust an attack on the GDP – although they are constantly annoyed that this number conceals the eco-catastrophe.
Hardly one of the researchers believes other numbers will appear prominently on the nightly news alongside the Dax and GDP or that the real state of the planet will be reported. Institutional and political assistance for other numbers is lacking. Kraemer says: “Only politics can change this.”
In England politics did just that. At the end of November 2010, the conservative British Prime Minister David Cameron announced he would measure the “well-being” of his nation in the future and make the result the foundation of his policy. He will be motivated by a public that has discussed measurement of the good life longer and more extensively than the German public. Stimulated by economists like Richard Layard, the Brits discuss necessary changes of society, fairness and distribution, in a word welfare, not only environmental questions. Recent studies show ever more clearly: more material wealth does not lead automatically to more satisfied societies. The Brits are encouraged by happiness-research and researchers who emphasize welfare, distribution, environmental and economic questions.
In Berlin, the parliament now raises new questions. At the end of November 2010, the Bundestag founded the Enquete commission “Growth, Prosperity and Quality of Life.” The idea came from social democrats and Greens. After initial hesitation, the CDU and the FDP agreed. If everything goes well, an alternative to the GDP will appear at the end, the new commission chairperson Daniela Kolbe, said.
The commission may not have to seek for long. The Frankfurt economist Stefan Bergheim presented his ideal number summarizing growth, the environment and social well-being. The economist who long worked at the research institute of Deutsche Bank and has now founded his own “research center” is certain: The new figure for progress is feasible. If everything goes right, the German government some time or other will no longer only commission the wise men with a report on the economic situation including the GDP estimate. Then something will be discovered about the situation of the nation. “Progress,” Bengheim says, “is like a snail that now finally runs in the right direction.”
RELATED LINKS:
www.onthecommons.org
www.wearemany.org
Redefining Progress:
www.sustainable.org
Jeremy Rifkin, Redefining Progress, 15 minute video:
http://www.google.com/url?url=http://www.youtube.com/watch%3Fv%3DcIOlVhJRqkw&rct=j&sa=X&ei=oVoPTebcG5K-sAOqxK2EDw&ved=0CFoQuAIwCQ&q=redefining+progress&usg=AFQjCNFrf6Iay5CbuFc5DEns6dPcX-sF_w&cad=rja
Jonathan Rowe, “The Growth Consensus Unravels,” 1999:
http://www.dollarsandsense.org/archives/1999/0799rowe.html