Thoughts on: how should we measure economic success?

By ivan hutnik on September 8, 2016

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In this blog post, Ivan Hutnik from Quakers and Business responds to the first new economy booklet, ‘What’s the economy for?’

Booklet 1 asks whether it is better to use a single metric (like GPI) or several (as in the NEF 5 indicators) to measure economic success. My own sense is that a single indicator will remain preferable, as this gives most people (e.g., commentators, politicians and journalists) a simple handle on what is happening. Overall all, I think GPI does an ok job of this. However, I have criticisms.

Economic ‘progress’ and war
I think one concern I have from a Quaker point of view is that none of the metrics take into account the connection between GDP and war. A good part of the UK and US economies are connected to armaments production and services (companies like BAE and Rolls Royce being the tip of the iceberg here). This isn’t reflected in the GPI graph, where the US economy started to take a very perverse turn in the late ’60s, building up immense debt due to armaments production due to the Vietnam war. Surely this is not genuine progress.

Happiness for who?
Looked at through this lens, there is also clearly something wrong with the Inequality-adjusted Human Development Index (IHDI). Ask any of the Aboriginal people (First Nations Peoples) whether they think Australia is in the top three happiest places! The half million First Nations Peoples have a life expectancy 17 years less than the non-indigenous average and an infant mortality twice that of the average. For IHDI not to pick this up indirectly supports this injustice: it suggests that IHDI is not measuring their needs but reflects Australia’s very high average standard of living. To discount the suffering of First Nations Peoples is surely not Quaker.

There is a similar danger with Bhutan’s Gross National Happiness (GNH) – who is it that they are measuring the happiness of? The “non-Bhutanese” (largely Nepali) have in recent years been expelled from the country and are excluded from such measures. According to Human Rights Watch, the 2008 citizenship laws were in effect ethnic cleansing – that led to expulsion of one-sixth of the population. Quakers need to be very careful not to condone this.

Beyond national measurements
When it comes to measuring the success of industries or companies rather than the country as a whole, all too often our politicians accept productivity figures as if these are the definitive measure of useful activity. In effective, productivity is as much a measure of capital intensity as anything (how much machine output there is) – one reason why the UK productivity is declining (due to outsourcing) and why it could never compete on this metric with more industrialised countries.

My own belief is that a measure of Socially Productive Activity (which could mirror macro metrics such as GPI) would be much more helpful. One idea might be for this to take account of negative environmental and socially destructive activities in a similar way to GPI (e.g., giving a negative value to CO2 production) and to add in the multiplier effect of activities that increase social support and cohesion (e.g., that actually reduce the need for state support or intervention).

One example might be that the value of home care is more than that expressed in terms of the wages/costs of the employees: its greater value is that it keeps people independent and helps them to stay out of care homes and hospitals (this directly reduces costs). Not only is this often of prime importance for the person concerned but it also reflects a social aspiration towards equality that seeks to avoid marginalisation of the elderly. Of course, as Booklet 1 points out, putting a person in hospital would add more to GDP, simply because it does cost more! This suggests that not only should we move away from GDP but away from crude productivity numbers.

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  1. Mark Frankel
    Posted November 29, 2016 at 8:40 pm | Permalink

    I agree that home care is insufficiently valued in measures of economic success, which is why I tend to deprecate suggestions that governments should act to reduce the cost of child care, typically to enable mothers to go out to work. Rather, the cost of child care should be increased, not reduced, because this would benefit typically low-paid, female childcare workers.

  2. sairamcp
    Posted February 13, 2017 at 4:22 pm | Permalink

    I like to think that economic success is based on the development of levels of ability to attain actualisation of self in the world. If the working classes or poorer and self demeaning classes of people in the world have an education system for their children which gives integrity and spiritual sustenance to them then the economy cannot but thrive. It is the central core of higher evolution for all people. It has been shown world-wide. It is little understood.It has been ‘stolen’ by the middle classes as it was designed with the poorer children of Rome. And it does not depend as one Quaker person suggested ‘depend on the environment’. Montessori called the child ‘The Universal Child’ that because we all develop in the same way. It is little understood even though incredibly successful and Thailand now uses it for their state education system. We can do the same.

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