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© Hazel Henderson,
2011
"GDP SCORECARDS STILL
MISLEADING GOVERNMENTS, BANKS
AND INVESTORS AS NEW SURVEY SHOWS DISCONNECT"
by
Hazel Henderson
The GDP results for the final quarter of 2010 remain unreliable in
charting recovery and progress in Europe, the USA, China, Brazil and
most other countries. A new survey, BEYOND GDP, by GlobeScan and Ethical
Markets (USA and Brazil) in Australia, Brazil, Canada, China, France,
Germany, India, Italy, Kenya, Russia, the UK and the USA, reaffirms the
large majorities favoring reform of money-based GDP with many available
indicators of health, education, infrastructure, poverty gaps and
environmental quality found in their 2007 survey for the European
Commission (www.beyond-gdp.eu).
Statistical agencies are still on automatic pilot, grinding out GDP,
an inaccurate "rearview mirror," omitting vital indicators of future
trends. The chorus of critics of "GDP fetishism" now point to many more
accurate indicators forecasting national wellbeing, sustainability and
quality of life. Britain's David Cameron has ordered his Office of
National Statistics to develop new measures by 2012, similar to Canada's
Index of Wellbeing.
Both surveys use the familiar debate format, asking
respondents which of the following statement they agreed with:
“The government should measure national progress using
money-based, economic statistics because economic growth is the most
important thing for a country to focus on.”
or
“Health, social and environmental statistics are as important as
economic ones and the government should also use these for measuring
national progress.”
The new 2010 survey results still show high levels of public
agreement with the "Beyond GDP" statement. Support in seven of these
countries eroded somewhat since 2007 while support increased in others,
notably Canada, Germany and Brazil where 83% favor reforming GDP.
Support for including broader indicators in GDP remained above 70% in
Britain, France and Italy despite the financial crises in 2007-2008 and
governments bailing out banks, transferring liabilities to taxpayers
through austerity and job cuts. In the USA, 59% approve of reforming GDP
in spite of foreclosures and the loss of retirement security in pensions
and savings – even as conservatives become predominant in politics and
media.
The Beyond GDP
Survey's implications mirror those of the 2009 Stiglitz-Sen Commission
to French President Nicholas Sarkozy, that GDP had become a "fetish" and
it was time to move on.
Other reasons this "GDP fetishism" has been perpetuated include
deregulation and the growing influence of money and finance in politics,
including developing countries (re-named as "emerging markets"). In
OECD countries, special interests and their allies in politics and in
ministries of finance, economic development, trade, central banks and
stock markets grew to dominate governments' policies. Money measures
and 24-7 global stock and bond markets are primary in mainstream media.
All benefit from GDP measures of growth which ignore future trends,
infrastructure, social and environmental costs.
Many companies, investors and the public in this Survey can see the big
picture: well trained work forces, efficient public infrastructure and
productive ecosystems in EU and other countries – all counted at zero in
GDP! GDP's macro-economic, money-denominated, over-aggregated methods
are unnecessary in our internet age, which enables multi-disciplinary
indicators and metrics, using systems approaches. GDP is superseded by
these new scorecards – with web-based dashboards displaying all the
vital areas of quality of life and true progress.
Yet obsolete models persist in finance along with lags in
macro-economic statistics. As deregulation and privatization became
widespread, infrastructure (ignored in GDP) was short-changed, while
ministries of education, health, social welfare, consumer and
environmental protection lost influence. Their support and that of NGOs
for overhauling GDP accounts was insufficient to breach the bastions of
macroeconomics. Statisticians claimed it was too difficult. Market
enthusiasm, buttressed by financial forces and powerful interests were
all justified by these traditional economic theories.
As far back as 1992, Agenda 21 Article 40, signed by 170 countries
at the UN Earth Summit in Rio de Janeiro, committed them to overhaul GDP
to account for infrastructure, social capital, unpaid work and
environmental assets. Indicators proliferated on infrastructure assets,
environmental quality, resource depletion, loss of biodiversity, public
health, access to clean water, education, poverty gaps, social welfare
and quality of life.
Yet, all these well-researched indicators produced since 1992 stayed
sidelined from GDP accounting and designated as "satellite accounts."
Not surprisingly, this devalued their importance and relegated them to
academia, NGOs and the margins of societies. Mass media, financed by
advertising, still focuses on driving mass consumption, GDP and other
macro-economic indicators. Stressing the need for "faster growth," most
fail to clarify that they and politicians use GDP-growth as the tacit
definition of overall progress. Other indexes of national progress (www.beyond-gdp.eu)
include the UN's Human Development Index (HDI) since 1990, the Living
Planet Index of WWF and the Ecological Footprint to measure global
conditions.
Meanwhile, the rise of socially responsible business and investment
has led to new corporate accounting standards -- beyond earlier
"efficient market" models -- to measure performance by environmental,
social and governance standards (ESG), the "triple bottom line."
Financial firms using enhanced accounting and risk analysis include:
Global Reporting Initiative, Amsterdam, NL; Calvert Group, USA; Swiss
Reinsurance, Zurich; ASRIA, Hong Kong; Friends Provident, London;
Triodos Bank, NL and UK; and Rabobank, International, NL; Ethical
Markets Media, USA and Brazil.
It is time to require all companies to internalize the
"externalities," i.e., to fully account for their social and
environmental costs of production on their balance sheets. Many
companies have succeeded in overhauling accounting practice toward this
"triple bottom line." Better practices and companies still must operate
in financial markets driven by simplistic GDP-measured growth. So
security analysts miss these "externalities" and valuable public assets:
infrastructure, airports, transport, etc., are masked in GDP which still
omits an asset account to balance public debts!
The new breed of micro-economists corrected company balance sheets
and incorporated the new indicators. But macro-economists and fossilized
incumbent industries they serve and their allies in politics and
government agencies; still seek to preserve their freedom to
"externalize" social and environmental costs. They benefit from the view
of "progress" in GDP-measured growth.
Thus, our economies continue to pump out carbon and other pollutants
while ignoring social and environmental assets, hiding poverty gaps, as
well as infrastructure assets – all missing in GDP. Financial markets
wager on the future of the euro and bet on member countries' sovereign
bonds, while demanding "austerity," forcing taxpayers to pay again for
bankers' follies. Calls by European leaders for bondholders' "haircuts"
are fiercely opposed.
We can now steer our societies away from dangerous inequalities,
pollutants and climate change toward the cleaner, greener economies we
are all building and track progress with the Green Transition
Scoreboard®, totaling all private investments since 2007 in growing
green sectors worldwide at $1.6 trillion in 2010.
As distrust, anger, resentment at the unfairness of the bailouts
emerged in political backlashes in the USA and in Europe, indicators on
public infrastructure, environment, health, education and quality of
life are even more important for our future. Nations can find new paths
out of austerity and recession as casino finance is curbed, downsized
and returned to its former, proper role in serving the world's real
economies. (see "Transforming Finance" at
www.ethicalmarkets.com). The Beyond GDP Survey shows that the public
is ahead of politicians (www.globescan.com).
*****
HAZEL HENDERSON, author,
president of Ethical Markets Media (USA and Brazil), co-developed
with the Calvert Group the Calvert-Henderson Quality of Life
Indicators (updated regularly at
www.calvert-henderson.com.) and co-authored "Qualitative Growth"
(2009), Institute for Chartered Accountants of England and Wales (www.icaew.com),
and advises many projects and conferences including the European
Commission's Beyond GDP, November 2007, and its first survey in 10
countries by Globescan and
Ethical
Markets Media.
Hazel Henderson
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