Report of the Club of Rome 2018, Chapter 3.14: “Not a single GDP ...”

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3.14 Measuring Wealth, Not GDP

The disadvantages of GDP growth as the main goal of the development of society have been considered in numerous reports. The problems are varied. GDP growth is not a guarantee of non-economic goals, rather the opposite. In addition, in an increasingly digitized economy, GDP growth no longer indicates an increase in the number of jobs.

3.14.1 Recent work on alternative indicators

In recent years, much work has been done on alternative indicators for GDP — more complete indicators can combine economic, environmental and social elements into a general structure to show the progress of net profit (or its decline). A number of researchers have proposed alternatives to GDP, which make one or more of these adjustments with different components and metrics. Others also noted that it was dangerous to rely on one indicator and suggested a “dashboard” approach with several indicators. Ida Kubizhevski described many of them, including “True Indicator of Progress”, “Environmental Impact”, “Biodiversity”, “Gini Ratio” and “Life Satisfaction”. The various proposed alternatives can be divided into three broad groups:

• Measures that change economic accounts to address equity and nonmarket environmental and social costs and benefits
• Measures of "subjective" indicators based on the results of the survey
• Measures that use a number of "objective" indicators

One of these indicators, located in the first broad group, is the Genuine Progress Indicator (GPI), a variant of the Sustainable Economic Well-Being Index (ISEW), first proposed in 1989. GPI starts with personal consumption expenditures (the main component of GDP) but adjusts it using about 25 different components, including income distribution, loss of free time, expenses for family breakdown, unemployment and other negative consequences, such as crime and pollution; depletion of natural resources; As well as the numerous environmental costs of GDP growth, such as the loss of wetlands, agricultural land, forests and ozone, long-term damage such as climate change is also taken into account. Among other things, GPI adds positive components that remain outside of GDP, including the benefits of volunteer and homework. Sharing actions that reduce welfare and raising it up, GPI is better approaching sustainable economic well-being. However, GPI should not be an indicator of sustainability. This is an indicator of economic well-being, which must be considered along with biophysical and other indicators. After all, since only one knows if the system is stable after this fact, there can be no direct indicators of sustainability, there can only be predictions. which must be considered along with biophysical and other indicators. After all, since only one knows if the system is stable after this fact, there can be no direct indicators of sustainability, there can only be predictions. which must be considered along with biophysical and other indicators. After all, since only one knows if the system is stable after this fact, there can be no direct indicators of sustainability, there can only be predictions.

If the same method of input / output tables were used to calculate GDP, the whole process would have to be adjusted. Tables should distinguish between economic activities that improve people's well-being and those that worsen them (see Figure 3.16). Another important change should be the inclusion of goods and services that are not part of the economic market, but have a large impact on people's well-being. Over the past few years, various groups, including the United Nations and the World Bank, have been working to create national accounts that include ecosystem services. Some of these efforts modify the I / O model to include services that are by nature.

Over the past few decades, ISEW or GPI has been calculated in about 20 countries. These studies have shown that in many countries for a certain period, GDP growth no longer correlates with the growth of economic well-being. The trend is similar in many countries. GPI tracks GDP fairly closely while the country is developing, but at some point their figures diverge. In the United States, this happened in the mid-1970s, while in China in the mid-1990s. GDP continues to grow when GPI levels compare or decline.



Figure 3.16 Components of the Genuine Progress Indicator (GPI) indicator (Source: Kubiszewski et al., 2013)

Not so long ago, global GPI was also estimated using GPI and ISEW data from 17 countries, which had about 53% of the world population and 59% of world GDP. At the global level, GPI per person peaked in 1978 (Fig. 3.17). It is interesting to note that in 1978 there was also a time when the human ecological footprint, a biophysical indicator that measures the human demand for nature, exceeded the Earth’s ability to support humanity. Other global indicators, such as life satisfaction surveys from around the world, also began to level off during this time. In fact, the strikingly persistent global trend shows that as income rises, wealth often decreases, combined with an increase in alcoholism, suicide, depression, poor health, crime, divorce, and other social pathologies.

The task of the GPI at this point in time to raise the red flag. Since GPI consists of many components of benefits and costs, it also allows you to determine which factors increase or decrease economic welfare. Other indicators are the best guides for specific aspects. For example, satisfaction with life, determined by surveys, is the best measure for assessing overall well-being. By observing changes in the components of individual gain and value, GPI shows which factors cause a decline or an increase in economic well-being, even if this does not always indicate that the driving forces are behind these changes. For example, it may take into account the basic consumption patterns of resources, but cannot recognize the self-reinforcing evolution of markets or political power that lead to these changes.



Figure 3.17 Global GPI per person and GDP per person. The GPI per person was estimated by combining data for 17 countries for which GPI or ISEW was estimated, and adjusting for discrepancies due to incomplete coverage compared with global GDP / per capita data for all countries. All estimates in 2005 are in USA (Source: Kubiszewski et al., 2013)

Recently, two governments in the United States of America adopted GPI as the official indicator, the states of Maryland and Vermont. In addition, the data needed to evaluate GPI is becoming increasingly available in many countries and regions. For example, remote sensing data makes it possible to better assess changes in natural capital, and surveys of people about their time use and life satisfaction also become more routine. New tools are being developed to measure inequality, and more detailed data is collected on crime, family breakdown, underemployment and other measures that may be used in the GPI in the future. The bottom line is that GPI estimates are not particularly expensive, data limitations can be overcome, and they can be relatively easily estimated in most countries.

3.14.2 Discrepancy between GDP and GPI

GDP was created in the United States in the 1930s and continued to be used after World War II, when the world needed repairing its built infrastructure and financial systems. Natural resources were considered abundant; Lack of access to infrastructure and consumer goods is the main limit to perceived improvements in people's well-being. During this time, it made sense to create an indicator that would ignore relatively rich natural resources and the distribution of wealth in order to focus exclusively on increasing the production and consumption of market goods and services that were relatively scarce.

However, as a result of our success, the world has changed a lot over the past few decades. We now live in a world full of human infrastructure. The negative impact on the environment has grown so much that in many cases, restrictions on the availability of natural resources now limit real progress more than restrictions on consumer goods.

Between about 1950 and 1975, GPI per person increased for most countries. Much of this was related to recovery efforts after World War II, when consumption and built capital were limiting factors for improving well-being in many countries, and environmental externalities were not yet significant. By the mid and late 1970s, most of the infrastructure was rebuilt. However, growing income inequality and an increase in external environmental costs have begun to reduce the growth of income associated with consumption, which has led to a decrease in the level of GPI per person. GPI is not an ideal measure for people's overall well-being, because it emphasizes economic well-being and does not take into account other important aspects of well-being. This, however, is an indicator

Social well-being or well-being ultimately depends on natural capital, human, built and social capital, and since GPI contributes and deductions to GDP to reflect the net contribution to these stocks, GPI is much better at evaluating economic well-being than GDP. The discrepancy between GPI and GDP, since 1978, shows aspects of our well-being that have been declining since then. This discrepancy also provides targeted areas in which the improvement of society is possible and necessary.

3.14.3 Towards a hybrid approach

All the approaches mentioned above have positive and negative sides. Therefore, the question arises: can we build a hybrid indicator that includes most of the positive aspects and minimizes a negative result? As Kostanza et al. Came to the conclusion: “the successor to GDP should be a new set of indicators that combines modern knowledge of how ecology, economics, psychology and sociology together contribute to the establishment and measurement of sustainable well-being. New indicators should receive broad support from stakeholders in upcoming meetings. ”

Against this background, one potential hybrid, the Sustainable Well-Being Index (SWI), can be a combination of three main parts, each of which covers the contribution to sustainable well-being from the size of the economy, society and nature.

Net economic contributionGPI can be considered as an indicator of the net contribution of economic (production and consumer) elements to welfare. It weighs personal consumption at the expense of income distribution, adds some positive economic elements remaining outside of GDP, and subtracts a number of costs that should not be considered benefits. Although some expenditures on natural and social capital are included in GPI, many others are absent (for example, the loss of social cohesion due to social upheavals caused by economic growth). Conversely, we need a way to measure and incorporate positive benefits for wealth from natural and social capital. Currently, GPI needs to add additional cost estimates from the SDG, including its targets and proposed indicators,

Contribution to natural capital / ecosystem services.
The positive contribution of natural capital and the ecosystem services it provides has been assessed indirectly explicitly and can be valued in different units, including monetary units. They can be assessed at country level, as well as at subnational and regional levels. For example, the World Bank's Wealth and Ecosystem Assessment (WAVES) project is actively working on this task, as well as other initiatives, including the new Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, Ecosystem and Biodiversity Economics (TEEB) and the Partnership in the area of ​​ecosystem services.

Social capital / social contribution.
A positive contribution to the welfare of social capital could be captured through surveys of various components of life satisfaction. For example, the World Valuation Assessment, as well as regional barometers (eg, Eurobarometer, Afrobarometer, etc.) ask questions about trust and other aspects of social capital. However, we may need to add additional research questions that directly ask about the value of social and social capital, in addition to individual satisfaction with life.

To be continued ...

For the translation, thanks to Jonas Stankevichus. If you are interested, I invite you to join the “flashmob” to translate a 220-page report. Write in a personal or email magisterludi2016@yandex.ru

More translations of the report of the Club of Rome 2018

Preface

Chapter 1.1.1 “Different types of crises and feelings of helplessness”
Chapter 1.1.2: “Financing”
Chapter 1.1.3: “An Empty World Against Full Peace”

Chapter 3.11: “Financial Sector Reforms”
Chapter 3.13: “Philanthropy, Investments, Crowdsors and blockchain "
Chapter 3.15:" Collective Leadership "
Chapter 3.16:" Global Government "
Chapter 3.18:" Literacy on the Future "

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