Instead of Gross Domestic Product, how about wellbeing? Economist and Nobel Laureate Joseph Stiglitz has been making the case for going beyond GDP. Fresh from an OECD experts conference of mostly rich countries in Incheon, South Korea, Professor Stiglitz has written a piece on Project Syndicate. Click here to read it. If you don’t, just carry on through the next few paragraphs. I think you’ll get the gist.
What’s at issue is measurement of economic and social performance. Of a country. Mr Stiglitz argues that countries shouldn’t solely use GDP. It focusses on market-oriented production and material wellbeing rather than things like health, education, the environment. Additionally, it is unable to track growing inequality and the lack of redistributive justice. That means rising discontent can’t be addressed before it dangerously manifests. More to the point, a GDP-focussed measure of societal progress can leave far too many people alienated, unhappy and insecure. It can tip politics into dangerous territory.
Instead of GDP, says Mr Stiglitz, countries should have different, “better indicators” of progress (or the lack of it).
The Professor was commissioned by the OECD to work on alternative measures to GDP with another eminent economist Jean-Paul Fitoussi. They suggested new indicators of the state of society: measures of inequality, environmental sustainability, happiness, trust and economic insecurity.
This matters hugely. It is not just wonkishness. Professor Stiglitz’s ‘Beyond GDP’ recommendation is enormously important. As he says, “inadequate metrics have led to deficient policies in many areas.”
Had governments and policymakers considered metrics other than GDP they might not have been so fixated on austerity, which lowered fiscal deficits – true – but also cut public spending to levels that profoundly affected vulnerable people.
As Mr Stigliz and Mr Fitoussi write in their report: “What you measure affects what you do.”
And what you do affects millions of people.