Genuine progress

Written By: - Date published: 7:13 am, May 27th, 2011 - 14 comments
Categories: economy, Ethics, sustainability - Tags: , ,

This story didn’t get any big headlines. This story slipped by almost completely under the radar. But it’s a very important story. Much more important for New Zealand’s development than the smoke and mirrors of the do-nothing budget. Because, here’s the thing. If you’re headed in the wrong direction, it doesn’t matter how much “progress” you make. You’re still headed in the wrong direction.

New Zealand has been heading in the wrong direction for as long as I can remember. Almost all of the policy, debate, and commentary, is about “growing the economy”. The crucial measure is GDP – Gross Domestic Product. When it goes up everything is supposedly rosy. When it goes down things are seen to be going badly.

But GDP is a flawed measure. It doesn’t count anything that isn’t bought and sold, things like volunteers, clean air, the cost of crime and so on. It doesn’t measure how much wealth is destroyed in making new stuff, or whether the economic activity is for good stuff (education) or bad (dirty polluting coal power stations). In the classic example, paying someone to dig a ditch increases GDP, as does paying them to fill it in again. In short it’s a measure of activity or churn, rather than a measure of progress.

There are alternatives to GDP. One is the GPI – Genuine Progress Indicator. Rather than just measuring economic activity, the GPI takes into account costs such as resource depletion, crime, and environmental damage, and benefits like unpaid labour. As Marty G put it, “GDP could be seen as like a company’s revenue. GPI is the net profit”. We’ve pushed the advantages of a GPI like approach to measuring progress several times here at The Standard.

Now it turns out (and you could knock me over with a hummingbird’s feather) that Treasury actually seems to be working itself up to try and think beyond the narrow minded square of GDP. Scoop reports:

Whitehead’s swansong shifts Treasury advice beyond dollars and cents

Outgoing Treasury Secretary John Whitehead has expanded the boundaries of advice to ministers beyond the mere dollars and cents of policy in an all-of-government approach.

The government’s fiscal adviser has introduced a framework to include other, less tangible measures when weighing up the benefits of policy in a bid to meet its target of lifting the nation’s living standards, Whitehead said in notes for what is his last speech as head of department. …

The department hopes the new framework will capture this in acknowledging the causes of living standards beyond income and gross domestic product; freedom, rights and capabilities; the long-term sustainability of policy; and subjective measures of well-being.

This will measure society’s skills and health, social institutions and general trust and the environment.

Whitehead was interviewed yesterday on Morning Report (audio link). There’s further coverage at Stuff, and this piece by Green MP Kennedy Graham sums up many of my feelings:

Parting gift from Treasury head a game changer

The outgoing head of Treasury, John Whitehead, has left New Zealand with one of the best parting gifts ever — the groundwork for an alternative set of measures to define ‘progress’.

This is one of the best news stories in my living memory. Why? Simply put, the way we define and measure progress goes to the very core of how we run our economy. Our singular focus on growing GDP has concealed the related decline in other measures of our prosperity, like the rapidly declining quality of water in our rivers and lakes, or the record growth in inequality within New Zealand. If we change the measure, we’re likely to change the outcome.

The draft Treasury paper, Working Towards Higher Living Standards for New Zealanders, is a good start and, if adopted, will help the Government make far better, longer-term policy decisions. However …

And yes there is plenty of “however”, but even so, I can’t help but share Graham’s optimism. This initiative offers us the chance to stop our blind dash in the wrong direction. A chance to climb a tree, have a look around, and a bit of a think about where it is that we really want to be going. Given all the challenges that we face right now, and given the mess that we’ve been making of it with our blinkered focus on GDP churn, this can only be good news.

14 comments on “Genuine progress”

  1. MrSmith 1

    Unfortunately Rob, as Kennedy Graham said, Here. “The report is light on environmental measures; only 4 of the 46 indicators have anything to do with the environment.”

    But its a start in the right direction or should that be the Green direction.

  2. Chris 2

    I agree completely with this. GDP is a terrible measure and they have only stuck with it because it is generally more objective and comparable than other measures. Which is why I was quite surprised to also see this story slip under the radar:

    http://www.stuff.co.nz/life-style/5052208/NZ-among-the-happiest-of-the-OECD

    I’ve always thought we have had it pretty good in NZ we just like to complain. Which explains why in most stuff comments and sometimes here you see people going on about moving to Australia etc. yet for all that our net migration is still positive and there hasn’t been a significant increase in the longer term number of migrants.

    • RobC 2.1

      Life is pretty good in NZ comparatively, but the headline is misleading. If the journo had bothered to read the report, “Life satisfaction” is actually compared in the report (caveat that measuring happiness is an extremely subjective exercise) with NZ 13th / 40. Interesting to see China dead-last on this score.

      What sticks out like pitbull testicles on the interactive chart is we’re above average on everything except income. I note also from the stuff article we score badly in respect of hours worked (i.e. we work a lot of them).

      So we’re a low-wage country, apparently we’re low on productivity, yet we work more hours than most. Fix that conundrum and we probably would be the best country to live in.

  3. Colonial Viper 3

    Maybe Treasury won’t have to be broken up and sold any more. Maybe.

  4. PeteG 4

    Good to see alternatives to GDP obsession being promoted. No measure will be perfect for everyone’s taste, but this looks like a significant step forward.

    I agree with Chris too, there’s a lot of moaning about our place and time that on balance has a heck of a lot going for it, far better than most places and times in history for most people.

    • Deadly_NZ 4.1

      And if it shows the last budget to be what it is Smoke and Mirrors. You can be sure your Masters will do their best to either discredit the author (this will be hard) or they can do what they always do when they don’t like something is to just bloody ignore it. So on one hand Pete you say its good to see alternatives, but if your masters the NACTS say it’s bad how long before you change your tune??.

  5. Lanthanide 5

    Oh yeah, I complete forgot to mention this yesterday. I heard the interview and was planning to mention it here.
     
    In that interview, he said that treasury has actually been looking at these different aspects for a few years now, and it informs their policy advice, but it isn’t a formal process. Now it will be a bit more formal (and hopefully, harder to ignore).

  6. ZeeBop 6

    Cheap oil meant activity abundance, energy in real terms getting cheaper as
    more ways to save energy were found and more oil was brought onto the market.
    Then we past peak oil, and governments in order to keep activity up looked the
    other way when banks continued the same lending practices, and the same
    neo-liberal economic social group think in society persisted.

    Now, we’re in chronic crisis, unsustainable debt, unsustainable environmental
    debts, resource limits, altered biosphere producing uncertainty and disasters.

    And why? Well, the chicken man, who grew up with chickens. If you
    destroy the community (sprawl), destroy the extended family, destroy the
    nuclear family (single parent households), destroy the environment (monoculture)
    force the major breadwinners of the extended family to move to get paid
    horrendous amounts of money, then of course you grow of lots of
    incapability, social, ecological, fiscal debt.

    Cheapen every good aspect, and reward debt accumulation, social
    debt, fiscal debt, environmental debt, then joy of joys you will
    destroy the human race inside a few centuries. Christianity meets
    Industrialization, it was a death sentence for Human kind. 😉

    The funny thing, is if you don’t care, is how the media make
    National out to be the considered approach, to debt, to fiscal
    fortitude, to environment concerns (farmers won’t pay ETS etc
    which both admits they are concerned to have ETS but won’t
    place the burden on farmers).

    Its the way the media manufacture acceptance that will be the
    end of us all. Media needs to be offensive to power.

    • PeteG 6.1

      Its the way the media manufacture acceptance that will be the
      end of us all.

      The media are beholden to their advertisers who are beholden to growing their business and are not beholden to conservation and common sense about consumption.

      The way the people pander to consumerism is the biggest problem, if you can go some way towards solving that you might bring business and media into line.

      • Lanthanide 6.1.1

        Without consumerism, huge numbers of people would be unemployed. How are we supposed to support them? Capitalism simply can’t work in an environment like that.

  7. Rodel 7

    I thought GDP as a concept was faulty.
    Then I read Bill Bryson’s explanation which convinced me that GDP is economists’ nonsense and a nice fantasy for politicians.

    Bryson says, ‘ None of this really matters because GDP is in any case a perfectly useless measurement…..It has been estimated for instance that the O. J Simpson trial added $200 million to America’s GDP through lawyers’ fees, court costs, hotel bills for the press and so on…. but I don’t think many people would argue that the whole costly spectacle made America a noticeably greater, nobler place…..” (Notes from a Big Country, Bill Bryson p 313)
    or google: Ron Schuler’s Parlour Tricks: GDP

  8. Afewknowthetruth 8

    Well, it’s good to see the truth about GDP being exposed: GDP = Global Destruction Process. GDP = Grandiose Deceit Paradigm.

    Unfortunately the time to implenent GPI was at least a decade ago -and preferably three or four decades ago. The economic system is now imploding and I’m sure we won’t be bothered what the GDP figures are a decade from now. In fact we probably won’t be bothered what the GDP figues are 5 years from now if the predicted fall-off in internationally traded oil eventuates.

  9. handle 9

    Before you get too excited that right-wing Whitehead has changed his spots, check this transcript of him talking about it on Q&A:
    http://tvnz.co.nz/q-and-a-news/john-whitehead-interview-transcript-4196622

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