GDP vs. Wellbeing Indexes
Until recently, most countries have used measures of Gross Domestic Product (GDP) as a proxy for development and human well-being. As a measure of domestic economic activity, GDP is a highly effective tool; however, GDP does not capture the full range of economic, environmental, and social realities affecting humans. Indeed, GDP was never intended to be used as a measure of human or environmental welfare, as Simon Kuznets, the inventor of GDP, revealed in his first report to the US Congress in 1934: “… the welfare of a nation can, therefore, scarcely be inferred from a measure of national income… “. Robert Kennedy, in a University of Kansas address in 1968, echoed this sentiment by emphasizing that GDP “measures everything, in short, except that which makes life worthwhile.” If “the proper purpose of an economy is to secure just, sustainable, and joyful livelihoods for all” (1), as Yes! Magazine co-founder David Korten reminds us in an article entitled “10 Common Sense Principles for a New Economy”, then we need the proper metrics to measure whether or not society is achieving its goals.
"The current system of accounts (GDP) has been sending the wrong message to everybody. The policy makers have been getting the wrong messages, so they're embarking on policies that are not wise, which have actually increased inequality and job security, resource depletion."
- Ron Colman, Executive Director, GPIAtlantic
ALTERNATIVE PROGRESS INDICATORS
Among policy makers and academics, there has been a resurgence of interest in adopting alternative progress indicators. Although there is no globally accepted alternative, several tools have been developed to bridge this gap. Full-cost accounting, measures of capital stock depletion, and happiness indicators present some of the current efforts to implement a complement to GDP, in other words, indicators that supplement GDP with additional environmental and social information. Some alternatives developed thus far include the UN’s Human Development Index, Bhutan’s idea of Gross National Happiness, the Happy Planet Index developed by the New Economics Foundation, the Genuine Progress Indicator, the Index of Sustainable Economic Welfare, and the Ecological Footprint.
CANADA'S INITIATIVES IN MEASURING WELLBEING
In Canada, at both the provincial and national level, initiatives that go beyond GDP in assessing the well-being of people, their communities, and the natural environment are taking shape; these include the Genuine Progress Indicator in Alberta, the Atlantic Genuine Progress Index in Nova Scotia, and the Canadian Index of Well Being, as well as more subjective approaches that are being researched and developed at top Canadian universities. In the past, the Federal Government has also taken some shy steps by developing complements to the GDP through the Canadian System of Environmental and Resource Accounts at Statistics Canada, as well as through the Federal Sustainable Development Strategy and Canadian Environmental Sustainability Indicators (CESI) at Environment Canada. The next logical step for the Government of Canada, with the help of academics and the not-for-profit sector, to work towards an officially sanctioned and integrated system that would provide decision makers at the municipal, provincial, and national levels the ability to better track progress, share information, and adopt best practices in regard to policy.