New Zealand Celsias

It’s a pretty worthwhile question to ask, and the answer is gets us to the heart of what’s important.  However, what would seem like a pretty straightforward connecting of dots in reality isn’t so simple.

Policy leaders at all levels of government look to such statistics as OECD rankings and how much the Gross Domestic Product (GDP) went up or down as keys to our success.  But are these measures really an accurate portrayal of prosperity and wellbeing in the country, or are they in some ways standing in the way of genuine progress?

Take GDP for example.  What was originally intended as a nice easy number for economists to get a sense of the economy’s volume has become synonymous with the health of a country.  To economists, if the GDP goes up, then we must be doing well, right?  Growth is good.  It’s the mantra we live by.

Well, have you had a car accident?  Gotten really sick?  Been hospitalized?  Lose your house in a mudslide and will have to rebuild?  Congratulations, you're doing good for the economy.  That doesn't sound so good to you? 

Some expenditure measured by GDP really signals decline in wellbeing.  Thing is, there is no distinguishing good from bad.  A simple fact about GDP is that one of its key architects, Simon Kuznet, gave a warning about its use: never use it as a measure of a country’s welfare.  We seem to have strayed from its intent of purpose, yet it continues to misguide actions and policy to this day. 

While GDP may oversimplify a complex situation, there thankfully are alternatives.  Enter something called the Genuine Progress Index (GPI).  It is a system of 20 components across social, economic, environmental, and cultural areas that’s been researched and created over the last 13 years by Canada’s Dr. Ron Coleman. 

Cutting down trees and turning them into houses might be good for GDP, but what about the value of the forest in terms of ecological services that will be lost?  This is exactly the economic reality that has been ignored to date, and aided humanity in outstripping nearly ecosystem on the planet. 

As Rod Oram said, “There’s no central bank to bailout a bankrupt ecosystem.”  The idea of GPI is to get a comprehensive view of what’s going up, what’s going down, and make conclusions from a more comprehensive set of data—in other words, a full-cost accounting.

Last week, as part of a nationwide speaking tour sponsored by Anew New Zealand, Dr. Coleman briefly discussed the GPI in a candid interview, and then gave a thought provoking presentation on how the index might be used to predict disasters such as the economic meltdown we’re still wading our way through. 

“It’s too hard and impractical to try and roll up such disparate things as employment, community cohesion, and fisheries stocks into a single number,” Dr. Coleman says.  “We need integration to show the links between the different areas we are measuring of the Genuine Progress Index.  An index gives us a holistic view and can better inform our policy decisions.”

From his native Nova Scotia, to the government of Bhutan, to New Zealand’s capital of Wellington, Dr. Coleman’s ideas have been internationally well-received.  The new government in Nova Scotia has adopted GPI, and locally the Maori Party has embraced the principles as part of their platform. 

The Wellington Regional Council is implementing GPI to monitor indicators across the community.  Its goal is maintaining Wellington’s competitive advantage as a good place to live.  As there is flexibility with GPI, the indicators have been tailored to suit their local needs, rather than blanketing a one-size-fits-all strategy. 

Back in Nova Scotia, Dr. Coleman’s GPI has been successfully used to predict several significant shifts:

• a decline in volunteerism (and negative social changes as a result),
• collapsing fish stocks after a record boom period (and subsequent loss of thousands of jobs in a key local industry),
• a steady decline of local farming economies (it’s no longer viable to work the fields, so farmers are inclined to sell land to developers),
• and the substantial growth of consumer debt versus income— and the financial crisis that followed. 

It’s a noteworthy track record, and with many questioning what got us into our current mess, it’s not surprising Dr. Coleman’s ideas are gaining interest.  So far the stimulus packages developed by governments worldwide are fighting off the worst edge of what could be happening. 

“But taking on government debt to fight the collapse of insolvent banks and faulty industries is a bit like fighting fire with fire.  There are issues out there, the big ones including climate change, peak energy, and resource depletion.  What will we do when the chickens come home to roost, and we’ve already thrown our trillions at the problems we’re facing today?” Dr. Coleman says.   

Using climate change as one example, what happens when a disastrous weather event causes havoc to the scale of what happened in New Orleans?  Decades of economic gain in the form of infrastructure can be destroyed in a matter of just a few hours.   Even proponents of GDP should be able to see the logic: we need better measures and better decisions. 

Dr. Coleman reckons that interest in a new system of will grow in the

coming months as bailouts lose their steam and people become more vocal about changing the system that created the problems to begin with.  Priorities will inevitably shift. 

Dave Breuer, the Founding Director of Anew New Zealand agrees.  “We need to challenge the misuse of GDP and use a GPI to strengthen democracy independent of partisan politics,” Breuer says.  “Increasing the wellbeing of our country should be the chief outcome of our actions at every level.” 

Along with Statistics New Zealand, Breuer has hosted a series of nationwide workshops aiming at developing a nationwide GPI for the country.  So far, there’s been significant public engagement and a strong interest in how we go forward in the future.  And what exactly does the future look like?

“Creative adjustment to a smaller economy is the way forward,” Dr. Coleman says.  “If there is any growth area of the future, it should be aligned with solving big threats like climate change.  This is where stimulus is a good investment.”

Events over the last year have made clearer than ever before how we equate unchecked growth with progress and wellbeing, and how unrealistic that assumption is.  Either we revisit the decisions we’ve made and the tools we’ve used to make them, or we flirt with a future that, with the recent course of events as a painful example, looks less than bright.  The time for a new model has come.   

Check out more from Dr. Ron Coleman on GPI in this video clip: