As a society, we cannot know if circumstances are improving unless we compare them with the past. But how can we adequately measure advancements in the rights, health, and wellbeing of people, animals, and the planet? What are the best ways to determine if municipalities, states, nations, and regions are meeting the needs of their residents?
Legacy of a Metric That Was Never Adequate
Leaders commonly refer to one deceptively simplistic measure to assess whether progress is being made within a population: gross domestic product (GDP). Politicians and economists have long referred to GDP as an indicator of a population’s wellbeing, even though the inventor of GDP, Simon Kuznets, cautioned against using the indicator in this way.
Since 1934, gross domestic product has been used to compare economic development between countries. After the Second World War, newly created institutions such as the World Bank adopted GDP as a primary measure of economic progress.[1]
Gross domestic product is a measure of how much money is spent in a country. Calculation of GDP relies on a sum of consumer spending, private investment, government spending, and net exports.
Logically, a nation’s population spends more money if it has more money. However, a country that spends more money is not necessarily better off than are countries that spend less money. GDP is no measure of people’s health and wellbeing, and it is certainly not a measure of how well rights are protected.
For example, in wealthy countries, when the government and the private sector increase spending after a natural disaster, this boosts GDP. The same money could have been spent on strengthening the economy, not just repairing it, including by preventing and preparing for disasters.
Ecological economists call such post-disaster spending “defensive expenditures,” which add to GDP even as they often worsen inequities, structural violence, and exploitation.[2]
When Debt Is Income
GDP is also boosted by spending that results from new loans or from assets being sold for the first time, because GDP does not subtract spending even if it directly increases debt or reduces assets.
Some of these assets may include so-called “natural capital,” like finite fossil fuels, but they could also be publicly-owned land, buildings, or other infrastructure. In fact, cumulative GDP growth since 2010 was about the same as cumulative “income” that came from foreign loans and from selling US assets to foreign entities—not counting sales of finite natural capital.[3] GDP has grown about $8 trillion since 2010, whereas the US net international investment position has fallen that same amount.[4]
Sometimes politicians refer to per capita GDP, inferring incorrectly that income distribution is equitable. In the US, GDP has risen consistently for nearly four decades as income equality has fallen.[5] In the United States, 90 percent of people in the labor force have seen no increase in their real wages for decades, while the cost of living has risen to the point that workers must rely on getting loans and selling assets.[6] The inequitable growth of GDP since the 1970s has been accompanied by an increase in the numbers of people who are unhoused.[7]
Given that the economy generally has relied on increased indebtedness, it is not surprising that some argue that the economy could soon collapse entirely.
Money Isn’t Everything
GDP does not count activity in which money is not exchanged—what is often called the informal economy—which means that it excludes most of the economy. The informal economy can include most childcare, education and training, labor, and any of the innumerable ways a community survives and thrives.[8]
As a measure of economic vitality, GDP ignores whether money is spent in ways that matter, and it discounts fundamental aspects of economies, such as education, worker productivity, adequate social services, and durability of infrastructure.
Often GDP reinforces and amplifies systemic violations of basic rights. Since everything in the measurement must be monetized, GDP commodifies individual lives.
For example, exploited animals are systematically reduced to commodities, and legal trafficking of these beings is counted as GDP growth. Similarly, economic planning that relies on GDP growth models has often used perverse methods for the accounting of human lives.
One infamous example is a cost-benefit analysis that was conducted by the Arthur D. Little company for the Czech government. The analysis concluded that promoting smoking would be beneficial because it would lead to people dying earlier and therefore to reduced government spending on healthcare and pensions.[9]
GDP growth models also consistently reduce the elderly population to net liabilities since, as retirees, their contribution to the formal economy has ended. Activities such as watching grandchildren or spending money from their retirement assets to support younger generations are not included in GDP.
Despite obvious problems with using GDP, it has persisted as an economic indicator because GDP growth has sometimes correlated with certain indicators of quality of life, such as average longevity.
However, improvements in quality of life generally do not correlate to growth in GDP.[10] Many countries have seen rates of some of the worst abuses of people, including child labor and trafficking, increase significantly over multiple years during simultaneous growth in GDP.[11]
Measuring Progress Honestly
Not surprisingly, many attempts have been made to “correct” GDP in order to better measure economic progress. However, any serious reference to GDP as indicative of rights, health or wellbeing remains a problem. Social and other determinants of health and wellbeing often cannot be monetized.
Additionally, since GDP only measures spending, the concept of legal or moral rights is irrelevant to the metric.
Finally, as with many useful indexes, GDP will always be a measurement of activity or conditions confined within one country’s borders, which is only necessary insofar as most of the financial and legal onus is on national governments to improve those measures. The effects of national policies can of course be transboundary, as are the activities of multinational corporations.
Putting a number on a country’s progress isn’t always what is needed. For instance, the Universal Human Rights Index provides data and policy recommendations for every country, based on the existing obligations they have agreed to through various human rights treaties.[12] This index includes an assessment of the protections of rights that pertain to health and wellbeing, such as those reflected in the Sustainable Development Goals (SDGs).[13]
In a 2016 paper, a group of economists proposed the Sustainable Wellbeing Index (SWI) as a way to compare countries and their progress on implementing the SDGs while also addressing some of the shortcomings of the SDGs, which they called a “diluted guidance at best.”[14]
In their paper, they described numerous alternative indicators that attempt to assess economic progress and wellbeing. They proposed an overarching goal for the SDGs with three key elements. They argued that the overarching goal should include “a prosperous, high quality of life that is equitably shared and sustainable,” and that the SDGs should hit on three elements: “building a living economy,” “protecting capabilities for flourishing,” and “staying within planetary boundaries.”
What is missing from the SWI, as well as from the SDGs, is an acknowledgement of the indelible connection between human and animal rights, health, and wellbeing.
One useful measure that acknowledges nonhuman animals is the World Animal Protection Index (API), which compares countries’ legal protections of certain negative rights for animals, legal acknowledgement that animals are sentient, and endorsement of specific international standards that restrict cruelty.[15]
The API makes it apparent that national governments have not yet acknowledged the inherent connection between justice for humans and justice for animals, but the API alone does not make this connection explicit. Similarly, a useful international approach that acknowledges the inherent link between the health and wellbeing of humans, animals, and the planet is the One Health concept, but this approach still needs to explicitly integrate rights and interspecies justice.
To address these gaps, at Phoenix Zones Initiative, we are working toward an “economic vitality” index, rights-based economies, and a Just One Health approach.
Sources:
[1] Robert Costanza et al., “A Short History of GDP: Moving Towards Better Measures of Human Well-being,” The Solutions Journal 5, no. 1 (January 2014): 91-97.
[2] Mariano Torras, “Ecological Inequality in Assessing Well-Being: Some Applications,” Policy Sciences 38, no. 4 (December 2005): 205-224.
[3] US exports per year of coal, oil, and gas in the last decade have amounted to tens to hundreds of billions of dollars per year. See: Diana Friedman, “Energy-related Products,” US International Trade Commission, accessed October 15, 2020.
[4] “International Investment Position,” Bureau of Economic Analysis, accessed October 10, 2020.
[5] Katherine Schaeffer, “6 Facts about Economic Inequality in the U.S.,” Pew Research Center, February 7, 2020.
[6] Lance Roberts, “US Real DPI, Savings Rate and Cost of Living, 1959-2014,” in “The Savings Rate Conundrum,” SNBCHF.com, November 8, 2017.; Joshua Freedman and Sherle R. Schwenninger, “America’s Debt Problem: How Private Debt is Holding Back Growth and Hurting the Middle Class,” New America Foundation, (presentation, World Economic Roundtable at New America, December 2015).; Lawrence Mishel et al., “Wage Stagnation in Nine Charts,” Economic Policy Institute, January 6, 2015.; Drew Desilver, “For Most US Workers, Real Wages Have Barely Budged in Decades,” Pew Research Center, August 7 2018.
[7] ”Why Are So Many People Homeless,” Coalition for the Homeless, accessed October 10, 2020.; “The Rise of Homelessness in the 1980s,” KCET, February 22, 2017.
[8] Women and Men in the Informal Economy: A Statistical Picture, 2nd edition, International Labour Office, WIEGO, 2013.
[9] Zosia Kmietowicz, “Tobacco Company Claims that Smokers Help the Economy,” BMJ 323, no. 7305 (July 2001): 126.
[10] Engelbert Stockhammer et al., “The Index of Sustainable Economic Welfare (ISEW) as an Alternative to GDP in Measuring Economic Welfare. The Results of the Austrian (revised) ISEW Calculation 1955-1992,” Ecological Economics 21, no. 1 (April 1997): 19-34.
[11] Examples from the last twenty years include Bolivia, Burundi, Chad, the Dominican Republic, Guatemala, Haiti, and Nepal. See Esteban Ortiz-Ospina and Max Roser, “Child Labor,” Our World in Data, accessed October 10, 2020.; Marking Progress Against Child Labour, Global Estimates and Trends 2000-2012, International Labour Organization, 2013.; Global Estimates of Child Labour, Results and Trends, 2012-2016,International Labour Organization, 2017.
[12] “Universal Human Rights Index,” United Nations Human Rights Office of the High Commissioner, accessed October 15, 2020.
[13] “Sustainable Development Goals,” United Nations, accessed October 15, 2020.
[14] Robert Costanza et al., “Modelling and Measuring Sustainable Wellbeing in Connection with the UN Sustainable Development Goals,” Ecological Economics 130 (2016): 350-355.
[15] Animal Protection Index, World Animal Protection, accessed October 15, 2020.