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There's More to Life Than GDP
Canadians need a new, holistic measure of societal progress that goes beyond economics
For many years - and particularly since the onset of the global recession - Canadians and people around the world have been bombarded with news about the gross domestic product. Numbers have been issued and then updated. Predictions have been made and then revised. So powerful and predominant has GDP become, that the New York Times referred to it as "a celebrity among statistics, a giant calculator strutting about adding up every bit of paid activity ..."
But what is GDP? What does it tell us about how well or poorly we are doing as a society? More important, what does it leave out? And what are the consequences of this omission?
GDP is simply the value of all goods and services produced in a country in a given year. It was first introduced in the U.S. during the Great Depression as a way of measuring how much and how quickly the U.S. economy was shrinking. Over time, GDP has emerged as a surrogate for wellbeing, something it was never designed to be. Even the "father of the GDP," Nobel laureate Simon Kuznets, recognized that "the welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP."
GDP makes no distinction between economic activities that are good for our wellbeing and those that are harmful. Spending on tobacco, natural and human-made disasters, crime and accidents, all make GDP go up. Conversely, the value of unpaid housework, child care, volunteer work and leisure time are not included in GDP because they take place outside of the formal marketplace. Nor are subtractions made for activities that heat up our planet, pollute our air and waterways or destroy farmlands, wetlands and old-growth forests. The notion of sustainability - ensuring that precious resources are preserved for future generations - doesn't enter the equation.
Perhaps the most eloquent summation of the limitations of GDP was expressed more than 40 years ago by senator Robert Kennedy, who noted that GDP "measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile."
Yet, GDP continues to exert great influence. Why? Because indicators are powerful. They often influence the policy agendas and decisions of governments. As Canadian-born, economic giant John Kenneth Galbraith put it, "if you don't count it, it doesn't count."
Thus, in recent years, we have seen a resurgence of interest in indicators, and the birth of a strong global movement favouring new, more comprehensive and transparent measures of societal progress. The goal is to inform and promote policy decisions that are based on solid evidence, and that will improve the quality of life for all people. The aim is not to replace GDP, but to offer a more holistic view of wellbeing.
Canada has very much been a leader in this effort. Today is the launch of the Institute of Wellbeing and the introduction of its signature project, the Canadian Index of Wellbeing (CIW). The institute is independent, non-partisan and guided by an advisory board of Canadian and international experts. The institute is affiliated with the University of Waterloo and we look forward to this exciting new research partnership that will further validate our efforts.
The index is rooted in Canadian values. It will report on our country's progress - or lack of it - both overall and in eight specific areas that really matter to our quality of life: our standard of living; our health; the quality of our environment; our education and skill levels; the way we use our time; the vitality of our communities; our participation in the democratic process; and the state of our arts, culture and recreation. Beneficial activities will be treated as assets and harmful ones as deficits.
Today the institute released its first report, summarizing research findings in the three areas of Living Standards, Healthy Populations and Community Vitality. We noted that during so-called economic good times, Canadian workers failed to reap their share of the benefits of productivity growth, with hourly wages rising at only half of the rate of GDP.
We also reported that while Canadians are living longer, they are not living better. The decline in the portion of the population that considers itself in excellent or very good health is most marked among Canadian teenagers. Whereas more than 80 per cent of 12- to 19-year-olds reported excellent or very good health in 1998, only 67 per cent did so in 2005. On a more positive note, Canadians are well-equipped to deal with current and future challenges because we live in resilient communities built around connectedness, safety and compassion for others.
Over the course of the next year, the institute will release the results of research in the five other areas of wellbeing. Our goal is to be able to convert all eight areas into a composite index, including a single number that will provide a quick snapshot of how Canadians are really doing.
The CIW will connect the dots between public policy decisions and Canadians' quality of life. It will promote a new understanding of wellbeing and a dialogue that reshapes the way we talk about wellbeing and public policy issues. It will encourage policy-makers to make evidence-based decisions that respond to the values and needs of Canadians. In that respect, it will be a true nation-building project.
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11 Comments so far
Show AllGDP means only one thing in the United States: God Damned Politicians.
Challanging the sanctity of GDP is a treasonous offense in the US.
GDP measures growth. The issue is not whether "growth" is a flawed concept. Growth itself is a vague term that has a wide variety of meanings from individual to individual and is generally viewed as "a good thing"; however, the emphasis of compounding growth as a national economic policy measured by the Dow Jones Average or Gross National Product does not encompass all the desired attributes of growth.
Ever-increasing growth, as measured by compounding interest concepts, is an inherent flaw embedded in the corporate and debt structure. Collapse is inevitable.
http://theformofmoney.blogharbor.com/blog/_archives/2005/9/18/1236759.html
There is more to this than meets the spreadsheet.
Growth is an economist's watchword. And it is measured in GDP, which is crazy. Just because GDP has grown by 3%, say, does not mean that most people are better off. It means that more money has exchanged hands. An increase of GDP more likely means that the rich have skimmed off a little more from the poor.
Ever hear or read of "Phantom GDP"? Paul Craig Roberts will perhaps be ridiculed, criticised, ... by plenty of so-called liberals, progressives, leftists, Dem. Party supporters, f.e., because he was a member of the President Reagan administration. However, I think what he has written about "phantom GDP", which wasn't coined by him, should be carefully understood by everyone. What he says is easy to understand, but perhaps very overlooked.
A Web search will turn up more of his articles about the problems with "free trade" and "phantom gdp", but the following two are examples (second one by implication, say).
"The Truth Comes Out About Offshoring",
by Paul Craig Roberts, June 12, 2007
http://www.vdare.com/roberts/070612_offshoring.htm
QUOTE:
All of this may be about to change. Susan N. Houseman, a good but previously obscure economist with the Upjohn Institute, has discovered a problem in the statistical data that produces phantom US GDP. Phantom GDP results when cost reductions achieved by US firms shifting production offshore are miscounted as US GDP growth. Phantom productivity increases occur when gains from moving design, research and development offshore are counted as increases in US productivity. Obviously, production and productivity that take place abroad are not part of our domestic economy.
END QUOTE
"How the economy was lost
By Paul Craig Roberts
Online Journal Contributing Writer
Feb 25, 2009"
http://onlinejournal.com/artman/publish/article_4409.shtml
QUOTE:
I have read endless tributes to Wal-Mart from “libertarian economists,” who sing Wal-Mart’s praises for bringing low price goods, 70 percent of which are made in China, to the American consumer. What these “economists” do not factor into their analysis is the diminution of American family incomes and government tax base from the loss of the goods producing jobs to China. Ladders of upward mobility are being dismantled by offshoring, while California issues IOUs to pay its bills. By shifting production offshore, offshoring reduces US GDP. When the goods and services are brought back to America to be sold, they increase the trade deficit. As the trade deficit is financed by foreigners acquiring ownership of US assets, the change in ownership means that profits, dividends, capital gains, interest, rents, and tolls leave American pockets for foreign ones.
END QUOTE
The latter article doesn't use the term 'phantom', but it's implied in what the piece says, including in this quoted paragraph, above. And both articles say plenty more than the above quoted "bits".
The above OnlineJournal article doesn't contain any hyperlinked text, I believe, but the one at vdare definitely has several, or more; fyi.
Sioux Rose
MIKE: Thank you for the info. Add this to the disappeared billions in Iraq, and the derivative scam that's to the tune of trillions. There is a phantom economy alright, and it's disguised to exist under the radar while all the other balance sheets (economic indicators) pretend not to notice what's gone missing, as if these were only minor perturbations!
Quoting from the article:
"On a more positive note, Canadians are well-equipped to deal with current and future challenges because we live in resilient communities built around connectedness, safety and compassion for others."
WELL, I've lived in Canada over half of my now 52 years of life and would really like to be able to say that I agree with this above quoted statement, but Canadians are very individualistic, do little to nothing in their lives to defend and encourage real democracy, etcetera. They seem to be good at sharing their incomes for humanitarian aide overseas, but clearly don't care about the poor, third-world poor here, in Canada.
In my prior post I referred to the topic of "phantom GDP", linking two articles for this, and those speak of offshoring of jobs, f.e. I'm not sure that either of those two articles refer to importing or employing migrant workers. In Canada, the situation is probably much like in the U.S., many citizens and residents not wanting to work for low wages, so employers want to use migrant workers, and this has apparently been on a serious rise in Canadian provinces. There was a report on this at CCPA, Canadian Centre for Policy Alternatives, policyalternatives.ca, around a year ago, or so, and part of what this report said was the practice of farmers employing migrant farm workers instead of citizens and residents is due to the migrants not being anywhere as protected under Canadian laws (I guess because the Canadian Charter of Human Rights is pretty [worthless], just another "piece of paper", like the Constitutions of the USA and Canada, treaties with the indigenous peoples of North America, and so on, are treated).
CCPA's report said that this farm employment practice had seriously begun on the west coast, in BC or maybe it was Alberta, while other Canadian provinces hadn't yet gotten into this sort of business practice. But the report said the practice quickly enough was adopted by Canadian farmers in provinces, heading eastward to Quebec; and perhaps even further eastward, by now, today.
Meanwhile, Canadians finding themselves in third-world poverty here can't find jobs and would farmers hire us instead of migrants? I don't know, for the migrants can be low-balled with respect to pay, as well as mistreated, both due to them not having equal rights with citizen and resident workers.
Canadian taxpayers, too many anyway, mock the third-world Canadians, claiming we're in this situation out of choice, etcetera, so we "deserve" to be in this situation, they philosophise.
Canadians, generous? For foreign humanitarian aide, based on what I've read; but not for third-worlder Canadians.
There certainly has been a transformation in Canada over the past 20 years almost coiniciding with when MUlroney came to power.
MY parents and most of my family grew up through the depression on the farms. They indicated many times that in order to survivce, the people had to stick together and look after one another. My mother told me many stories of people coming to their door for food and how my Grandmother would often give them the last of their bacon or some such because "They need it more then we do".
That experience helped drive the need for Social programs.
Most people today have never experienced this. They bought wholesale into the 'whats in it for me'.
Maybe a crash is just what we need.
The article contained part of the comment by Robert Kennedy about GDP. I saw it once and was so impressed by it that I copied it. The numbers and some of the ideas are from 1968 and out-of-date but the concept still holds.
"Our gross national product is now over 800 billion dollars. But that GNP, if we judge the country by that, counts air pollution, cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonders. It counts napalm, nuclear weapons, and armored cars for police to fight riots in cities. It counts rifles and knives and television programs which glorify violence in order to sell toys to children."
"Yet, the GNP does not allow for the health of our children, the quality of their education, or the joy of their play. It does not count the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither wit nor courage, neither wisdom or learning, neither compassion or devotion to country. It measures everything except that which makes life worthwhile."
A National party MP (the conservatives ironically) by the name of Marilyn Waring from New Zealand pointed out quite rightly that if you burn your neighbors house down you do lots for the GDP (i.e increase it) while if you grow tomatoes and give them to your neighbor you do nothing for the GDP. Taking in your neighbors laundry and paying them to do yours isnt real economic activity yet this describes a large part of the service economy. The Farmer and the Tin Man are the backbone of real economic activity. Administative self gratification and invidious self indulgence is not.