By Cynthia Kaufman
August 22, 2021
If our economies are measured only by GDP, we will have the false belief that we need more capitalist production to have good lives.
On July 30, Representative Ilhan Omar introduced the Genuine Progress Indicator Act, which would require federal agencies to evaluate economic policies using the metric known as GPI, alongside the traditional Gross Domestic Product (GDP). If other representatives get on board, this could be an important step in building a socially and environmentally sustainable society.
GDP measures how much is bought and sold within an economy. It assumes that more is always better. The GPI is a more nuanced measure, and it subtracts for things that are bad for society and the environment. GDP was invented to try to calm boom and bust cycles in an economy. It was not intended by its inventors to measure the health of an economy. The GPI measures an aggregate of about 26 different factors and combines them into one simple number. It adds for things such as consumption and leisure, and subtracts for things such as inequality, pollution, and crime. Vermont, Maryland, Oregon, and several countries are already experimenting with using the GPI.
Economic growth is a nickname for increased GDP. Many nations, and many commentators on the economy, have come to use increased growth as an indicator of a healthy economy. They do this even though more growth can be terrible for the environment and for human wellbeing. More growth often goes along with increasing levels of poverty. GDP counts as positive things that are bad for society, such as more economic activity that has to happen to deal with a natural disaster. And GDP doesn’t measure bad things such as poverty, increased greenhouse gas emissions, or death from air pollution. In terrible times we can have high levels of inequality, the rich getting richer, pollution levels soaring and money being spent cleaning the pollution, and increased GDP. Focusing only on GDP discourages us from asking a deeper set of questions of our economic policies: What are we doing that helps us meet real human needs? What are we doing to develop environmentally sustainable practices?
GDP measures throughput in the money economy. The aspects of our world where we take care of each other without using money are invisible to it. Feminist economists have argued since the 1980s that much of what we do to meet our needs through household labor should be considered productive economic activity. If I cook dinner for friends, that does not count as economic activity in the GDP. If they buy dinner at a restaurant, it counts. Measuring an economy based on GDP encourages us to think that more buying and selling is in itself a good thing, even though a world where more of what we do to meet our needs is done without buying and selling is likely to be more satisfying than one where all labor becomes capitalist wage labor.
If our economies are measured only by GDP, we will have the false belief that we need more capitalist production to have good lives. If people are told every day in the news that the cause of their poverty is a lack of economic growth, they will support pro-growth policies. We need to help people distinguish what promotes environmental and social well-being from what promotes growth. Sometimes growth leads to more jobs and sometimes it doesn’t. But increases in wellbeing are always good. One important way to wean people away from a belief that economic growth is always better is to promote the use of better economic indicators, and that’s where the GPI comes in.
Omar’s bill, smartly, does not ask the US to stop using the GDP. While GDP is a terrible way to measure the health of an economy, trying to eliminate it would create extra opposition to the bill. And, as we shift to using alternative economic indicators, it is worthwhile to still measure GDP in order to make comparisons. If you look at graphs of GPI versus GDP for any given economy, having both measures side by side is a powerful indictment of the weaknesses of GDP as a measure of economic health.
In response to the introduction of the GPI Act, John Talbert, Founder of the Center for Sustainable Economy wrote:
What’s measured matters, and for too long the US has been measuring economic performance in a way that masks the staggering costs of inequality, crumbling infrastructure, deteriorating health, vanishing ecosystems and rapid climate change. We’ve been pursuing growth for its own sake without asking ‘growth in what, for whom, and at what cost?’ Instead of registering all growth as positive, the GPI can help identify what sectors need to grow to bring quality of life improvements for all and what sectors need to shrink or be replaced because the toll they exact on the rest of the economy is far too great.
Measuring the US economy with the GPI will help us know when we are on track to building a better world. There are many things driving us toward destruction of the environment and the social fabric: wasteful consumerism, the political power of fossil fuel companies, racial and economic inequality, a lack of trust in democratic institutions. Our work to fight each of these problems is made easier when we can measure our economy and ask how well are we moving to a world where human and ecological needs are met. Please write your local congressional representative and get them to support Omar’s GPI Act.