Is Alberta's Progress Sustainable?

Mark Anielski
April 24, 2001

For more than 50 years nations have been measuring economic prosperity using an accounting system that simply tracks all of the cash flowing in an economy. The Gross Domestic Product or GDP is measure commonly used to take the economic-growth pulse of nations. Through this narrow lens of economic health, Alberta would rank as one of the most economically prosperous communities in the world. Indeed, Alberta,s GDP has grown 400 percent in real terms in the last 40 years. But is Alberta,s progress sustainable? That is are we potentially eroding our living capital (human, social, natural) at the expense of more cash flow?

To answer this question requires a comprehensive "check up of the actual conditions of our human, social and natural capital that contributes to our well-being. Robert Kennedy once said that the problem with the GDP as a measure of well-being is that it "measures everything except that which makes life worthwhile." What Kennedy meant is that GDP counts everything we produce and everything we do for money but fail to account for condition of our well-being and quality of life.

Paradoxically, measures like the GDP violate the very spirit foundation of economics. I remind my students at the University of Alberta that the word "economics comes from the Greek oikonomia meaning the stewardship of the household. The word "wealth comes from the Old English meaning "the condition of well-being. Thus, real economists should be concerned with measuring the condition of all capital or real wealth human, social, natural and produced capital. Just like a doctor measures the condition of his or her patient using a family of health indicators rather than simply one,s blood pressure. Economist John Kenneth Galbraith reminds economists that there is a major fault in measuring the quality and achievement of life by the total of economic production (the GDP).

But how should we measure genuine well-being and progress beyond using cash flow as a proxy of economic success? How should we measure our performance as stewards of all capital, both living and produced? What would a sustainable future look like and what ethic would guide our actions?

In their 1989 seminal work For the Common Good, Herman Daly and John Cobb Jr. provided us with a blueprint for sustainable living. They suggested exciting opportunities for redirecting the economy toward community, the environment and a sustainable future. They identified the need to address the myth that "more growth is good. They argued for a new ethic that celebrates stewardship and responsible care of all capital. They argued that individuals, communities, businesses and governments orient their life energy to regenerate, nurture and sustain communities and ecosystems. They focused on the meaningful challenge of qualitative improvement and stewardship over the easy path of making money by consuming living capital.

Their vision of a sustainable future led U.S. economic think-tank Redefining Progress to develop a tool for measuring sustainable economic well-being -- the Genuine Progress Indicator or GPI. The GPI provided an alternative monetary measure of well-being by addressing the flaws in GDP accounting. For example, the GPI counts the value of unpaid work and deducts the social and environmental costs of eroding human, social and natural capital. Much of this living capital depreciation currently counts as GDP growth not a "cost of economic prosperity. The U.S. GPI results showed that while the U.S. economy (i.e. GDP) continued to grow over the past 50 years, the GPI (adjusting GDP for social and environmental capital depreciation) peaked in the early 1970s and has been in decline ever since. This demonstrated for the first time that our economic barometer was actually obfuscating the erosion of the capital which makes life worthwhile.

Now, a team of researchers at the Pembina Institute have developed an even more holistic and comprehensive Genuine Progress Indicators (GPI) Sustainable Well-being Accounting system. This new accounting blueprint for measuring sustainable well-being goes beyond the original U.S. work. How? By measuring the actual physical conditions of our quality of life and living capital along with the social and environmental costs which currently count as economic progress. The results place 40 years of economic growth in the context of what is happening to the lives of average Albertans and the environment. The Alberta GPI accounts are like a full medical checkup; they contain a family of 51 indicators of economic, social and environmental well-being. This presents Albertans with a comprehensive picture of their quality of life and leaves us wondering, is our economic progress sustainable?

The Alberta GPI accounts also show what social and environmental costs are contributing to Alberta,s GDP growth. This includes estimates of the value of unaccounted benefits from unpaid work, such as parenting, eldercare, housework and volunteerism. We also examine the costs associated with crime, car crashes and the depletion of nonrenewable oil and gas reserves. This common-sense approach to accounting for the well-being of nations is consistent with capital accounting practiced by accountants and businesses. The findings are published in the Alberta Sustainability Trends 2000 which is available at the Pembina website (www.pembina.org).

Instead of counting an Exxon Valdez disaster as a benefit to GDP growth, the GPI accounts would identify the expenditures to clean up the mess as a regrettable contribution to economic growth. Instead of counting spending on divorce, car crash, and cancer treatments as income in the GDP, we might identify these as regrettable costs. This would require a full accounting of the money spent on lawyers, auto repairs, and hospitals. We would also estimate the time we spend with our kids and volunteering in the community and the value of this time. Furthermore, we would account for the depreciation costs of depleting our inventory of nonrenewable oil and gas reserves and the cost of potentially unsustainable agricultural and forestry practices.

Common sense says that there is a difference between growth and development. Development implies a qualitative improvement in the conditions of living or the conditions of human, social and natural capital. Development requires stewardship or responsible care of our capital so to sustain their integrity for current and future generations. But economic systems suggest that growth (measured by GDP) can be eternal which in life is nonsensical. So long as we continue to measure progress by narrow measures like GDP, we will discount the human, social and environmental conditions.

The pursuit of a sustainable future presents profound challenges to our ethic of living. We are challenged to examine our values and consider what is meant by progress. We must ask what is meant by sustainable stewardship? How do we go beyond the myth of "more growth is good to a future of stewardship and restorative management of living capital? Such a transition is not easy given 50 years of economic growth momentum. Yet, such as journey is meaningful and exciting. It will require leadership and conviction to avoid slipping back into the well-worn growth path. It will require a redesign of our current economic system. It will require having the maturity to address the good, bad and the ugly of our current performance as stewards of our natural endowments. It will require addressing our responsibility to future generations and other global citizens for the condition of social and natural capital. Surely, this presents an exciting opportunity for all Albertans and Canadians.

Isn,t it time we considered a new vision for a sustainable future and new measures of progress according to the things that make life worthwhile?

Mark Anielski is Director of the Green Economics program with the Pembina Institute for Appropriate Development, Senior Fellow with Redefining Progress (Oakland, CA) and Adjunct Professor, School of Business, University of Alberta.

Mark Anielski
Director, Green Economics
Pembina Institute for Appropriate Development Tel/Fax: 780.491.0696
marka@pembina.org
www.pembina.org