Genuine Progress Index

Making decisions primarily on the information provided by GDP is like
driving a bus using only the speedometer. The GDP "speedometer" has
its place, but it doesn't explain some matters of consequence.
With the Northern Cod fishery, for example, the industry's
contribution to GDP was rising steadily until just before it
disappeared. Another instrument on the dashboard - one that measured
changes in fish stocks - could have provided information that would
have cautioned those driving to steer clear of the "overshoot and
collapse" disaster that followed.

Several "instruments" that should be on the dashboard of our
proverbial bus, are described below. Their purposes would be to: end
the confusion between constructive and regrettable expenditures;
recognize unpaid work for the benefits it provides to families and
communities; keep a closer eye on the adequacy of employment
opportunities; provide a "balance sheet" type account of natural
resource stocks; record, for comparison, the amounts of various
pollutants released into the environment, their levels of
accumulation and their effects; and monitor other factors that people
feel might affect our well-being.

When the opportunity arose for me to work with a Member of Parliament
promoting a Genuine Progress Index (GPI) for Canada, the people
already involved in such work quickly offered me their wholehearted
cooperation. These included Ron Colman of the GPI Atlantic, Mark
Anielski of the Alberta GPI and Sandra Zagon with the Canadian Policy
Research Networks to name a few of the most active in Canada.
Perspectives were shared, understanding grew, techniques were
proposed, and after numerous drafts and revisions we had a proposal
for national legislation.

The result was the Canada Well-Being Measurement Act, which will be
discussed here following an explanation about measuring genuine
progress.

Separating Constructive and Regrettable Expenditures
The value to society represented by the amount of money spent
producing food, shelter and tools, providing education and creating
works of art, differs substantially from the value we receive from
money spent on medical assistance for people with avoidable diseases,
replacing stolen property, treating people for addictions, or
cleaning up oil spills. The former, constructive expenditures up to
the point of comfortable sufficiency, contribute directly and
positively to human well-being. The later, called regrettable
expenditures, are only necessary because we have failed to avoid
problems. While remedial work is important when problems are
identified, increasing regrettable expenditures should not be
mistaken for progress.

Increasing activities that provide for human needs and enrich our
lives has a generally positive effect, as long as the things produced
get to those who need them. The negative repercussions of resource
depletion and pollution from excessive consumption are accounted for
in subsequent categories below.

Food consumption illustrates the line between constructive and
regrettable expenditures. When people are truly hungry, more food is
distinctly positive. However, when people are becoming obese from
over-eating, additional consumption of food can contribute to costly
medical problems that degrade their lives. The diabetes industry
thrives on such over-consumption. Cases of Type 2 Diabetes have
climbed in unison with the expansion of the fast food industry.
Worldwide, approximately 30 million people had the disease in 1985.
The number is in the range of 150 million today. The World Health
Organization expects 300 million cases by 2025. While fast food
outlets do offer salads and other non-problematic dishes, most of
their customers hunger for sugar, salt and fat. Type 2 Diabetes is
largely preventable, but the excessive consumption of fat and sugar,
the major contributing factors, create complications that add
substantially to GDP.

The direct health care costs for treating diabetes attributed to
obesity is over $400 million annually in Canada. Eli Lilly and
Company, manufacturers of the synthetic insulin needed by diabetics,
sold $901 million worth of the drug internationally in 2001, a
substantial contribution to GDP. The announcement that Lilly will be
constructing over 80,000 square metres of new production space, at a
cost of $1,383 million, has been presented as an economic boom. If it
were not for the enormous amount of human suffering that makes it
necessary, it might be so. However, with the disease in the U.S.
contributing to the deaths of 200,000 people annually, news of the
expanding industry is more accurately described as an unfolding
disaster.

The costs of avoidable health problems, crime, family breakdown,
traffic accidents, natural disasters and wars all contribute to
increased GDP, but, to a large extent, are indications of trouble
rather than progress. By separating such regrettable expenditures
from positive ones, a Genuine Progress Index can provide
policy-makers with much better information upon which to make
decisions.

Accounting for the Value of Unpaid Work
Imagine the state of society if people didn't take out the garbage,
do the dishes, or clean and repair their homes; if parents didn't
care for their children and no one took the time to look after people
who are sick or aging, unless they were paid for each hour. Chaos and
discomfort would result very quickly. Civilization could grind to a
halt within a generation. The work that people do for their families
and for their communities provides enormous benefits to the
well-being of society. Yet, because money is not exchanged for this
essential work, it is considered worthless by the GDP measure.
Other voluntary work that goes unaccounted for by GDP includes
Guides, Scouts, Big Brothers and Big Sisters, service clubs, soup
kitchens, and a great deal of the activities that make community
events, like amateur sports, theatre, fairs and festivals, possible.

The absence of these would greatly diminish the quality of many lives.
Much of the work that is done for free is also done in other
circumstances for pay. A GPI would establish the value of unpaid work
by taking the average pay rates for the various activities and
multiplying those rates by the approximate number of volunteer hours
spent at each sort of task. The sum total would provide a measure of
the contribution unpaid work makes to well-being in society. If
circumstances arise, or decisions get made that reduce the amount of
unpaid work taking place, GPI accounts would be able to compare the
loss against the benefits those changes brought about. Such
comparisons would make it possible to determine if progress was, in
fact, being made.

A Balance Sheet for Natural Resources
Balance sheet accounting has been standard practice in business since
the late 1700s. If a business is making clothing out of cotton cloth,
for example, and 100 pairs of pants and 100 blouses are made, the new
stock of finished goods will be accounted for as inventory worth a
certain amount and available for sale. At the same time, the amount
of raw cloth that was used up in the production process will be
subtracted from the material stock inventory. The value of the
clothing is worth more than the value of the cloth, so money is being
made. But, if the company does not account for the reduction in the
raw materials presently in stock, they may be caught without
sufficient inventory to produce the next run of garments.
By the same reasoning, when natural resources are extracted from the
Earth it is worthwhile to account, not only for the value of the
materials brought into the human economy, but also for the reduction
of those resources in the natural world.

Understandably, our economic system emerged without such balance
sheet accounts. Just a few centuries ago, human numbers and the
extent of our actions were relatively inconsequential. With vast,
sparsely populated frontiers, the Earth seemed to offer a limitless
supply of raw materials. It is no wonder that we did not bother to
compare our consumption with overall supply; we had no concept that
the Earth itself was finite.

This is no longer the case. We have extensively mapped available
natural resources around the globe, and our level of consumption has
grown exponentially to where mathematical projections predict serious
supply problems for fresh water, forests, fish, fossil-fuel and soil
fertility, among others. If we hope to make decisions that will not
leave our offspring holding an empty bag, balance sheet accounts of
natural resources use are critically important.

There are three types of accounts needed: renewable resources,
non-renewable resources that can be recycled, and non-renewable
resources that are destroyed when they are used.

Renewable Resources
The use of renewable resources would be accounted for in comparison
to their rate of renewal. Fish, trees, crops and water flows are like
money in the bank. They produce a certain amount of "interest" on a
regular basis. As long as we need and consume only the annual
production, we can do so forever. If we consume living resources at a
rate faster than they can grow, we diminish the "capital stock,"
thereby reducing the amount that can grow from it in future years.
Over-exploitation can also depress the quality of capital stocks.
Where forests are clear-cut, the soil, no longer protected from the
elements by vegetation, can erode, leaving it unable to grow trees as
well as before. All the commonly used renewable resources have been
studied thoroughly enough that, given the political will to act
responsibly, rates of renewal and safe maximum levels of extraction
could be established. Balance sheet accounts could then keep track of
the amount of the various resources "in stock" and the various rates
at which we are extracting resources from those stocks.

Recyclable Non-renewable Resources
Two accounts would be required to monitor the use of non-renewable
resources that can be recycled - metals and minerals. A balance
sheet, would keep a record of how much of each resource is being
extracted relative to known reserves. Another account would track the
rate at which each resource was being recycled. Together these
figures would tell us when rates of consumption approach the edge of
what can be sustained. Much of the necessary information is already
being collected.

Non-renewable Resources that are Lost when Used
The final type of balance sheet account would be for non-renewable
resources destroyed when used. This refers primarily to fossil-fuels
- coal, oil and natural gas. Since the rate at which fossil-fuels are
formed is negligible compared to the rate of use, we have to consider
the present resource as being all that will ever be available. Any
use, with the exception of some recyclable plastics, decreases
overall supply. Balance sheet accounts for these resources would
compare consumption with increases in the efficiency with which we
use the resources and the amounts of energy-generating capacity that
are developing from renewable energy sources. This would provide
critical information about how much energy we presently need, how
much of that we can provide from renewable sources, and how much time
we have to develop the renewable sources and energy efficiency that
will be necessary as fossil-fuel produced energy is used up.

Pollution Inventories
The other side of resource consumption is waste. A great deal of
waste is created in the process of making products and because very
few products are kept around for long, almost all products become
waste. With the exception of some art, furniture and architecture,
everything we use is eventually considered waste and thrown away.
Some of this "waste" is recycled, some is effectively isolated at
landfill sites, and the rest escapes into groundwater flows or is
released into the air and surface water. Natural processes can absorb
some of these releases. But, while some of it is harmless, some of it
is disruptive to ecological systems and poisonous to living things.

A GPI would account for pollution by volume and toxicity and compare
the amounts produced to the capacity of the environment to absorb it.
As a civilization, we should know how much pollution we create,
whether that volume is increasing or decreasing, how much is
persistent, how much is effectively absorbed, and how much has
negative effects on people, other living things and ecological
processes. As with recyclable, non-renewable resources, much of this
information is already available for monitoring. A GPI would collect
the information in one place and present it in a format that anyone
could access to see how we are doing.

Two Perspectives of Health

Almost by definition, a focus on health determinants in our core
measure of progress will shift attention from treatment to
prevention. Since an ounce of prevention tends to be worth a pound of cure we might expect expanded measures in the health field to lead
toward a healthier population at less cost.
Ron Colman, GPI Atlantic

The field of health provides an example of how different actions are
taken in response to different sorts of measurements. Traditionally,
the health of a population has been measured in terms of how many
people have been afflicted by various diseases, how many have died
and what the average life expectancy is. Another approach would be to
measure the circumstances that influence people's health, known as
"the determinants of health." These include food quality, community
stability, income distribution, education, pollution levels, quality
of employment, exercise, stress, participation in decision-making and
other such things that make people more or less susceptible to
disease. Rather than just providing money for treating people who are
already sick, as we try to do in response to information about
illness, measuring determinants of health would result in programs
aimed at improving the circumstances that cause people to become ill.

Other Factors of Concern
Along with the above types of measurement, there are numerous other
factors that affect our well-being and quality of life. These include
the quality and quantity of employment and leisure time, durability
of goods, dependency on foreign investment and on imported goods,
levels of violence, quality of health care and education and the
costs of crime. These and anything else arising that might be a
threat to long-term well-being should be monitored.

If directing the affairs of society while considering only the GDP is
like driving a bus using only the speedometer, each of the accounts
described above is like an additional instrument on the bus's
dashboard. With more instruments to keep track of relevant factors, a
rear-view mirror to see how things have changed, and a clear
windshield through which to look out for any new obstacles that might
arise, we may yet steer our way to a sustainable future. The
International Institute for Sustainable Development (IISD) has
developed a measure based on the dashboard analogy. For more details,
see their web site at: http://www.iisd.org/cgsdi/dashboard.asp

Aggregation
The individual indicators represented by the instruments on the bus's
dashboard would themselves be determined by "aggregating" a number of
related aspects of the issue in question. For example, an indicator
representing the health of a community or country might take into
account the following factors: the extent to which people are exposed
to toxic substances; job satisfaction; income disparity; involvement
in decision-making; levels of stress; and instances of disease and
mortality. An indicator for the conservation of nature could look at
forest cover, wetlands, habitat loss, threatened and endangered
species, nutrients and toxins, alien species, and global
environmental change. Economic prosperity, while still including GDP,
might be more accurately viewed by working in measures of employment
and underemployment, poverty, savings and investment rates, natural
resources, and environmental conditions that effect productivity,
security, and sustainability.

While each of these encompassing categories might be reported with a
single figure, the various components from which they are aggregated
should be accessible to anyone who wants to take a closer look.

GPI Sees the World Differently than GDP
In the mid 1990s when the organization Redefining Progress worked out
GPI figures for the previous 30 years in the U.S., they discovered a
serious trend. A great deal of the GDP growth, which Americans were
told meant that all was well, could be accounted for as expenditures
aimed at fixing mistakes from the past, borrowing resources from the
future, and moving voluntary activities out of homes and communities
and replacing them with paid work. The main categories for which they
compiled comparative statistics were crime, family breakdown and
other regrettable expenditures, household and voluntary work, income
distribution, resource depletion, pollution, long-term environmental
damage, changes in leisure time, lifespan of consumer durables and
public infrastructure, and dependence on foreign assets. What they
found was that GDP and GPI were almost the same in 1970. The GPI then
began to drop below the GDP by 1% a year over the next 10 years. This
increased to a 2% per year decline in the 1980s and 5% per year in
the 1990s. This decline in social and environmental well-being
answers the question asked in Atlantic Monthly's October, 1995
article, "If the GDP is Up, Why is America Down?" People sense
well-being on a far deeper level than just how much money is being
made and spent. When the things people value are being lost, they
tend not to feel so good.

Developing measures of well-being along these lines bears a
similarity to great advances in evolution. In the distant past,
primitive organisms had little sensitivity to the world around them.
They simply consumed what they could and grew. As time went by, the
creatures able to sense light and motion had an advantage over those
that could not. They could notice danger and act to avoid it, or
sense food and move toward it. As sight, hearing, smell, taste and
touch became more and more developed, the organisms that possessed
them did better than those without. As a civilization, we are
expanding our capacity for sensing the world around us. Most of the
measurements discussed above are being made, but until they become a
comprehensive sensory system with permanently established "nerves"
making the information available to all who might use it, we are, as
a society, still in the early stages of evolving the senses we need
to succeed in our changing world.

This material is copied from
"Life, Money & Illusion; Living on Earth as if we want to stay."