Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

The search for an alternative to GDP to measure progress

There is consensus among New Zealand policymakers and researchers that GDP is not a good measure of a nation’s well-being. But the debate about what metric should replace GDP is ongoing.

Last week’s well-being budget was based on the Livings Standards Framework (LSF), a set of well-being measures that include cultural identity, environment, income and consumption, and social connections. But these provide no overall index of the nation’s performance.

Our research uses the Genuine Progress Indicator (GPI). It shows that by that measure, New Zealand may be only half as well off, compared to conventional measures such as GDP.

________________________________________

Accounting for costs and benefits of economic activity

Globally, the GPI is the most widely used method to replace GDP. It is essentially a macro-scale analysis of the costs and benefits of activities associated with economic activity. It includes personal consumption of goods and services as one of the largest benefits, but it balances this with costs, which may include social factors such as income inequality and environmental factors such as water pollution and the emission of greenhouse gases.

We show that overall, on a per capita basis, New Zealand’s GDP has increased by 91% since 1970. But the GPI gives a more accurate measure of the nation’s well-being, an increase of only 53%.

Personal consumption is the highest value in both GPI and the GDP during the 1990s. It grew strongly with an improving economy, but there is a widening gap between GDP and GPI because of the increasing cost of environmental problems and other externalities, such as the high cost of increasing commuting time.

________________________________________

Sustainability as the beacon

The struggle to find something better than GDP has a long history in New Zealand. The first attempts to find a GDP replacement were heavily influenced by the idea of sustainable development as an overarching concept of societal progress. In 2002, the Ministry for the Environment commissioned a review of headline indicators for tracking progress towards sustainability. This identified seven factors that were considered critical for successful indicators of progress. Of the 33 indicators reviewed, two were eventually implemented: the ecological footprint and the genuine progress indicator.

In 2008, towards the end of the Labour government term, Stats NZ developed a conceptual framework for measuring progress towards a “sustainable development approach”. This substantive work did not come up with a replacement for GDP, but instead listed trends under 15 topic areas, grouped under the themes of environmental responsibility, economic efficiency and social cohesion. From an analytical standpoint, it was hard to see how this laundry list of indicators explicitly linked to the concept of sustainable development, which this tool set was purportedly measuring.

With the National Party coming to power in 2009, sustainability literally became a banned concept. All the work on sustainability was halted and, in many cases, annihilated. The Ministry for the Environment removed commissioned reports on ecological footprints from its website.

Living standards research

From 2011, Treasury began developing the Livings Standards Framework (LSF) as an alternative to GDP. Many took notice as Treasury, one of the last true believers in GDP, was questioning its usefulness as the indicator of national progress. The framework is based on the idea that four capitals – human, financial, social and natural – provide the basis for “intergenerational well-being”. It includes 12 measures of well-being.

The theoretical underpinnings of this framework are diverse, drawing on concepts of sustainability as well as a capabilities framework, as outlined in economist Amartya Sen’s 1985 book Commodities and Capabilities. Treasury released the well-being indicators last year.

Unfortunately, when you drill down into the detail of these indicators, you realise that, in many cases, they are very subjective and dependent on how survey questions are framed. For example, there are subjective questions like “the perceived state of New Zealand’s environment on a 1 to 5 scale”. In my view, that could be much better answered if hard environmental data, like water quality indicators, were used.

The living standards indicators also provide no guidance on whether the country is worse off or better off in an overall sense. The data is deliberately disaggregated and there is no attempt to come up with an overall index of the nation’s performance.

Progress indicators for the regions

From 2007 onwards, there were a number of useful attempts by central and local government to develop workable progress indicator systems. The Waikato Regional Council, developed a composite index for their region, covering economic, social and environmental aspects of progress. The Wellington Regional Council’s index was derived by adding up 85 equally weighted indicators covering economic, environmental, social and cultural well-being.

The struggle to find a replacement for GDP has not led to any firm conclusions, and one can’t ignore the role of politics at both a government and inter-departmental level.

Governments of various persuasions have attempted to impose their own view of what a GDP replacement would look like. Until this situation stabilises, and there is an enduring and robust replacement that is accepted by all, then by default GDP will continue to be the pre-eminent indicator of the nation’s progress.


© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Labour’s Mishandling Of The Alleged Sexual Assault

The focus of Labour’s alleged sexual assault scandal has now shifted from the party organisation to the Beehive... This is now a crisis of Beehive management and response, not something occurring at a distance within the party organisation.

Presumably, the QC appointed to clarify what happened will eventually shed light on key issues. Such as: on what date prior to the publication of the original Spinoff article did the party hierarchy/PM’s office/PM’s press secretary realise they were dealing with a sexual assault allegation, and what did they do about it at that point? More>>

 

'History Rectified': Rua Kēnana To Be Pardoned

An official pardon for Tūhoe prophet and leader Rua Kēnana is one step closer after the Te Pire kia Unuhia te Hara kai Runga i a Rua Kēnana: Rua Kēnana Pardon Bill was read in Parliament for the first time today. More>>

ALSO:

Mental Health: Initial Mental Health And Wellbeing Commission Appointed

The Government has announced details of the initial Mental Health and Wellbeing Commission which will play a key role in driving better mental health in New Zealand. More>>

ALSO:

people outside the meeting house at WaitangiEducation: NZ History To Be Taught In All Schools

“We have listened carefully to the growing calls from New Zealanders to know more about our own history and identity. With this in mind it makes sense for the National Curriculum to make clear the expectation that our history is part of the local curriculum and marau ā kura in every school and kura,” Jacinda Ardern said. More>>

ALSO:

Sexual Assault Claims Mishandled: Labour Party President Resigns

Jacinda Ardern: “This morning I was provided some of the correspondence from complainants written to the party several months ago. It confirms that the allegations made were extremely serious, that the process caused complainants additional distress, and that ultimately, in my view, the party was never equipped to appropriately deal with the issue…" More>>

ALSO:

Budget Process: Wellbeing To Be Enshrined In Law

Legislation has been introduced in Parliament to ensure every Government considers the wellbeing of New Zealanders when creating future budgets. More>>

National In China: Bridges Praises CCP, Meets Law Enforcement Head

A recent trip to China has raised questions over who the Opposition leader Simon Bridges met with and why... Anne-Marie Brady, a Canterbury University professor and expert on Chinese politics, has described Guo Shengkun as the leader of the Chinese secret police. More>>

ALSO:

Gordon Campbell: On The SIS/GCSB’s Compliance With Torture

Torture is a crime under international law. New Zealand has signed (a) the UN convention against torture and (b) formal agreements about how armed conflict should be conducted. That’s the legal backdrop to the fascinating report released this week by the SIS Inspector-General.

ALSO:

New Strategy: Suicide Prevention Office To Drive Prevention Action

The Government has announced a Suicide Prevention Office will be established to coordinate action already underway to reduce New Zealand’s historically high rate of suicide. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels