Public ideas
The quest for something better than GDP
Even though GDP, or growth in GDP, has a sacred status among economic indicators, it is hardly radical or novel to point out that GDP is a poor indicator of people’s well-being. The economists who developed national accounts ninety years ago would be horrified to learn how the GDP has been used, misused, and elevated in status as the most important economic indicator.
In fact GDP doesn’t even capture people’s material well-being very well. In a country like Australia with high population growth, GDP can be growing rapidly while GDP per capita is falling. And GDP is only an indicator of the cost of production, not the income from that production. That shortcoming is relevant for Australia, because many of our most profitable industries are foreign-owned: for example the recent surge in gas prices may have boosted our GDP and our per-capita GDP, but has probably done nothing for our per-capita income, indicated by our per-capita GNI (Gross National Income).
And even GNI per-capita reveals only an average: it tells us nothing about how income or wealth is distributed.
In an article in The Real World Economics Review – Keynes’, Piketty’s, and an extensive failure index: introducing maldevelopment indices , a couple of Swedish economists – Jorge Buzaglo and Leo Buzaglo Olofsgård, take us through a number of indicators of wellbeing. They start with a simple index that takes into account unemployment and inequality in wealth and income as well as GDP: Australia comes out best of the 22 countries surveyed. Their next iteration brings in greenhouse gas contributions: on that indicator we slip to fourth-worst ranking, a little worse than Russia. They go on to indices that bring in gender disparity, transparency, “extensive failure” (socio-economic dysfunction, ecological damage, exclusion, distress, militarism, and alienation). We redeem ourselves somewhat on most of these indicators, other than on our contribution to ecological damage.
Earlier this century the ABS put a great deal of work into a project Measures of Australia’s Progress, which looked at progress, or the lack of it, using 26 indicators. Those indicators included the usual economic indicators, such as GDP and employment, and many others such as crime rates, environmental protection, and levels of trust in institutions, to name just 3 of those 26. In 2013 the incoming Abbott government, in its spite for any signs of innovation in the public sector, killed the project, but the project is still on the ABS site. Unlike Buzaglo and Olofsgård, the ABS did not attempt to consolidate those indicators into one composite indicator: indeed it would be well outside the remit of a statistical agency to apply the normative assumptions involved in applying weights and consolidating indicators.
The Centre for Policy Development has been working on developing a wellbeing framework for Australia. Commonwealth Treasurer Chalmers is enthusiastic about finding better ways of measuring progress than relying solely on national accounts. Writing in The Conversation Warwick Smith of the CPD describes how Australia is trying to recover lost ground: Beyond GDP: Jim Chalmers’ historic moment to build a well-being economy for Australia. Many countries, including New Zealand, are now well ahead of Australia (having benefited from the ABS’s pioneering work).
The difficult part of the task is not in finding indicators: they are there if we look for them. Rather it is in applying any weighting. Chalmers has said that the government wants to measure the intergenerational consequences of public policies. That’s a worthy objective, but as the conflicts over climate change illustrates, it involves the conceptually difficult task of trading present and future costs and benefits – discounting to use the economists’ terminology. That’s truly difficult territory.
Stan Grant on living without God
In an essay on the ABC website – The census shows Australians are becoming less religious but why have we chosen to live without God? – Stan Grant reflects on the secularization of Australia he has observed over his lifetime. He relates his observations to the ideas of philosophers – Friedrich Nietzsche (God is dead), Charles Taylor (the west has moved to an age of disenchantment) and others.
Secularization, he observes, is a “western” phenomenon. Elsewhere, Christianity and Islam are booming. For Australia, and similar countries, Grant wonders what takes the place of religion.
Snippets from gurus
Jeffrey Sachs
The Spanish newspaper El País has a transcript of a short interview with economist Jeffrey Sachs on climate change, the UN sustainable development goals, and the war in Ukraine. When asked “has capitalism failed”, he leaves us in no doubt that “market capitalism” has failed, but so too have economic systems that do away with the market. “So what we’re looking for is something that is mixed. That is an economy that has markets, government, civil society and a set of clear ethics. And it should be environmentally sustainable.”
Kishore Mahbubani
Singapore diplomat Kishore Mahbubani’s opening remarks to the 2022 Global Youth Congress held in China in May are a call for the west to strengthen the UN family of institutions rather than trying to weaken them. He refers to two great global challenges that should be beyond ideological dispute and about which UN institutions can play a vital role: Covid-19 and climate change.