Measuring everything and nothing

Speaking almost 60 years ago, Robert F. Kennedy said: “Gross Domestic Product measures everything, in short, except that which makes life worthwhile.”  Kennedy had a point.

Gross Domestic Product (GDP) is quite a crude device to measure well-being. In simple terms, GDP represents the market value of all goods and services produced by the economy, including consumption, investment, government purchases, private inventories, and the foreign trade balance.

However, GDP does not directly account such things as leisure, environmental quality, levels of health and education, non-market activities (such as housewives’ work), changes in inequality of income, increases in variety, increases in technology, or the positive or negative value that society may place on certain types of output.

Above all, GDP has nothing to say about the level of inequality in society. After all, GDP per capita is just an average. Thus, when GDP per capita rises by 5%, it could either mean that everyone in society is better off by 5% or simply that the GDP of some groups has risen by more while the GDP of others has risen by less—or even declined.

GDP has nothing to say about the level of inequality in society.

Neither does GDP has anything to say about the amount of variety available. GDP does not care whether 100 loaves of bread bought by a family in a particular year are all white bread, or whether the family can choose between wheat, rye, and many types of bread. GDP just looks at whether the total amount spent on bread is the same.

Similarly, GDP is silent about which technology and products are available. Yet, the standard of living in, for example, 2020 versus that in 1960 was affected by what people could buy, not just by how much money people had. No matter how much money you had in 1960, you could not buy an iPhone or a personal computer.

This explains why many are now using composite indices which capture aspects other than GDP. One of them is the UN Human Development Index (HDI). This shows that, in Malta’s case, it took us 15 years to gain 0.06 points, but we gained 0.08 points in the next 15.

Following the economic and financial crises in 2008/9, GDP grew only marginally, but the rich survived with barely a dent to top incomes, while poverty rates, homelessness and personal debt soared. A period of modest income growth but high inequality and apparent individualism has brought about social instability in the West.

Reduced wellbeing and economic justice were indicators of diminishing returns to income and of degraded security of work and housing. But I would venture to say that none of the drivers of poor wellbeing are built into our neoliberal economic system a system that, since the 1980s, has been designed and maintained by the wealthy for their own interests.  

We now have plenty of research demonstrating the damaging effects of insecure work, poverty and personal debt. We also have well-developed alternative indicators to replace GDP. The reason that policy has not changed is not because there isn’t enough research. It’s because the current system serves those who run it.

Again, the UN HDI enables us to compare wellbeing in Malta with the rest of the world. The Index Comparison shows how we fare better than the world average in the overall HDI (28thout of 189 countries), Inequality-adjusted HDI (IHDI), and Gender Development Index (GDI), but worse in the Gender Inequality Index (GII).

There are various other indices. Another oft-quoted one is the Healthcare Access and Quality Index (HAQI) published by the Bill and Melinda Gates Foundation, where Malta’s healthcare system is ranked 27th out of 195 countries.

Isn’t it about time that our Government starts publishing an index, like New Zealand does, that gives us a better picture of our wellbeing?  

Though the findings from wellbeing research underline that social relationships are more of a predictor of wellbeing than income, the power structures of the system would argue that the measurement and pursuit of wellbeing as a primary goal of policy are, at best, a distraction from the real work of rebuilding the economy and, at worst, undermine it.

The economy depends on people, and people depend on nature. Exponential growth of extraction, trade and production has brought us to the brink. One only has to see our oversized global footprint: production and consumption in Europe account for a disproportionate share of the world’s natural resources. If everyone lived as Europeans do, we would need 2.8 planets. Over the 60 years between 1950 and 2010, western Europe imported 15% more than it exported in tonnes of biomass, fossil fuels and metals.

Mining, deforestation, biodiversity loss, climate chaos and pandemics are all interlinked and intertwined with human rights — or, rather, the lack of them. Moreover, the growth in GDP following the Second World War has been associated with human-rights violations, environmental destruction, and violations of workers’ rights. These are all intimately linked to the European economy.

Over roughly the same period, global wealth inequality has tripled: roughly 1% of the world’s population now controls over 45% of its wealth. Most of the world’s richest individuals owe their august positions to their ownership of large corporations. There is no doubt that corporate and individual wealth and influence are intimately linked. The already extremely rich and powerful can disproportionately influence political rules, to their further financial gain.

The misguided aim of non-stop economic growth persists not only because decision-makers and large portions of the public have been unable to conceive of any alternative, but also because the European economy is structurally dependent on endless expansion—thereby trapping ourselves in a downward spiral.

In fact, one persistent myth is the idea that political and economic decisions must necessarily involve a trade-off between people and nature, society and environment.  We are still told that the idea that we can grow our economies while reducing environmental pressures (the notion of ‘green growth’) is at best wishful thinking.

Granted, empirical evidence shows that decoupling output from the consumption of resources and production of externalities (for example, pollution caused by cars) is not achievable on the scale and at the speed required. Yet, all people of sound mind know that Europe’s dependency on growth has to end. 

The underlying socio-economic weaknesses exposed by the pandemic have given us a rare opportunity to heal and to thrive. The good news is that prosperity without growth is possible, that we can build an economy fit for the most crowded, connected and nature-stressed century in the history of humankind.  

We need to transform our linear economy into a circular one. If we do, our economy will thrive within the boundaries of the natural world, whilst providing a good and dignified life for everyone. Our political leaders not only need to redistribute wealth after it has been accrued and concentrated, but they should ensure a more equal distribution of wellbeing, access to power, and decision-making.  

As Prime Minister Robert Abela has said, “It is time to shift from GDP to Quality of Life (QOL), from economic production to general well-being as the key policy target. Liveability, equality and human development will now take centre stage.”

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