How to go beyond the gross domestic product?
Pursuing an actual modern reflection of wealth means finding tools to move away from an excessively quantitative, restrictive and accounting outlook to assess the collective performance. Changing indicators of wealth while we amend our way of production and thinking involves rethinking the limits of national accounting as well.
Thirty years to date, GDP per capita has tripled in our developed societies. Why, then, according to all surveys, the welfare of the average Joe has not known the same dynamic? How can we move beyond GDP? How to measure a nation’s progress and wealth ?
New indicators of wealth: a dispute that goes way back.
The first time the indicator of gross wealth was challenged academically came about the 1970s when the Club of Rome casted doubt on the goodness of the concept of growth. Also in 1972-1973 the first Tobin-Nordhaus report — Measure of Economic Welfare — tried to correct the GDP by eliminating what they called defensive expenditures, ie those costs that do not meet net investment: for example repair costs, recycling costs, etc.
It goes without saying that such initiatives aroused the indignation of the national accounts of the moment — criticism that reappeared in the 1990s, since GDP is a taboo indicator, a fetish indicator of human behaviour, a structuring myth as a result of the World War II — a myth displayed as the guidebook of postwar reconstruction from a Keynesian perspective of budgetary programming. Somehow it took so long to implement that one understands well the current reluctance not to put into question: GDP is the monetary indicator par excellence, the result of the added values, a convenient indicator that lets you add units from various sources. It is universal and widespread as it shows the supremacy of production and consumption into our advanced societies.
GDP, a growth model of industrial production after WW II, becoming now obsolete.
Currently, the prevalence of environmental concerns and the primacy of issues related to the culture of services and the economy of knowledge are critical – mostly when foreseeing a change in the assessment criteria of the global accounting aggregate.
The GDP has significant limitations.
Primo: It only takes certain activities into consideration and always around paid work. It neglects significant activities: care of children, housework, voluntary work, political activity: non-monetary activities that allow our civilization to last over time and which count for nothing in the overall aggregate assessment.
Second key limitation: the GDP is little or no sensitive to inequalities in consumption and production sharing.
Third limitation: it is a cash flow indicator, a flow and stock accounting that does not outcome into a balance: you can not produce added value and simultaneously destroy part of natural capital — human and social. Its principle of action is to ‘create assets primarily, and then redistribution will follow.’
That is why it is essential to review the wealth concept while we change our way of thinking. Another accounting logic is possible.
Changing or completely replacing GDP?
There are other indicators in this day and age. From the human development index till the ecological footprint — not to mention Osberg and Sharpe’s index of economic welfare, Ruut Veenhoven’s ranking of quality of life and happiness or the Catrice Jany’s social health index.
Other indicators are concomitant, such as the administration of physical resources, the aggregate indicator of the ecological footprint and the adjusted net savings – though the latter, as a simply monetary concept, suggests a poor vision of sustainability: roughly speaking, a country can pursue a sustainable development path even when its natural capital is deeply exhausted.