Measuring What Matters and Redefining "Growth"

It's a dire economic situation out there. Many of us have several loved ones who have lost their jobs. The news is full of stories about the need for economic recovery. The U.S. presidential candidates and Congress argue about whether tax breaks will fuel economic growth.

But according to a recent essay in Orion by associate professor Steven Stoll, we're "mismeasuring" what's important. And an increasing number of communities and countries are making changes in how they measure "growth."

Stoll outlines the disconnect between our GDP, which is considered the ultimate indicator of success, and the amorality of what it does (and doesn't) measure. He says:
"Consider the sale of a two-dollar t-shirt by a big-box store. The sale instantly becomes part of GDP, but there would have been no sale were it not for the undercompensated labor of the Cambodian woman who made the shirt. A Cambodian woman who, in one year, stitches and sews $195,000 worth of goods is paid $750. That calculates to a share of three-thousandths of every retail dollar. Meanwhile, many Cambodian workers aren’t paid enough to adequately feed their families.

Thoroughly globalized products present a problem for GDP as a measure. After all, what is a “domestic product” when the citizenship of product and profit are difficult to determine? The t-shirt’s costs stay in one country and its profits go to another. If the true cost of producing the t-shirt became part of its price, few households in the United States could afford to buy one. The profitability of the t-shirt and its volume of sales for the big-box store depend on below-subsistence wages and the absence of environmental laws. Economists call this externalizing—when the costs of production are dumped on the public, while the profits remain in private hands. To the extent that GDP represents millions of products shared across national economies, it is a highly subsidized number—in which other people and other places sustain the true costs of growth."
 Stoll calls for the implementation of new measures of prosperity, and an investment in "natural capital" -- those "benefits" that we and our fellow beings enjoy from the natural world doing its job (such as providing oxygen, holding back floods, and maintaining balance).

Stoll mentions several of the alternative measures that are being used by others, including:
  • Index of Sustainable Economic Welfare
  • Genuine Progress Indicator
  • Happy Planet Index
  • Gross National Happiness measure
  • National Accounts of Well-Being

Read the complete essay.

Most of us don't even consider the effects of relying on the GDP as a measure of health & success, so it's a great topic to explore with students. Check out our free lesson plan about the GDP and alternative indicators -- Is What's Good for the GDP Good for Me? -- which helps students, grades 8 & older, think critically about our current system and consider better ways of measuring the health & well-being of people and planet.

~ Marsha

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