measure – Purpose

Replacing GDP with “Girls on Bikes”.

Since early 2018, we have spent a lot of time with our protagonist Katherine Trebeck. In the summer of last year, we also traveled to Costa Rica together, to film her while she was speaking at a conference about sustainable fashion, and while she met the Costa Rican First Lady.

On that trip, she told us about an idea that I forgot about later, and that I was again reminded of recently. It is a beautiful thought that very convincingly illustrates how much we must change our notion of what progress actually means.

You have a very tough challenge to overcome when you try to move away from an economy that is measured by the “growth” it produces, in terms of financially measurable output. Or, in other words, by how much it increases GDP every year. GDP is such an established measurement: Everyone has heard of it, it seems so incredibly familiar (even though most people have no idea what it really is), and that’s why people have a really hard time letting go of it.

Now, how does the growth of GDP tell us that a society is improving?

Well, it measures how much a society makes every year, in terms of how much money is being spent on things in that society. And then it assumes that we are doing better if more things are made and sold next year. And so on. Forever. More stuff is better. It’s as simple as that.

We are now finding out that more is not better. Up to a certain point, yes. But after that, more just hurts more: It hurts nature. It hurts equality in society. It hurts the psychological health in a population. It hurts the climate. Etc.

In the western world, and after we’d broken everything in World War II (“thanks” to the nation I come from, Germany), looking at the GDP was probably a good idea, for a while. We could simply count how much we are making and then assume that we’re doing better if we are producing more next year. It meant more people in jobs, more people could afford things, life was getting better. But those days are gone. We are no longer better off if the GDP keeps growing, we’re actually worse off, nowadays. And we’re clearly ruining the planet this way.

So we speak a lot about what might be a better measure. There’s not going to be a single thing that replaces GDP, of course. But if you ask Katherine which single measure she would pick if she could use only one, to analyse if a society is actually doing better year after year, she’ll say this:

Why not get countries to measure the number of girls who bicycle to school?

Ok, this may seem very strange at first glance. What? Rather than looking at how much economic output our country is producing, let’s count girls on bikes?

Think about it. It makes a heap of sense:

If more and more girls ride a bike to school, it means it’s safer and safer to cycle in traffic.

If more and more girls ride bikes to school, it means that bikes are increasinly accepted as a means of transport. And it means less parents’ cars — who are now doing the “parent taxi” thing (a big issue here in Germany) — are polluting the air and creating dangerous traffic jams outside schools.

If more and more girls cycle to school, it means that more and more girls are actually going to school and getting an education, period. That’s an important achievement in many countries.

If more girls are cycling to school, it means that they’ll get used to this mode of transport, it will translate to better health for them in the future, and to less pollution in society in the future.

If more girls go to school on bikes, it means that they are not afraid to be attacked by predators who do them harm.

If more and more girls ride bikes to school, more and more boys will do that, too.

If more and more girls cycle to school, it means that more of them are empowered and unafraid.

I think I agree with Katherine: This is an incredibly convincing measure of progress. And one that deserves serious consideration as a replacement for GDP. And I am not joking one bit.

Free photo by @luizmedeirosph.

World Economic Forum: “Forget GDP.”

On November 13th, Pushpam Kumar — Chief Environmental Economist at the UN — published a text on the “Agenda” blog of the WEF website, cautioning against the use of the GDP as the primary yardstick for economic and societal progress. Titled “Forget GDP – for the 21st century we need a modern growth measure“, he is quite explicit about the GDP’s shortfalls:

GDP provides measurements of output, income and expenditure quite well, and these are needed to understand and devise fiscal and monetary policies. But this measure flatly fails when it comes to wellbeing.

And he quotes a UN report that shows that nature “goes down” while the GDP goes up:

The UN Environment Programme-led Inclusive Wealth Index shows the aggregation through accounting and shadow pricing of produced capital, natural capital and human capital for 140 countries. The global growth rate of wealth tracked by this index is much lower than growth in GDP. In fact, the 2018 data suggests natural capital declined for 140 countries for the period of 1992 to 2014.

As a consequence, he advocates five factors that a better measure for progress should consider: financial and produced capital (these are the more traditional output-based measures, interested in assessing whether more has been produced and earned), plus: skills in the workforce (human capital), cohesion in society (social capital) and finally, the value of our environment (natural capital). The approach is still a very monetary one — he argues in terms of what all this is “worth” to us, financially speaking:

Natural capital assets such as forests and water bodies have only been valued for the products they provide for the market, such as timber and fish. However, these ecosystems offer a much larger suite of services, such as water purification, water regulation and habitat provisioning for species, among many others. These are clearly valuable services.

I am unsure if true change can happen if we keep considering the financial measurement of outputs as a core element of our economic systems, and if we evaluate nature as “but a resource” that provides services which we just haven’t started including in the calculation yet. The chosen vocabulary betrays a viewpoint that still considers the “accumulation of wealth” as the core idea of any economic activity — just a more varied range of “wealth types”. And yet, it seems like a helpful starting point for those who come from a GDP point of view.

Finally, he presents a Canadian approach to measuring progress more holistically, the Comprehensive Wealth Project, which now includes the five factors. And its current results are summarised as follows in the text:

The report raises several red flags, most notably that Canadians’ comprehensive wealth only grew at an annual average rate of 0.2% from 1980 to 2015. In contrast, GDP grew at an annual average rate of 1.31% over the same period.

In other words, if you look at all five facets, the GDP of Canada may have been growing by 1.31% per year on average — so the country keeps making and earning more. But in terms of a more overall approach to wellbeing, the development has been pretty much flat.

In other words, and once again: More GDP does not mean better lives.