Even when the worst of the current worldwide economic crisis ends, the U.S. economy will have fundamentally changed. What will that new economy look like? We may see slower economic growth, with more gradual ups and less precipitous declines. Perhaps fewer hours will be worked on average per year, but with higher productivity per hour. Whatever the changes, we will need to develop a new way of measuring how well our society is doing to supplement – or even replace – gross domestic product.
GDP and similar metrics fail in several ways when used as proxies for more general societal progress. First of all, GDP doesn’t tally many parameters that matter as much or more than production when trying to track the overall health of our society. For example, GDP does not count work without wages by stay-at-home parents. And many things that are tallied are not measured in terms of their true worth.
Damage from Tropical Storm Irene is an all-too-familiar example. Despite the heroic recovery efforts and assistance from the federal government, it is hard to consider the storm as a benefit. But given how spending is measured, GDP will count the recovery efforts as an economic boon to Vermont – in keeping with the tradition that breaking and replacing windows is measured as productivity.
It’s not a new problem. Robert Kennedy spoke to it in 1968 when he pointed out that GDP “counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl.”
Kennedy concluded that GDP “measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile … and it tells us everything about America except why we are proud that we are Americans.”
This doesn’t mean that GDP is useless or false. The mistake is to treat the ups-and-downs of one very limited measurement as a broader signal of how we and our neighbors are doing.
We need a more comprehensive and accurate way of evaluating our progress, especially here in Vermont, where quality of life and environmental health are so fundamental. Many of the factors nearly or completely left out of GDP calculations – including loss of farmland, short commutes, air quality and the health of the whitetail herd – are particularly important to Vermonters. With the help of state government, legislative economists and the state’s university, we could track the measures we consider most relevant.
Some important work in this area has already been undertaken by the Gund Institute for Ecological Economics at the University of Vermont. Ten years ago Gund researchers estimated measures of the Genuine Progress Indicator for Burlington, Chittenden County and Vermont as a whole from 1950 until 2000. All three levels of measurement in Vermont had significantly better GPI per capita since 1980 than the United States overall – and by the year 2000 per capita GPI in the Green Mountains was twice what it was nationally. The main factor was better performance on the environmental measures compared to the national average.
A Vermont GPI is much needed, because it has significant potential as an extremely useful indicator of whether residents are making progress towards the lives they want.
This article originally appeared in the Rutland Herald and Times Argus on January 1, 2012.