GEOG 352 – Day 14

1. GEOG 352 – Day 14

2. Housekeeping Items Our agenda for today is: • to have the debate on GDP (quite timely!)‏ • to hear Julian's book presentation • to cover the last few slides from last time • and discuss Anielski [see the latter's work on Genuine Progress Indicator for Alberta and his Genuine Wealth model] and the on-line article [see also the special issue of Alternatives]. • Just a reminder: in addition to the Ridley and Low article, we're also reading the chapter from Jared Diamond for the week after study days.

3. GDP and Its Discontents GDP based on purchasing power parity - 2007 (US$)Country Per capita GDP Qatar                           $80,870 Luxembourg                $80,457 U.S.                            $45,845 Canada                        $38,435 U.K.                           $35,134 Dem. Rep. of the Congo  $309 Zimbabwe                        $188 Source: IMF

4. Alternatives to GDP Measure of Economic Welfare (MEW) — The MEW is the work of Yale University economists William Nordhaus and James Tobin. They developed their Measure of Economic Welfare back in1972 as one of the first attempts to address the shortcoming and mismeasures of GDP. It proposed accounting for such variables as household work, pollution, and spending on crime. This measure was to form the basis of several later attempts to measure well-being. Index of Economic Well-being (IDEW) — This index is the work of the Ottawa-based Centre for the Study of Living Standards.It's a weighted average of what the Centre considers to be the four main components of economic well-being: consumption flows, stocks of wealth, inequality, and indicators of economic insecurity like unemployment and poverty in old age. The Centre found that the economic well-being of Canadians, as measured by the IDEW, has increased at a much slower rate over the last 25 years than real GDP per capita. Its last look at 14 industrialized OECD countries found Norway was at the top of its Index of Economic Well-being, while Canada was in 10th spot, the U.S. was 11th, and Spain was 14th.

5. Alternatives to GDP Genuine Progress Indicator (GPI) — The GPI was developed in 1995 by Redefining Progress, a private research institute based in California. It arrives at its Genuine Progress Indicator by taking GDP figures and then adjusts them to take into account income distribution. It adds points for household and volunteer work, and subtracts points for the costs of things like crime, pollution, car accidents and the loss of leisure time. Under its per capita GPI formula, the U.S. has been basically treading water for the last 30 years — making no real progress in that time, even though real per capita GDP had jumped significantly. Nova-Scotia-based GPIAtlantic has developed its own Genuine Progress Index to reflect the standard of living in Nova Scotia. Its GPI is constructed along similar lines to the GPI from Redefining Progress. But GPIAtlantic doesn't turn its index into a single number. One of its research studies found that volunteerism adds $1.9 billion a year to Nova Scotia's economy — a figure that doesn't find its way into traditional GDP reports. Index of Sustainable Economic Welfare (ISEW) — Developed in 1989 by Herman Daly and John Cobb, the ISEW takes into account private spending on defence (a negative), domestic housework (a positive), the costs of environmental harm (a negative), and it corrects for income inequality.

6. Alternatives to GDP Human Development Index (HDI) — This index is the work of the United Nations Human Development Report. It calculates an annual HDI that ranks the world's countries on their achievements in three main aspects of human development: health (life expectancy at birth), knowledge (as measured by literacy rates and school and college enrollments) and standard of living (as measured by GDP per capita based on purchasing power parity.) For 2007-08, Iceland was in first place, Canada was fourth, the U.S. 12th, and Sierra Leone was last, in 177th place. Happy Planet Index (HPI) — The Happy Planet Index was developed by the British-based New Economics Foundation to, in their words, "show the relative efficiency with which nations convert the planet's natural resources into long and happy lives for their citizens." In other words, it doesn't really measure whether people are "happy". Its most recent HPI ranking puts Vanuatu, Colombia and Costa Rica first, second, and third. Canada is in 111th place (just below Benin), and the U.S. is 150th. Finally, in 1972, the King of Bhutan came up with the Gross National Happiness (GNH) indicator that he felt would be more in tune with his country's Buddhist values (i.e. sharing prosperity, protecting the environment, and preserving culture).

7. Genuine Progress Indicator (GPI)‏ • Mark Anielski, who has worked on the GPI, has had something interesting observations to make: the GDP makes no distinction between 'good' expenditures and 'bad' expenditures -- “A healthy person in a healthy marriage who cooks at home, walks to work and doesn't smoke or gamble is an economic villain.” • GPI addresses several major problems with GDP: first, it considers the value of unpaid housework, child care, volunteer work and leisure activities (all examples of the dependence of the economic on social capital).

8. Genuine Progress Indicator (GPI)‏ • It doesn't assume, when something that was formerly free now has to be paid for, that that represents progress. • It doesn't treat depletion of natural resources/ disruption of environmental services as present income, but instead as depreciation of capital, as liquidation of an asset. • It takes into account inequalities in the distribution of income. • It doesn't treat spending on weapons, crime prevention, environmental clean-ups, accidents, and commuting as adding to net social well-being.

9. Genuine Progress Indicator (GPI)‏ • It takes into account the long-term benefits of spending on health and education. • It tries to take into account key indicators of social capital and health, such as volunteer rates, voter participation rates, etc., as well as the negative impacts of unemployment and underemployment. • It also adjusts for net foreign borrowing. • According to Anielski, figures for the U.S. showed that economic well-being has been declining since the 1970s. During the '90s, annual GDP growth in the U.S. was 1.4%, while GPI was declining at 2.7% per year. Key drivers include: depletion of non-renewables, long-term environmental damage, the costs of commuting, loss of leisure time, and increased foreign indebtedness.