When it comes to economic growth, bigger is better. Or so says the mainstream wisdom. But more and more people—including, increasingly, governments—are realizing that equating growth with quality of life is to follow a broken compass toward a host of social and ecological problems. The state of Maryland is the latest government to look for a better way to measure progress: Governor Martin O'Malley's office recently announced the launch of the Genuine Progress Indicator (GPI), an alternative economic indicator that will allow the state to keep track of which activities actually contribute to quality of life—and which detract from it.
As University of Maryland researcher Dr. Matthias Ruth, with whom the state collaborated in the development of the GPI, told the UM NewsDesk, “The calculation of a Genuine Progress Indicator begins to correct the picture of how well-off we actually are. It counts as positive that which is actually positive—time spent with family, volunteer work in our communities, restoration of the environment, for example—and it subtracts the negative—time spent in our cars or loss of wetlands.”
The GPI will take into account 26 different quality of life indicators, putting price estimates, in dollars, on the negative—and positive—impacts of economic growth. The indicator considers, for example, the future costs of climate change and the strain of income inequality on social services; it also accounts for the value created by volunteerism and forest preservation. Taken together, the measurement should equip citizens and policymakers with a more clear-eyed picture of the costs and benefits of the state’s economic activity.
Already, the GPI is telling a very different story about the connection between economic growth and quality of life. A cross-sector partnership between the University of Maryland and several state agencies looked at data all the way back to 1960 and found that, by the early 1980s, Maryland’s growing gross state product (GSP—the state's version of GDP, the traditional measure of economic health) no longer reflected an increase in genuine progress. In other words, while economic activity increased, quality of life didn't. By 2000, GSP estimates were nearly 50 percent higher than what’s reported by the GPI—a measurement that, Ruth maintains, is closer to the real experience of citizens.
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Maryland can now use the GPI to forecast the impact of various future policy scenarios on the lives of residents. With full-tilt investments, for example, in things like green jobs, renewable energy, and compact urban planning, the GPI starts to outpace the GSP around 2025. By 2060, the difference between the two metrics is in the hundreds of billions of dollars.
The GPI is meant to complement the traditional economic indicator, the GSP, and is accompanied by a web-based interactive tool that allows Marylanders to forecast future scenarios for themselves.
Maryland isn’t the only government to reconsider its use of GSP (or gross domestic product, GDP, on a national scale) as a measure of progress. These indicators simply track the total amount, in dollars, of all the goods and services produced and paid for within an economy. A growing GDP has long been assumed to translate into new jobs, more wealth, and greater happiness—leading economists, politicians, and the mainstream media to scrutinize the jumping tick of dollar flow—but there’s a growing consensus that that’s not always the case. In 2009, for example, President Nicolas Sarkozy of France announced a new plan for that country to begin measuring social progress in terms of the happiness of its citizens. And Bhutan, in Southern Asia, has been reporting its Gross National Happiness since 1972—during which time, despite low per capita incomes, levels of clean drinking water, literacy, and life expectancy have been on the rise.
The notion of an alternative economic indicator has been kicking around sustainability circles for years. An early ancestor to the GPI emerged, probably not coincidentally, from the work of University of Maryland economist Herman Daly in the 1980s. Subsequent iterations have caught on in the United Kingdom, where the New Economics Foundation has published their Happy Planet Index, a measurement of “the ecological efficiency with which human well-being is delivered.”
According to its critics, the GDP is too blunt an instrument to be useful; it merely lumps together the frenzy of activity within an economy into a not-so-meaningful number that convinces us things are going well when they’re not. Without a means of separating economic good from bad, they say, undesirable events that stimulate the flow of money and stuff—like paving over a forest, spending a night in the hospital, or imprisoning a criminal—get lumped into the GDP and filed under “progress” as well. As Jonathan Rowe put it in a 2009 article for this magazine, “Sickness and the consequent medical treatment is good for the GDP. Health is not.”
Whatever the outcome of the GPI, Maryland should be applauded for taking a bold and transparent step toward a working relationship between nature, people, and the economy. No other state, in fact, has achieved anything quite like it.
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