Beyond GDP: Redefining Wealth in the 21st Century. Simran Sethi School of Journalism & Mass Communications

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2 Beyond GDP: Redefining Wealth in the 21st Century Simran Sethi School of Journalism & Mass Communications

3 What is Wealth? We seem to have surrendered community excellence & community values in the mere accumulation of material things. Our GDP...counts air pollution & cigarette advertising, & ambulances to clear our highways of carnage. It counts special locks for our doors & the jails for those who break them. It counts the destruction of our redwoods & the loss of our natural wonder in chaotic sprawl. It counts...the cost of a nuclear warhead, & armored cars for police who fight riots... Yet [it] does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It 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. Robert F. Kennedy (1968)

4 Gross Domestic Product GDP is the market value of all materials, foodstuffs, goods & services produced within the borders of a country in a particular year. GDP measures what is produced within the borders of a country regardless of ownership.

5 Limits of GDP GDP does not recognize non-monetary transactions GDP does not internalize externalities GDP sets the intrinsic value of natural resources at zero (until they enter the monetary economy) GDP places a positive value on all transactions GDP does not distinguish between the frequent purchase of cheap, low-durability goods v. infrequent purchase of high-durability goods GDP does not distinguish between destructive & restorative activities GDP does not measure the sustainability of growth GDP does not recognize income disparity

6 Why are New Measures of Wealth Required? The welfare of a nation can scarcely be inferred from a measure of national income. If the GDP goes up, why is America down? Distinctions must be kept in mind btw/ quantity & quality of growth, btw/ costs & returns, and btw/the short & long run. Goals for for more growth should specify more growth of what & for what. Simon Kuznetz, Creator of GDP (1934)

7 HDI The HDI measures 3 dimensions of human development: 1) A long & healthy life, as measured by life expectancy at birth 2) Knowledge, as measured by the adult literacy rate & school enrollment 3) A decent standard of living, as measured by the log of GDP (PPP)

8 Human Poverty Index COUNTRIES WITH LEAST POVERTY: 1) Sweden 2) Norway 3) Netherlands 4) Finland 5) Denmark 6) Germany 7) Switzerland 8) Canada 9) Luxembourg 10) France 11) Japan 12) Belgium 13) Spain 14) Australia 15) United Kingdom 16) United States

9 Ecological Footprint Analysis Our ecological footprint is a measure of the land required to sustain our lifestyles & absorb our waste. If everyone had the ecological footprint of the average American, we would require 5 planets to sustain us.

10 Carbon Footprint The area needed to produce the natural resources consumed & absorb the carbon dioxide emitted by the average North American is almost twice the area required by the average Western European, & some five times greater than required by the average Asian, African and Latin American. It is the consumers of the rich nations of the temperate northern regions of the world who are primarily responsible for the ongoing loss of natural wealth in the tropics. World Wildlife Federation (2000)

11 Genuine Progress Indicator The limits to increased fish harvests are not boats, but productive fisheries. The limits to irrigation are not pumps or electricity, but viable aquifers. The limits to pulp & lumber production are not sawmills, but plentiful forests. Paul Hawken, The Ecology of Commerce

12 Genuine Progress Indicator Time and time again Americans are misled by glowing accounts of how well our economy is doing. GPI analysis looks beyond the hype by acknowledging the costs associated with income inequality, global warming, pollution, sprawl, lost family time & our growing mountain of consumer debt. Tragically, per capita GPI has stagnated near $15,000 since the late 1970 s while per capita GDP has grown to over $36,000. This means that the average American family has had to work harder and harder just to maintain the standard of living they enjoyed 30 years ago. Dr. John Talberth, Lead Author of GPI (2000)

13 Calvert-Henderson Quality of Life Indicators

14 Bhutan s Gross National Happiness Recipe for happiness: 1) Good social relationships 2) Meaning (religion, philosophy of life) 3) Goals that are fun to work on

15 Counting What Really Counts The indicators a society chooses to report to itself about itself are surprisingly powerful. They reflect collective values & inform collective decisions. A nation that keeps a watchful eye on its salmon runs or the safety of its streets makes different decisions than does a nation that is only paying attention to its GNP. Dr. Donella Meadows Economist, Dartmouth College

16 Bridging the Divide

17 Speaking Truth to Power