by From Jorge Buzaglo and Leo Buzaglo Olofsgård and RWER current issue In recent years there has been a proliferation of alternatives to move beyond GDP as an indicator of socio-economic wellbeing. This was most probably due to the growing distrust of GDP as an appropriate metric for measuring the degree of advancement of societies. Another probable reason for the growing GDP disbelief is the ecological crisis rapidly approaching catastrophic levels, and the international opinion and mass mobilization it has given rise to. Ecological disruption is not a subject about which GDP has much to say — although there have been attempts to adjust GDP to allow for the costs of environmental destruction.1 GDP is not only a socially (distributionally) blind indicator but also an ecologically blind
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from Jorge Buzaglo and Leo Buzaglo Olofsgård and RWER current issue
In recent years there has been a proliferation of alternatives to move beyond GDP as an indicator of socio-economic wellbeing. This was most probably due to the growing distrust of GDP as an appropriate metric for measuring the degree of advancement of societies. Another probable reason for the growing GDP disbelief is the ecological crisis rapidly approaching catastrophic levels, and the international opinion and mass mobilization it has given rise to. Ecological disruption is not a subject about which GDP has much to say — although there have been attempts to adjust GDP to allow for the costs of environmental destruction.1 GDP is not only a socially (distributionally) blind indicator but also an ecologically blind indicator.
The search for alternatives to GDP has even reached the highest bastion of economic orthodoxy, namely the International Monetary Fund (IMF). In a recent article in the IMF’s house organ, Daniel Benjamin and others explain how to measure “the essence of the good life,” and how to find a better gauge of prosperity than GDP (Benjamin et al. 2021, based on Benjamin et al. 2017). Their proposal is “beyond GDP,” both in the sense of abandoning GDP’s economistic approach and also in the sense of abandoning GDP’s objective approach based on observable, measurable physical quantities. The approach is based on subjective, non-observable mental states, as reported by respondents of surveys designed to detect them. The approach is thus methodologically close to that of the World Happiness Report, which is mainly based on the results of the Gallup World Poll.2
The plethora of different attempts to find a better gauge of human progress, and to quantify “the good life” are positive and promising symptoms of an extensive collective search — a wide and intellectually multifaceted attempt to find a new economic and social paradigm. That is, it can be seen as a search for a way out of the present, in many senses flawed system.3
However, the “GDP mentality” is still strong and dominant, and it seems to prevail in the factual choices of most governments and international organizations. This mentality not only ignores or neglects the policy reorientation messages implicit in the proposed alternatives to GDP. It also refuses to recognize the flaws and ills of the present system, since long been denounced by numerous social thinkers and reformers.
One most prominent such thinker and reformer economist, John Maynard Keynes, introduced the concluding chapter, on the social philosophy underpinning his book — The General Theory of Employment, Interest, and Money — with the sentence:
The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
It is relevant to remind economists, including Keynesian economists, of these final words. Keynes is here taking distance from, or negating, the supposed economic laws of distribution. The distribution of incomes is for Keynes arbitrary, that is, it does not follow any such law, as for instance the marginal productivity law. The same applies to the distribution of wealth, i.e. accumulated incomes/profits. This means that the distribution of wealth and incomes can for Keynes be modified without that impinging on some ineluctable economic law. What is more, for Keynes the rules according to which wealth and incomes are distributed should be changed, because they are inequitable.
We live now, 86 years after The General Theory, and after several decades of the dismantlement of the Welfare State, back in economic societies with levels of income and wealth inequality, and with employment problems, similar to those of Keynes’ time. To that, we must now add the new and very ominous risks inherent in the impending climate catastrophe.
This should be seen as a real failure, and urgent measures should be taken to get rid of it. The first rational measure in such a situation should be to carefully scrutinize the state we are in. This is where the idea of failure indices comes in. While alternatives to GDP try to show what a better life should look like, and rank countries according to how far they have reached in that direction, a failure index should show what are the unsolved faults and flaws of present societies needing urgent attention, and how far they have come in solving them. read more