Covid-19 pandemic and climate change related weather events over the past year have demonstrated that the economy is impacted by forces rarely if at all taken into account by common economic performance measures.
We get daily reports on market valuations of resources (oil and gold), on money (Canadian dollar), and investments (stocks and bonds). The dominant measure is the gross domestic product (GDP) which represents the market value of all goods and services produced. The GDP number and its movements up or down, is held up as the Holy Grail of the nation’s well-being. A consistently upward trending GDP indicates that we are on the right track, whatever obstacles we may be facing today.
If I were to get infected by Covid-19 and be hospitalized in intensive care, the GDP would record my refusal to be vaccinated as a positive contribution to the economy. For GDP purposes it makes no difference whether I install solar panels on my home or make an equal investment to install a coal-fired boiler. In fact, a coal-fired boiler would be preferable because the continuous need to purchase coal would make a contribution to the GDP while harvesting the sun’s free energy has no value.
A Commission of the French Economic Observatory (OFCE), chaired by Prof. Joseph E. Stiglitz published The Measurement of Economic Performance and Social Progress Revisited to raise a crucial question: “What do we want to measure?” Much of what we measure concerns the present. What is the price of oil today? What is the value of the Canadian dollar today? When we use the GDP to measure the impact of the Lytton fire, we find that this inferno was not a tragedy at all because the GDP will grow from the resulting reconstruction activities. The GDP ignores the destruction of assets, be they financial or natural, private or public.
The Commission determined that, worldwide, 1.8 global hectares are available per person. North Americans use 9.8 hectares per person! The Commission concluded that “it is imperative to pay due attention to the problems arising from the depreciation of environmental assets that are essential to human well-being or even survival.”
The Commission allowed that, while “no single number can summarize anything as complex and variegated as [society]”, it is essential for humanity’s well-being that we measure not only what we do, but, more importantly, that we measure the overall cumulative impact and consequences of what we do. In its concluding remarks the Commission noted “that the time has come to make a clear move from measuring production to measuring welfare, to try to close the gap between our measures of economic performance and widespread perceptions of well-being.” The Commission’s report was released 13 years ago, in December 2009!
The federal election provides us with an opportunity to fashion our debates with a view to what we learned from the global pandemic and from the fire and flood experiences of the past year. We – candidates and citizens – should make an effort to move our election talk beyond the personality of party leaders and flowery promises that voting for my leader and for my party will lead us to nirvana. Instead, why not debate an undertaking to follow-up on the Commission’s closing recommendation calling for “research into the development of better metrics that will contribute to a better assessment of economic performance and social progress”?