Comprehensive Indicators

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Latest revision as of 15:10, 22 February 2012

GDP in question

For almost sixty years, the objective of economic growth, quantitatively assessed by the Gross Domestic Product (GDP), has been pivotal within the elaboration of socioeconomic policies in capitalist economies. Today however, GDP faces a growing wave of criticisms. Whatever the nature of the criticism, this phenomenon reminds us that GDP is a historically situated tool, built in the specific post-war context, marked by a urgent need for reconstruction and for rebuilding an image of national power. To this latter respect, Fourquet^[1] shows that the construction of this indicator has been largely determined by a vision of national power that was dominant already in the 1930s 1940s. Moreover, the generalisation of the use of GDP has emerged in a context where the link between growing value of production (assessed in money) and social progress was implicit and largely accepted. The underlying mechanism that legitimised this vision of progress was enrooted in a system of systematic redistribution of the gains of growth between labour and capital. Far from being a product of some national accountants, GDP has emerged from a lot of diffused debates, at different stages of the social dialogue, and from the existence of a consensus on the underlying values that this indicator implicitly carried.

Today however, the contestation of GDP has become very important and broadly spread among different actors around the world. So much in the citizen sphere, as well as at the political level, in numerous economic institutions, or in the academic sphere, the question of interpretation and use of GDP feeds numerous debates, and this, within the framework of powerful economic institutions such as the OECD^[2] , the EU^[3] or the World Bank^[4] . This wave of criticisms often takes the form of initiatives of indicators that would constitute an alternative and/or a complement to GDP. The proposed indicators - also gathered under the streamer “comprehensive indicators” mainly aim to put into light the inability of GDP to grasp main issues related to the evolution of people’s relation to their natural environment on the one hand, and of people’s relation to other people within the society, on the other hand.

Why are comprehensive indicators so important today?

Main challenges of the 21th century lead to question the consistency of keeping GDP as a major beacon for leading socioeconomic policies.

First, humanity faces today major environmental problems that have been scientifically recognized: climate change, loss in biodiversity, natural resources depletion. These environmental issues shed light on one of the main lacks of GDP: built on a principle of neutrality, the economic activity always positively increases GDP, independently of the fact that it contributes or not to an increase of individual or collective societal progress (an activity that would be considered as a loss for the community because of its environmental externalities, will be treated as an economic gain).

Second, the consequences of growing inequalities, source of growing conflicts and misery, are more and more visible, between North and South but also within countries. To this respect, the fact that GDP, in its measure, does not take into account the allocation of incomes, the inequalities, the poverty level and the economic security, renders it unable to grasp these core challenges in the elaboration of public policies, though these issues could be considered as influencing the progress of societies.

Third, in a society where it is more and more recognised that social cohesion should be enhanced, it seems inaccurate to go on using a GDP that does not take into account activities and resources which contribute to enhance the interactions and networks of exchange and that are not registered as such for they are not realised on a market, or because they do not have a direct monetary production cost.

Finally, one has observed a growing gap between economic growth and stagnating (sometime decreasing) life satisfaction . One might wonder whether an indicator that accounts only for input/output (for instance, education expenditures) is more consistent that a measure that would rather focus on the outcomes (rate of alphabetisation).

GDP is a good indicator of the volume of what’s produced and consumed on a given period of time. It has not been shaped to measure a more comprehensive understanding of societal progress. As long as the correlation between both held, the question of the link between growth and progress was not at stake. But, with the evolution of the economy toward the third sector, the growing difficulty to assess the production and with the plurality of ways existing to do it, some gap has appeared, giving rise progressively, for now more than sixty years, to new comprehensive indicators and initiative promoting them.

What are the major initiatives in terms of indicators?

Typology of indicators  following two dimensions:

- Fields covered

- Computation

References/ Footnotes

1. ↑ Fourquet, F. (1980), Les comptes de la puissance, Recherches, Coll. Encres, 462 p
2. ↑ The OECD has launched in June 2007 a world forum entitled “Measuring and Fostering the Progress of Societies” , gathering more than 1000 personalities among which politicians, social scientists (statisticians and economists for most of them) as well as high-level representatives of international financial and economic institutions. More recently, OCDE organized its third world forum : "Charting Progress, Building Visions, Improving Life", October 27-30 2009, Busan, Korea.
3. ↑ The EU parliament, in collaboration with the OECD and the WWF, has organised an international conference aimed at raising a critical inquiry on the use of GDP and on the necessity to go beyond this traditional measure.
4. ↑ World Bank has developed a sustainability indicator : the Adjusted Net Saving. It aims at evaluating, at a national scale, the net creation/destruction of wealth (encompassing produced, human and natural capitals).

See Also

• Gross Domestic Product
• Human Development Index
• Millennium Development Goals
• Sustainable Society Index
• Global Project on Measuring the Progress of Societies

Further Reading

• The Gross Domestic Product and Alternative Economic and Social Indicators, 2000, Blayne Haggart, Economics Division

External Links

• Genuine Progress Indicator