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Monday 29 May 2023 Dublin: 9°C
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Opinion GDP is not the right measurement for the growth of a country - it's time for a change
Marc Ó Cathasaigh of the Green Party outlines why he believes the future of growth measurement will be more than GDP.

ROBERT KENNEDY SPOTTED it early. As far back as 1968, the then-presidential candidate told students at the University of Kansas that using Gross Domestic Product to measure how a society was faring was a flawed process.

Such a measure “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.”

GDP, he added, “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.”

2008 shocks

Kennedy’s words would prove prophetic during the 2008 economic crash that followed 40 years later. As companies failed and homes were repossessed, a group of economists began exploring an important question – was the way in which we measured economic success the root cause of many of our difficulties in the first place?

By employing such a narrow indicator of success as GDP had we allowed ourselves to become obsessed with selling products – be they cars, clothes or houses – to one another without questioning the real end value of such work?

Their research, led by Joseph Stiglitz, Amartya Sen and Jean Paul Fitoussi, aimed to identify the limits of GDP as an indicator of economic performance and social progress.

It also aimed to explore what additional information might be required to produce more relevant indicators of social progress; to assess the feasibility of alternative measurement tools, and to discuss how to present the statistical information in an appropriate way.

The resulting report, titled “Mismeasuring Our Lives: Why GDP Doesn’t Add Up”, arrived at an unambiguous conclusion. “It has long been clear that GDP is an inadequate metric to gauge well-being over time, particularly in its economic, environmental, and social dimensions,” the report stated.

Too simplistic

The report’s findings rang true for many academics, politicians and across wider society. Here’s a simple example – using GDP means that the sale of tobacco counts towards a country’s national income despite the disastrous effect cigarettes have in terms of shorter lives, increased hospital costs and bereaved families. The same goes for the sale of oil and coal.

Similarly, the drive to sell more and more property had helped fuel the sub-prime crisis in the US and the housing crash here in Ireland. To judge by GDP alone, the Celtic Tiger years had been a roaring success in Ireland but it failed to signal that such growth was unsustainable and would end in disaster.

As Stiglitz and his co-authors pointed out, by using the wrong measurements, it was hardly surprising that we were getting the wrong results.

‘What we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices, once environmental degradation is appropriately included in our measurement of economic performance,” they wrote.

Well-being measurements

The obvious question that followed from the economists’ work was what should we be measuring instead? Many of the most important sources of satisfaction in our lives, such as physical and mental health, a clean environment and the work that carers do, were simply ignored by GDP.

The move towards using well-being indicators is one that the Green Party has long championed and which we helped ensure was included in the Programme for Government that we agreed with our coalition partners two years ago. On Tuesday, the Cabinet approved the second report on the creation of a well-being framework for Ireland, which will be embedded into policy making in Ireland including the Budget process.

The framework includes the 11 dimensions of well-being that matter most in terms of quality of life, such as housing, mental and physical health, environment and safety and security. The report also included a well-being dashboard, which offers a clear, visual sense of how Ireland is faring according to the various indicators.

Our hope is that the well-being framework and dashboard will offer us, as policymakers, better information when addressing policy challenges and help us make better decisions when using limited public resources to deliver effective public services with equality at the core. Used properly, the Well-being Framework should cut across government departments, breaking down siloed thinking and delivering greater policy coherence in service of the national good.

What is an economy?

And it also takes account of something often lost in the measurement of GDP, but is becoming ever more obvious as we face the twin crises of climate and biodiversity breakdown – that our economy is a subset of ecology, not the other way around. An economy that is built around environmental degradation and exceeding our planetary boundaries is one that’s doomed to fail.

Many people will of course look to the experience of New Zealand which in 2019 became the first country to use well-being indicators in a comprehensive manner following a confidence and supply arrangement between Labour and the Green Party. Their experience has been encouraging, with the Jacinda Ardern-led government devoting significantly more resources to mental health and tackling child poverty and domestic violence, with their Well-being Framework underpinning a thematic approach.

Straying beyond narrow economic measurements may be uncomfortable for some here in Ireland, but such an approach is guaranteed to result in significant savings in years to come. A wider range of indictors will allow us to ensure our population is happier and healthier from the outset, ensuring that expensive fixes don’t have to be implemented at a later stage. It will be better able to capture that money spent in one department can very often save on money spent in another, resulting in better value for the taxpayer overall.

As Stiglitz himself noted in a 2018 opinion piece for the Guardian; “Better metrics would also become an important diagnostic tool, helping countries both identify problems before matters spiral out of control and select the right tools to address them.”

Having taken the first steps in this process, the government will hold a consultation process in the autumn in order to gauge the public’s views on this exciting new approach. If fully embraced, I truly believe it could help ensure the values we hold as a society are infused into every aspect of our public policy making.

The financial crash showed the perils of being too focused on narrow economic indicators. By widening our vision, we will all prosper, not just as an economy, but as a society.

Marc Ó Cathasaigh is a Green Party TD representing Waterford. He is the Green Party Spokesperson on Social Protection and the vice-chair of the Joint Oireachtas Committee on Social Protection, Community and Rural Development and the Islands.


Marc Ó Cathasaigh
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