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A New Way to Measure Economic Success
(by Anthony Pollina, Vermont Senate Washington County - September 14, 2011)
A New Way to Measure Economic Success
Editor:
First let’s take another moment to consider the suffering and loss Hurricane Irene has brought to our neighbors and neighboring communities. While we know Vermonters will find ways to work together and move forward, it will not be easy or quick and it will take real investment to restore homes, businesses, bridges, roads and so much more that has been damaged or lost.
Yet, in the midst of all the devastation it was interesting to hear former Clinton Labor Secretary Robert Reich say that if there was a silver lining to Hurricane Irene, it was that it would stimulate the economy, bringing jobs to rebuild infrastructure and homes.
Of course he’s right; disaster is one way to jumpstart an economy. But it’s not the kind of economic stimulus we are looking for.
His comment was especially interesting because I recently proposed a new way to measure the success or failure of our Vermont economy.
Now we use the Gross Domestic Product (or GDP) and you may be surprised to know that Vermont has one of the strongest GDPs in the country.
The problem is GDP is no longer a useful economic measure because it is out of touch with everyday reality. It measures production and consumption but nothing more. Not who is consuming and who is going without or how it is impacting our families or environment. It doesn’t actually measure how “we” are doing.
Our economy is changing dramatically. The middle class is struggling, good jobs being lost, savings disappearing, yet GDP keeps growing, right along with the lines at the food bank.
And yes, disasters raise the GDP. It did in Louisiana after Katrina and in Sri Lanka after a tsunami. Creating jobs cleaning rubble and rebuilding homes and communities. But that’s not economic growth. If lucky it gets us back to where we started. But that’s how GDP works and why Reich’s absurd observation actually made sense. And, since GDP ignores the costs of things like pollution and climate change, using GDP logic, a toxic spill in Montpelier would boost the economy by creating jobs. A meltdown at Vermont Yankee would do the same, if anyone were around to rebuild.
Vermont needs a better way to measure our economic progress – to reflect what people are really experiencing. The one I propose is called a Genuine Progress Indicator (or GPI).
A Genuine Progress Indicator considers things that impact families who live in the real world – the one that, along with production and consumption, includes hunger, stress created by joblessness, inequality, polluted waterways and more. It measures real costs along with benefits.
The State of Maryland already uses a GPI that tracks 26 indicators. Some cities, Canadian Provinces and even nations are developing or using other ways to do it. And the GUND Institute at UVM is a leader in developing Genuine Progress Indicators. It can all be measured with existing data and surveys to see how people are experiencing the economy.
Hundreds of economists now agree the GDP is “inadequate and misleading as a measure of true prosperity.”
A Genuine Progress Indicator on the other hand, measures things we cherish along with the things we buy.
Anthony Pollina, Vermont Senate
Washington County
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