This has only just come to my attention, but that makes little difference to the points I make:
Yes, that's the Davos crowd making this point. And they go on to say:
GDP provides measurements of output, income and expenditure quite well, and these are needed to understand and devise fiscal and monetary policies. But this measure flatly fails when it comes to wellbeing.
I guess that's news to no-one but the Davos crowd.
They continue:
Hence growing international interest in a tool that still captures financial and produced capital, but also the skills in our workforce (human capital), the cohesion in our society (social capital) and the value of our environment (natural capital).
Work has advanced on some of these elements. The UN Environment Programme-led Inclusive Wealth Index shows the aggregation through accounting and shadow pricing of produced capital, natural capital and human capital for 140 countries. The global growth rate of wealth tracked by this index is much lower than growth in GDP. In fact, the 2018 data suggests natural capital declined for 140 countries for the period of 1992 to 2014.
This is the chart:
Again, I guess that's news to no one, except the Davos crowd.
But what's scary is the conclusion:
People deserve an accurate sense of how well their economies are performing, with a view to long-term sustainability. GDP has and always will have valuable short-term insights, but to respond to 21st-century pressures we need a modern economic measure.
At that point I wanted to scream. What we, apparently, need is a measure of how badly Davos mentality is screwing things up. We don't need to heed the warnings. Or give up a growth obsession that fuels globalisation and is supported by the myth of profit maximisation driving well-being to which the whole of Davis subscribes. No, we just need a better measure of the damage that myth causes.
Bring on the Green New Deal, I say.
Will it be on the Davos agenda? I doubt it, somehow.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Presumably the Davos crowd were all stoned off their heads in 1968.
https://www.theguardian.com/news/datablog/2012/may/24/robert-kennedy-gdp
Hi Andy,
That Kennedy speech on GDP is brilliant (I think I was first introduced to it by one of Charles Adams’ posts). I found it myself and was just about to to post a link to it when I realized that you had already done so.
I particularly like the following excerpt:
“It [GDP]counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product 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.”
He was right….
At least it is (a small) step in the right direction.
What always makes me want to scream is when people who think GDP is the only important metric accuse the Green Party of knowing nothing about economics. And that is a view held much wider than by just the Davos crowd.
I know……
It might be in the right direction. But I saw it as “We need a measure of the social assets that we haven’t cashed in yet.” Those would be “the skills in our workforce (human capital), the cohesion in our society (social capital) and the value of our environment (natural capital)”. Those things might contribute to well-being, or something else could happen to them instead.
I suppose I am being optimistic, but by putting a value on things other than just GDP perhaps it would have been shown that there has been a planet wide recession (or at the least less growth) for years. How else do you convince the neoliberals that the current business as usual is not working?
Humanity is currently incapable of protecting the environment without somehow putting a price on the damage. We seem incapable of even slowing down global warming which will have a staggering price tag in the end.
I do also remember reading a well reasoned Monbiot article about how attempting to put a value on things such as environmental capital is entirely the wrong approach however. Nothing is simple.
Well said Neil. Ask an economics undergrad what GDP is and she’ll prattle gross domestic product as the answer. So what’s e = mc2^ then? Energy equals mass times the speed of light squared comes the answer. Does knowing this let you do physics? Foucauldian accountants wrote quite convincing arguments that a penny on income tax in the West could solve poverty. This was barred from economics students as surely as papers on where the oil wealth was going from consideration by my Bahraini classes (who knew anyway – ‘they are eating us from the inside out’). Economics education is not unlike learning scripture and demanding tithes from the poor as the Church of England did in the Depression.
@archytas
“Economics education is not unlike learning scripture”
Just the point that is made in “Debunking Economics” which I am working my way through at the moment. I’m hoping the reason why I find it hard to get my head around Demand Curves etc. as defined in neo-classical economics is because (as the author states) they don’t make sense. For the moment I am ignoring any other reason for my difficulties 🙂
I promise you, they do not make sense
Just as the maths of economic theory makes no sense at all as it assumes very small numbers behave like zero
That’s a fundamental error
“Just as the maths of economic theory makes no sense at all ….”
It never will if the object of the exercise is to make it seem simple (in mathematical terms). National economies are ‘Complex’ and ‘Chaotic’ systems and are affected by external influences. What these sort of theories point out is the difficulty in making accurate predictions because minuscule inputs radically alter outcomes.
If the models economists use make idiotic assumptions such as Adam Smithites harp on about…rational human behaviour, efficient markets (pah!) and people dedicated to maximising their gains and such like twaddle the application of mathematics to economics is always going to be of relatively little utility in predicting outcomes.
You do well, Richard to stick to language (and maybe pictures) as the only medium to explain economics.
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]