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The Genuine Progress Indicator

The Genuine Progress Indicator

Editor

The previous article by David Shearman has alerted us to the fact that GDP is a poor measure of economo-socio-ecological well-being. The deficiencies in GDP as a measure, tell us that we need new measures for sustainable prosperity and it’s about time we realised GDP has limited use. In this context we recommend an article by Donella Meadows on a more recently formulated indicator of national progress that reflects more accurately our real value and real welfare, known as the Genuine Progress Indicator (GPI). The article is entitled “A Genuine Talk on Progress and the GPI” [1]

A much larger report entitled “The Genuine Progress Indicator – A new index of changes in well-being in Australia” has been written by Clive Hamilton and Hugh Saddler of the Australia Institute [2]. They have provided a summary of their research [3] as follows:

“It has long been recognised that GDP growth does not correlate well with changes in social welfare, i.e. national well-being. The GPI adjusts GDP by 23 factors that reflect some of the social and environmental costs of economic growth to give a better measures of changes in national prosperity. This paper explores these issues in the context of describing the methodological approach of the Australian GPI. The results show that a sharp divergence between GDP and the GPI has opened up since the 1970s. “

Reference 1 defines GPI as a measure of economic wellbeing alternative to the traditional GDP according to the following criteria: “ Whereas GDP measures how many things were produced and how many things were bought and sold in the market in a given year, GPI measures the impact of that economic activity on our lives, our environment, and on our social wellbeing. Higher levels of volunteer work and educational achievement make the GPI go up, societal harms such as water pollution, greenhouse gas emissions, or family breakdown make the GPI go down. Big disparities in income distribution also lower GPI.”

The following diagram from reference 1 lists 26 indicators that affect the overall GPI:

 This graphic shows each of the 26 indicators and how they affect the overall GPI (image developed by the Donella Meadows Institute 2014, extracted from ref 1)

In regard to GPI within an Australian context mention also must be made of the work of Prof Philip Lawn, who for many years has been one of Australia’s leading ecological economists, working to build a bridge between modern monetary theory and ecological economics. He is a pioneer of the GPI, and in 2017 produced a report for the Government of South Australia, estimating the Genuine Progress Indicator for the state, and comparing South Australia with the rest of Australia, across the range of environmental, social and economic indicators which are included in the GPI. He has been developing a set of consistent GPI accounts for most countries in the world, to serve as a guide to policy makers internationally.

1. A Genuine Talk on Progress and the GPI The Donella Meadows Project, Academy for Systems Change, March 11th, 2014 https://donellameadows.org/genuine-talk-progress-and-the-gpi/
2. https://australiainstitute.org.au/wp-content/uploads/2020/12/DP14_8.pdf
3. https://australiainstitute.org.au/report/the-genuine-progress-indicator-for-australia/
4. Philip A. Lawn, A theoretical foundation to support the Index of Sustainable Economic Welfare (ISEW), Genuine Progress (GPI), and other related indexes, Economics, 2003, vol. 44, issue 1, 105-118

 

 

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