The Genuine Progress Index (GPI)

Issue: 

The GPI is a more accurate measure of a country’s progress since it takes into account the environmental costs of economic activity

Econometrics is the science of measuring an economy. The traditional approach, documented by Simon Kuznets in his 1941 book, National Income and Its Composition, 1919–1938, assesses a country’s progress by comparing its Gross Domestic Product (GDP) over successive years. The GDP is the money value of all goods and services produced in a country in one year. Gross National Product, Net National Product, and Income are similar ways of measuring national economies.

Unfortunately, these measures do not necessarily provide any indication of human welfare. As Kuznets himself noted in 1934, “the welfare of a nation can scarcely be inferred from a measure of national income.” This is because such measures do not include unpaid labour that nonetheless makes a significant contribution to a country’s economy, for example, women’s household work and childcare.

Moreover, these numbers do not include the ecological and human costs of production. Commercial agricultural production in a country might expand, for example, leading to a rise in GDP; but if the increase is made possible by displacing women from land they farm to feed their family, or through practices that degrade the environment, like deforestation or the use of chemical fertilizers, pesticides and herbicides, the lived experience of poverty will increase.

Accordingly, other measures of human well-being in a nation-state have been developed, such as the Human Development Index, the Index of Sustainable Economic Welfare, and even Bhutan’s Gross National Happiness. These approaches assess specific indicators of human welfare like longevity, literacy, and maternal and infant mortality, but are not economic in orientation.

In 1995, Redefining Progress, an economic think tank in Washington, DC, developed the Genuine Progress Indicator (GPI), also known as the Genuine Progress Index, to replace or supplement the GDP as a measure of economic growth, and to bring together economic and welfare assessments of progress.

It uses as many as 51 economic, environmental and social factors to assess economic well-being, in contrast to the sole indicator, i.e. revenue flow, used in the GDP. Best known attempts to apply the GPI include GPI Atlantic and the Alberta GPI in Canada, but at least eleven countries have revised their economic analyses to include the GPI.

The GPI is the GDP minus the environmental costs of economic activity like biodiversity loss, resource depletion, pollution, loss of farmland and wetlands, and ozone depletion, and social costs like increase in crime and family breakdown.

For example, in coastal mangrove regions of India, shrimp farming generated substantial profits for those involved in the export market. Once the environmental costs of biodiversity loss through destruction of mangroves, ecosystem damage as well as social costs are factored in, however, the economic gains of shrimp farming no longer look like genuine progress, sustainable development, or poverty alleviation.

In India’s energy sector, damming major rivers to produce hydroelectric power constitutes development. Yet decreasing fresh water input into the Bay of Bengal disrupts the monsoon cycle that supports agriculture in central and Southern India. So growth in the energy sector has led to losses in agriculture. The GDP cannot assess these losses because subsistence farmers’ crops do not go to market and are thus not counted in the GDP. So what looks like development can be seen under the GPI actually to increase the lived experience of poverty.

Moreover, the GPI incorporates sustainability by looking at losses and gains in “natural capital” like resources, biodiversity and ecosystem health. It can take account of whether development is leaving a country better or less able to generate future revenues, thereby showing whether development is creating a “bubble economy” that is borrowing from the future by squandering natural capital.

Boring wells for irrigation that lower the water table increases the GDP. But farming that uses renewable water sources like runoff, for example, counts for more under the GPI.

In a world increasingly dominated by corporate interests, the GPI provides economic assessments that can inform other perspectives in support of social justice, poverty alleviation and sustainable development.

Trish Glazebrook is an Associate Professor at Dalhousie University.

Sources and Resources:
Genuine Progress Indicators Report 1961 to 1999. Calgary: Pembina Institute for Appropriate Development, Anielski, M, M. Griffiths, and others.
Just Ecological Integrity: The Ethics of Maintaining Planetary Life, Anielski, M. and C. Soskolne. 2001,
Ecological Economics. Costanza, R. 1995.
Ecological Application, Costanza, R. and R. V. O’Neill. 1996. http://en.wikipedia.org/wiki/Genuine_progress_indicator
http://www.rprogress.org/sustainability_indicators/genuine_progress_indi...
www.gpiatlantic.org www.gpipacific.org www.pembina.org
gdp_gpi.tif

At least eleven countries have revised their economic analyses to include the GPI.