EDITOR’S NOTE: Traditional economic indicators are now not the only way to measure a country’s developing. Council on Foreign Relations fellow Terra Lawson-Remer weighs in on the debate on whether to use new and more appropriate tools hat take into account human progress and environmental sustainability.
How should the status and progress of a country or people be measured and judged? For over six decades, the standard metric has been economic production and consumption — per capita income, as variously defined by gross domestic product, gross national product, and gross national income. These measures are commonly used as shorthand to describe the quality of life in a given country, but in reality they represent a dramatic oversimplification of wellbeing. As a thought exercise, consider the protagonists of Charles Dickens’ classic Christmas Carol: Judging by their per capita incomes alone, Uncle Scrooge is far better off than Tiny Tim. But the moral of the play is that wealthy Scrooge lives an undoubtedly miserable life whereas Tiny Tim is poor but happy.
Thankfully, over the past thirty years, some leading policymakers, development practitioners, and scholars have begun to challenge traditional measures of wellbeing. As a result, a plethora of alternative indices designed to measure countries’ performance on a range of social and political metrics have emerged. Indicators now exist to measure elusive characteristics such as democratic governance; voice and accountability; rule of law; civil and political rights; sustainability and natural resource consumption; and business climate. Many researchers and policymakers now agree that economic wealth as traditionally measured does not capture progress; that a focus on income alone ignores other essential issues; and that new and more appropriate metrics are needed.
The first breakthrough moment in this movement came in the early 1990s with the establishment and wide acceptance of the Human Development Index. The HDI attempts to give a single concrete number to the complex concept of development, as defined by the economist Amartya Sen. This framework measures development not just in terms of income, but in terms of the ability of individuals to live free and meaningful lives. The human capabilities approach views income as a means to realizing freedom, not as an ends in itself, so the focus is on all the aspects of human development.
Around the same time, another equally powerful current of thought brought environmental sustainability to the fore. The global environmental movement first gained traction in 1960s with the recognition that the world’s economic growth trajectory was wreaking havoc on the environment and causing irreparable harm in the form of acid rain, dead bald eagles, deforestation, and toxic water and soil. Environmentalists such as Rachel Carson, author of ”Silent Spring,” argued that any conception of wealth or wellbeing that fails to consider natural resource depletion is fundamentally flawed and misleading — if economic growth comes at the cost of environmental damage, then the depletion of shared natural resources should be taken into account in any honest calculation. Although this concept continues to face resistance from many who see real and immediate financial costs from prioritizing environmental sustainability in terms of profitability, growth, and jobs, the idea also has some powerful allies, including the World Bank, which is currently championing Natural Resource Accounting. Like a banker marking down the value of a spendthrift’s trust fund, NRA deducts the destruction and depletion of natural resources from countries’ economic production figures.
Advocates of sustainable development view environmental sustainability as an issue of inter-generational equity. As first crystallized with the publication of the Brundtland Report in 1987 — issued by a high level U.N. commission chaired by former Norwegian Prime Minister Gro Harlem Brundtland — sustainability should be viewed as integral to economic and social performance, and is required to ensure opportunity for future generations.
These newer measurements have critics, and have yet to realize the status of ubiquitous shorthand descriptors enjoyed by per capita income measures. Some skeptics argue that although fine in theory, in practice both the HDI and NRA, along with the myriad of other measures, distort and mislead because they aim to count what cannot be counted. Other critics point to practical issues of public understanding — whereas the meaning of GDP is relatively clear, alternative measures are more complex and difficult to understand. Others argue that per capita income is both a powerful determinant and reasonable proxy for other aspects of development, since poorer countries also almost invariably have more poor people — rendering other measures redundant and distracting. Then, of course, there are those who benefit from the status quo, and would stand to lose from a shift in policies towards new development approaches.
This debate is evolving quickly and the policy implications of what we measure and how we measure it are profound.
Edited for style and republished with permission from the Council on Foreign Relations. Read the original article.