Chasing Progress

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Chasing Progress

  1. 1. Chasing Progress Beyond measuring economic growth The power of well-being 1
  2. 2. Every society clings to a myth by which it lives; ours is the myth of economic progress. That’s why the year-on-year sustained growth is not the same 16,000 performance of the Gross Domestic thing as sustainable growth, even in Product (GDP) continues to economic terms. And when it comes 14,000 dominate national policy and to environmental and social well- 12,000 GDP fascinate the media. But a new being, it isn’t growth so much as the 10,000 composite Measure of Domestic quality of our lives and the health of 1995 Pounds Sterling Progress (MDP) – designed to factor our environment that counts. The 8,000 in the environmental and social Labour Government has explicitly 6,000 costs of growth – highlights how far recognised this. In the foreword to off-track we might be in our the UK’s Strategy for Sustainable MDP 4,000 relentless pursuit of GDP (Figure 1). Development, entitled quite simply 2,000 The results are salutary: A Better Quality of Life, Tony Blair 0 acknowledged: 1950 1960 1970 1980 1990 2000 • GDP has soared in the last 50 years; ‘We have failed to see how our economy, our Figure 1: MDP v GDP in the UK:1950-2002 but MDP has struggled to take off at environment and our society are all one. And all. Growth is on track… that delivering the best possible quality of life • There’s little doubt about it: We are The divergence is especially for us all means more than concentrating living in an age of unprecedented solely on economic growth..’ transparent over the last 30 years: economic prosperity. The national GDP increased by 80 per cent, but The report argues that ‘achieving income has tripled, in real terms, in MDP fell sharply during the 1980s a better quality of life, now and for the course of only half a century. We and has not yet regained its 1976 generations to come’ means meeting are three times better off than our peak. four simultaneous objectives: grandparents were and it shows. • In spite of improvements in air and Higher incomes, warmer homes, water quality, environmental costs • wider choice, better communications, Social progress that meets the needs have risen by 300 per cent in the last faster cars, newer gadgets: these of everyone. half century (Figure 3). • are the windfalls from an Effective protection of the environment. • Social costs have risen 600 per cent • extraordinary surge in consumer Prudent use of natural resources. in the same period with a staggering • spending over the last few decades. Maintenance of high and stable levels 13-fold increase in the costs of crime And like the election theme song on of economic growth and employment. and a four-fold increase in the costs which this Government came to of family breakdown (Figure 4). Each of these objectives is power, it really does seem like • challenging in its own right. This The Labour Government has so far ‘things can only get better’. Government came to power, in part failed to curb income inequality which at least, because the Tories failed to rose by a factor of seven during the …but what about quality of life? deliver on key social goals and left last 50 years. But as everyone from Mahatma • whole sections of the community out Gandhi to cult pop-group the MDP bears a closer resemblance to of the growth bonanza. Moreover, Black-eyed Peas (and even Tony Blair) life-satisfaction data – which has not failures to protect the global climate, has pointed out, more isn’t always risen for 30 years (Figure 5) – than it the ozone layer, water quality in our better. Too much food makes the does to GDP. rivers and air quality in our cities nation obese. Burgeoning traffic leaves • The ‘hidden’ costs of future climate have haunted successive the roads congested. More guns make change and resource depletion governments for decades. our streets unsafe. Endless choice constitute a continuing threat to long- leaves us hurried and harried. term economic stability. So how are we to set about Mountains of waste leave our tips achieving these demanding goals? over-flowing. Burning too much carbon Are they even achievable threatens our climate. Excessive In short, the persistent divergence simultaneously? This is the commercialism erodes social value of MDP from GDP raises difficult enormous challenge of sustainable and strips our lives of meaning. questions for the Government’s development in the 21st Century, and No one can deny that we’re Sustainable Development Strategy, it’s far from having been overcome. witnessing an extraordinary period and casts serious doubts on the of economic prosperity. But myth of economic progress. 2 Chasing Progress
  3. 3. 16,000 800% GDP Climate Change 14,000 700% GDP 12,000 600% Economic 1995 Pounds Sterling Adjustments 10,000 500% Social Costs Resource Depletion 8,000 400% 6,000 300% Environmental Costs Lost Land 4,000 200% Resource Depletion Air Pollution MDP MDP 2,000 100% Water Pollution 0 0 1950 1960 1970 1980 1990 2000 1950 1960 1970 1980 1990 2000 Figure 3: Environmental costs of progress Figure 2: Components of the UK MDP Measuring progress But the results of the exercise make the time, have had a key role in It is scarcely news, of course, that for uncomfortable reading. The reducing levels of polluting emissions GDP is not a very good measure of following key statistics illustrate a into the atmosphere and into rivers. progress. Even in the 1960s, the late growing divergence between GDP And as a result air pollution and Senator Robert Kennedy warned and MDP over the last half century: water pollution costs have declined that the GDP: by around 50 per cent since the • early 1990s. GDP per capita has tripled since 1950, ‘is indifferent to the decency of our factories but MDP has not yet doubled. and the safety of streets alike. It does not • But there is little room for complacency GDP rose by 80 per cent since 1975 include the beauty of our poetry or the here. These important gains are alone: but MDP fell consistently during the strength of our marriages, the intelligence of over-shadowed by other more 1980s and has struggled to return to its our public debate or the integrity of our public intractable costs: the slow loss of officials. The [GDP] measures neither our wit mid-1970s peak. • nor our courage, neither our wisdom nor our productive rural land and natural The average growth rate in MDP was barely learning, neither our compassion nor our habitats, the continuing depletion half that of GDP over the last 50 years. devotion to our country. It measures • of mineral resources, and the rising Environmental costs have increased by everything, in short, except that which makes ‘hidden’ costs of climate change. 300 per cent since 1950; and social costs life worthwhile.’ by 600 per cent. • Economists and politicians alike have These hidden costs are different MDP has staged something of a revival in been slow to accept this indictment, from many of the other costs the last decade, growing faster than GDP at and the relentless pursuit of GDP has included in the MDP: we do not feel times but progress appears to have faltered been a defining characteristic of UK their impact now. The brunt of these over the last two years of the study. politics over the last 50 years. That’s costs will be borne by future why the Government’s Strategy for When it comes to assessing our generations. Recent policies to Sustainable Development represents progress towards the Government’s combat climate change will reduce such a profound departure from sustainability objectives, the MDP is the rate at which these future costs conventional thinking. But having a potentially useful tool because it is accumulate. But our cumulative debt accepted, as Labour did, that growth possible to unpack the composite to future generations now stands by itself will not deliver quality of life, index into different sustainability 650 per cent higher today than it the question remains: how do we factors. Figure 2 shows a series of was in 1950 – even though it has measure our progress towards this adjustments subtracted in turn from been ‘discounted’ here to take into more elusive goal? GDP to arrive at the MDP index. account the fact that the costs fall This analysis reveals that social mainly in the future. One approach is to adjust existing costs, environmental costs and measures of growth to account for resource depletion have all played Our current attitude towards these a variety of costs and benefits not a significant part in depressing the future costs is a bit like taking out an usually factored into them. As a step index below the GDP measure. endowment policy to pay off a in this direction, nef (the new mortgage and then forgetting to pay economics foundation) has Cleaner and greener? the premiums. As each year passes, calculated a new ‘Measure of Most striking of these effects is the the amount we ought to be putting Domestic Progress’ (MDP), designed role played by environmental costs. aside to make the eventual to reflect our progress towards For long periods of time, these repayment just goes on getting sustainable development by including constitute the single largest bigger. One day it will be too late; the economic progress, environmental adjustment to the measure. But how mortgage company will repossess costs, resource depletion and social does this square with government the property. And at some point the factors in a single composite measure claims that our factories are more costs of climate change may derail (see What is MDP). Combined efficient than they used to be, our economic stability altogether. together these contributions provide a rivers cleaner, and our cities powerful indication of trends over time greener? As Figure 3 illustrates, Lost in translation? in relation to the Government’s these claims are partly true. In fact, So what about social progress? sustainability objectives. environmental policies put in place Are we any more successful in our from the 1970s onwards, however pursuit of this objective? Undeniably, unpopular they may have been at we have seen signs of social 3 Chasing Progress
  4. 4. 800% 200% 180% 700% Crime 160% GDP 600% 140% 500% 120% SWB 400% 100% Family Breakdown 80% 300% MDP 60% 200% 40% MDP 100% Inequality 20% 0 0% 1950 1960 1970 1980 1990 2000 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 Figure 4: Social costs of progress Figure 5: SWB, GDP and MDP in the UK: 1973-2002 improvement over the last few and half times the divorce rate in Could it even be that the institutional decades. Aside from the higher 1950. In the subsequent decade, it structure of growth creation is average standard of living that appeared to stabilise and even fall incompatible with key dimensions of economic growth delivers, longevity slightly, leading to a decline in the social progress? Forty years ago, has increased slightly and social and psychological costs the economist Simon Kuznets unemployment has fallen since associated with family breakdown. proposed that rising income the mid-1970s. But even here, the last couple of inequality was an inevitable years have witnessed a worrying consequence of the early stages of Paradoxically, however, for a ruling reversal of the previous positive trend. economic growth. He predicted, party founded in social ideals and however, that beyond a certain committed to reducing social So what became of those Labour stage, inequality would begin to fall exclusion, the story is not pledges? Is it just that more time is again. The only trouble is it clearly unequivocally positive. Crime, needed before the impacts of hasn’t; and perhaps it simply can’t. inequality and the costs of family policies already in place begin to breakdown (Figure 4) have all grown take effect? Is it that the manifesto Bolstering the economic miracle of dramatically over the period. And in commitments were nothing more the last 50 years now appears to spite of manifesto commitments to than ‘sound and fury’, signifying require continued access to cheap be ‘tough on crime and tough on the nothing in terms of real progress? credit, low taxation levels, and the causes of crime’ and to protect Or is it possible that something even whipping up of material desires in the vulnerable families and communities, more insidious is happening? increasingly affluent middle classes. the years of Labour rule have not yet But what happens when cheap credit managed to turn this trend around. Chasing progress encourages bad debt? What happens Could it be that economic growth, when low taxation restricts the public To be fair, some efforts were made. and our unquestioned allegiance purse? And what happens when The Cabinet Office Social Exclusion to it, blind us to the social and unbridled materialism leads to the Unit, for example, has put out report environmental implications of gradual erosion of social values? after report aimed at reducing protecting and promoting it? To poverty, and tackling inequalities in create more and more growth we There is, in the current climate, no access to important basic services. need more and more consumption. real alternative to economic growth But the sad truth is that the loss in To achieve more and more that doesn’t involve the risk of even collective well-being associated with consumption, we need to keep greater hardships for the most the unequal distribution of our buying more and more stuff. But what vulnerable in our society. And yet, incomes has increased by 600 per if more and more stuff doesn’t lead to perhaps what the history of the last cent over the period and shows no happy families and fulfilling lives? 50 years is telling us is that we have immediate signs of abating under to start thinking the unthinkable. The Labour rule. This is precisely the suggestion that myth of economic growth is frayed at arises from yet another important set the edges and the promise of social Even this trend is dwarfed, however, of data. Quantitative measures of and environmental progress is one of by the 13-fold increase in crime over subjective well-being (SWB) or the first casualties of its dereliction. the last 50 years. And here the ‘life-satisfaction’ have shown precious pattern is even more worrying. little movement over the last 30 years Beyond the mirage Crime peaked in 1992 and costs (Figure 5), prompting some to Every society has a cultural myth by then fell consistently for seven years speculate that the pursuit of social which it lives; ours is the myth of in a row. But after this brief respite, progress is a little like trying to run up economic progress. So long as the they began to rise again sharply, the down-escalator. Or like the Red national income continues to rise, mainly as a result of a disturbing Queen in Lewis Carroll’s classic we feel safe in assuming not just increase in violent crimes. Through the Looking Glass: we’re that we are doing well, but that we running faster and faster; but we seem are living better than our parents or Some kind of social progress is to end up in exactly the same place. our grandparents did; that we are noticeable in relation to family progressing – not just as individuals stability. The divorce rate peaked in but as a society. 1993, albeit at a level that was five 4 Chasing Progress
  5. 5. In all probability most of us feel some But what exactly can we do beyond Perhaps most importantly, there is a comfort in that belief. And why highlighting the issue? A clear clear need to engage in a longer- shouldn’t we? One of the roles of starting point would be to term debate about the pursuit of cultural myth is to furnish us with a reformulate the sustainability national well-being, and to devise sense of meaning and provide objectives (as the SDC proposes), new ways of promoting and continuity in our lives. But a society and in particular to tease apart the measuring social progress. This may that allows itself to be steered by a objective of maintaining full or may not entail developing our own faulty myth risks foundering on the employment (which is clearly concept of GNH as Bhutan is doing. shores of harsh reality. This is the desirable) from that of pursuing But if a country of barely two million danger that the MDP is pointing us growth (which is problematic at people who have never witnessed towards: economic growth is running best). In addition, there are the level of economic prosperity unacceptable environmental risks, numerous avenues for improving enjoyed by the affluent West is doesn’t guarantee social progress, social progress and promoting prepared to engage so creatively and isn’t even making us any happier. environmental protection which with the subject of human well-being, need not conflict with economic then perhaps it is time that we did. nef is not alone in highlighting this goals, including: issue. A recent Cabinet Office report Acknowledgements • Reducing income inequalities and on life-satisfaction alerted the This briefing note has been prepared by improving access to basic services. Government to the well-being Tim Jackson, an Associate of nef (the • Promoting social cohesion by supporting paradox: life-satisfaction is resolutely new economics foundation) and local community development. static in spite of continuing economic Professor of Sustainable Development at • Speeding up the transition to a growth. Last year the Sustainable the University of Surrey. It is based on low-carbon society. Development Commission (SDC) numerical analyses carried out by the • Developing a long-term strategy for the urged the Government to abandon author and colleagues at the Centre for protection of rural land. single-minded pursuit of growth and Environmental Strategy in the University • Re-evaluating the impact of government ‘re-define prosperity’. And as this of Surrey. The author is particularly policy signals on personal and social briefing goes to press, the tiny grateful for help with data collection and well-being and on community values. kingdom of Bhutan in the Himalayas collation from Phil Sinclair and Nic Marks, • Encouraging and promoting pro-social and is hosting an international and for editorial inputs from Hetan Shah, pro-environmental consumer behaviour. conference to operationalise its own Andrea Westall, Nic Marks and Andrew • Establishing a protected ‘environmental concept of ‘gross national happiness’ Simms. nef would like to thank the futures’ fund to guard against the future (GNH) in place of GDP. Environmental Research Trust for the costs of climate change. funding which made this work possible. What is MDP? promise for the future. nef is actively engaged in The MDP is one way of approaching the difficult developing this agenda. question: how can we measure our progress towards an improved quality of life? There are three main A third approach is to construct ‘adjusted’ economic approaches to this problem. indicators. The MDP falls into this third category. Adjusted economic indicators provide a single The Government’s answer has been to establish a set performance index by adapting conventional economic of 147 separate indicators, measuring things like adult measures such as GDP or consumer expenditure to numeracy and literacy, social investment as a include social and environmental costs and benefits percentage of GDP, crime levels, river quality, that normally lie outside the accounting framework. A populations of wild birds, and so on, as well as the GDP variety of attempts have been made to construct such itself. Recognising that such a huge set of indicators is indicators over the last 20 years. These include unwieldy, the Government has selected 15 ‘headline Nordhaus and Tobin’s Measure of Economic Welfare, indicators’ from the larger set to represent different Daly and Cobb’s Index of Sustainable Economic aspects of its four strategic objectives. But even 15 Welfare (ISEW), and the Genuine Progress Indicator indicators can present potentially confusing messages (GPI) developed by the US-based lobby group to policy-makers. What does it mean if seven of the Redefining Progress. The MDP is modelled closely on indicators go upwards, and eight go downwards? Is this these developments and in particular on earlier work better or worse than the case in which eight go by the author and his colleagues to define a UK ISEW. upwards and seven go downwards? Does it depend on Several additional developments have been which go up and which go down? And how does our incorporated into this new measure and we have recent performance (the indicator set is after all only a re-labelled it MDP rather than ISEW or GPI because few years old) compare with longer term trends over the we do not believe that a rising MDP either guarantees last 50 years? sustainability or ensures ‘genuine’ progress. A second approach is to measure various dimensions Like the earlier measures, MDP takes as its basis of subjective well-being (SWB) such as life-satisfaction consumer expenditure in the UK. It then adjusts this or happiness (Figure 5). This is a useful and valid way basis to account for a series of different factors which of assessing some aspects of social progress. In affect domestic progress towards sustainable particular, it can provide us with a psychological development. The key differences between MDP and ‘snapshot’ of the nation’s ‘mood’ at any one time. GDP are that in the MDP: Extended measures of well-being, incorporating different psychological goals such as life fulfilment or personal development and accounting for broader social or environmental factors show considerable Continued overleaf 5 Chasing Progress
  6. 6. • Components of the UK MDP Spending to offset social and environmental costs (defensive expenditure) is taken out. Type Indicator Influence • Longer-term environmental damage and the depreciation of on MDP natural capital are accounted for. • A number of economic adjustments associated with ensuring Consumer expenditure +ve prudent investment and trade balances are made. Economic indicators • Value of services from domestic labour +ve Changes in the distribution of income are accounted for, reflecting the fact that an additional pound in the pocket means Public (non-defensive) expenditures on more to the poor than to the rich. health and education +ve • A value for household labour is included. Difference between expenditures on and Key differences between MDP and the ISEW are the service flow from consumer durables -ve inclusion in MDP of the costs of crime and family Net capital growth mainly +ve breakdown, and some adjustments to the Net international position mainly -ve methodologies used to account for climate change and resource depletion, in response to criticisms of the earlier work. Effects of inequality in the distribution of incomes -ve Although based on economic assumptions and widely available statistical data sets, the MDP is not a rigorously Defensive private expenditures on health Social costs defined economic measure. Neither can it provide a and education -ve robust reflection of quantitative changes in each of the Costs of commuting -ve 147 indicators of sustainable development selected by the Government. It is certainly not a guarantee that Costs of car accidents -ve Britain is on course for a sustainable future. Costs of noise nuisance -ve Costs of crime -ve However, it does offer insights that cannot be gleaned from a disparate indicator set. In particular, it is clear Costs of family breakdown -ve that the MDP does reflect the influence of policies Environmental costs designed to affect social progress, economic growth, Costs of personal pollution control -ve environmental protection and prudent use of natural resources. In doing so, it allows us to present a Costs of air pollution -ve systematic assessment of domestic progress towards Costs of water pollution -ve sustainable development over a long period of time, and to compare this against GDP. Estimated costs of climate change -ve Costs of ozone depletion -ve natural resources Prudent use of Loss of natural habitats -ve Loss of farmlands -ve Depletion of finite natural resources -ve new economics foundation 3 Jonathan Street London SE11 5NH United Kingdom Design by cyandesign.co.uk Telephone: +44 (0)20 7820 6300 Design: bwa Facsimile: +44 (0)20 7820 6301 Registered charity number 1055254 E-mail: info@neweconomics.org © 2004 nef (the new economics foundation) Website: www.neweconomics.org

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