Seeking an alternative
Political leaders and policy makers generally attach extreme significance to GDP in their decision- making.
When economic growth statistics are reported on by statisticians and disseminated in the mainstream media, the positive real growth results tend to provoke an optimistic response, observed in upside trading patterns in financial markets and accelerated retail activity. The opposite scenario is equally true, and the ensuing instability and pro-cyclic effect create volatility which is hair-raising for the majority of working adults with retirement savings.
Central banks formulate their interest policy on growth expectations in GDP terms, as do credit ratings agencies when determining sovereign solvency. Politicians know that a negative GDP forecast may hurt them at the voting polls and therefore subordinate decisions that risk this outcome, even if the investment will have a long-term pay-off, including those relevant to climate breakdown. This is particularly relevant to future planning – by omitting the depreciation of natural capital associated with climate breakdown, as well as the depletion of extractive resources through industrial activity, GDP falsely implies that we are richer than we really are, and that we will continue to be rich into the future.
The environmental degradation and human under-development crisis has produced a number of challengers to GDP. These include the Human Development Index (HDI), Sustainable Economic Welfare (ISEW) and its later version the Genuine Progress Indicator (GPI), and the Happy Planet Index (HPI). All have all managed to complement GDP to varying degrees of success, but not replace it.
For every new index proposed, dozens of methodological oppositions arise in response. The contentions surrounding these alternatives capture the major challenges that arise in trying to develop a truly holistic measurement, simply because the concept of progress is profoundly complex. None has managed to beat GDP “at its own game”.
Specific difficulties aside, there is the overarching challenge of widespread acceptance and diffusion, without which the impact of a new measurement will remain limited. GDP’s very embeddedness is a source of its resilience. Stalemate.
The obstacles to a paradigm shift
A true paradigm shift, in Kuhn’s conception, is nothing short of a revolution, and it requires three things: (1) logical evidence that the current paradigm is wrong, (2) a community of supporters promoting the change, and (3) sufficient promise that the alternative paradigm is attainable and desirable.
The strength of a paradigm lies in its universality, providing the fundamental explanation for the world which allows scientists to experiment with the details and make new discoveries within the bounds of its truth. Part of the process of discrediting the prevailing paradigm is to make explicit its invisible assumptions and fundamental truths. This can be applied to our fixation with GDP growth.
(1) Making the case through evidence
The single-minded pursuit of economic growth has had a disastrous impact on both the environment and humanity, to the extent that the long-term future of both is threatened. Threatened by the assumption that money is really all that matters, the prevailing system can be said to be in “crisis” with the potential for revolution.
Instead, the major supranational entities responsible for global decision-making have responded by prioritising what they call “sustainable development”. In so doing, society has embraced the environmental and social challenges without really altering from a growth course. The solutions proposed by sustainable development are not revolution but rather a more responsible version of growth. The argument that economic growth can be “decoupled” from environmental and social damage, that the environment can be accounted for in monetary terms, and that the resources of the earth exist for human use, still places human economic interests front and centre. Nothing very fundamental is going on here.
Technology is regularly hailed as the flagship of sustainable development due to the improvements it can bring. It must however be acknowledged that we do not fully understand the impact of technology on society. Also, it would be disingenuous to view its capabilities in isolation from the humans who use it. The deeper point is that, so long as material and wealth accumulation are valued as the signifiers of success, resource depletion and inequality will not be averted by technological intervention. The economies of scale afforded by digital production will just make us more efficient at producing the stuff we desire.
Therefore, while the logical strength of the evidence to discredit the prevailing paradigm is acknowledged, the mainstream discourse of sustainable development has successfully expanded to include it. Attaching “responsible” or “inclusive” to “growth” is a welcome improvement, but it is not the deep sort of change that brings about shifts at the paradigmatic level.
(2) Power of the people
The community calling for the amendment or replacement of GDP has grown substantially in recent decades and, since the global financial crisis, with greater vehemence. However, far from presenting a coherent alternative, this community is characterised by fragmented efforts in multiple directions with few sharing the same interpretation of core ideas.
Ecologists have a limited understanding of institutional power and social change, while social scientists lack an appreciation of the ecological context of social skills. Silos in academia, business and other institutions also do not assist with presenting a “united front”.
The general population is the largest and arguably the most powerful community of followers of the growth paradigm. The invisible conflation of success and wealth has a profound influence on virtually all spheres of life including employment choices, voting patterns and interpersonal relationships. The picture of what a good life looks like – one defined by wealth and its associated social status – is reinforced ad infinitum through mainstream advertising and entertainment media. This is despite the fact that research into human happiness has added empirical weight to the notion that consumption for consumption’s sake brings with it certain dissatisfaction.