The Genuine Progress Index - At Last!

November 23, 2008

Here's a choice for you.

Suppose I offered you an opportunity to double your income, while your expenses went up only by 80%. In your new situation, however, you would have no access to the voluntary services provided by charities and service clubs, or by friends and family. Divorce would be three times more common. The quality of your air and water would be worse. The crime rate and the addiction rate would be far higher, while access to recreational and cultural services would be much lower.

Would you be better off?

Almost every economist and every government agency on the planet would say Yes -- you're earning more and spending more, and that makes you richer. I would say No -- what you've lost in health, security and informal social support is worth far more than your modest financial gain. And that's the difference between the Gross Domestic Product (GDP) and the Genuine Progress Index (GPI).

As the Faithful Reader knows, the GDP simply measures the dollar value of the goods and services exchanged in an economy. Bad things -- like crime, pollution and divorce -- make it rise, while a clean environment and unpaid services literally don't count.

For the last dozen years, a little research organization called GPI Atlantic, based in St. Margaret's Bay, has been developing a Genuine Progress Index for Nova Scotia. (Disclosure: I've occasionally done some writing for GPI.) The GPI assigns positive value to things like “natural capital” -- a healthy environment, for example -- and to unpaid work like housework and volunteer community service. Conversely, the GPI deducts the cost of undesirable things like crime, illness and pollution.

Last month, GPI Atlantic released its completed accounts, a summary of key indicators in 20 social, economic, and environmental areas. We are now among the very few jurisdictions in the world which actually know whether or not they're moving in a desirable direction.

The good news is that, measured correctly, Nova Scotia is a wealthy province. We have a strong civil society, high rates of volunteerism, robust family relationships, high levels of home ownership, and relatively low levels of household debt, for example. The wealth that is normally uncounted makes Nova Scotia a good place to live. That's why many tradespeople commute to Alberta rather than migrating there.

The bad news is that as our GDP rises, our real wealth often erodes. Over the past decade, for instance, Nova Scotia women have achieved more equitable pay rates, but they're working longer hours and women do most of our volunteer work. The resulting decline in volunteerism between 1998 and 2005 “cost the province $370 million in lost voluntary services in 2005,” says GPI, “and will cost a similar amount every year that the shortfall persists.”

The decline particularly affects vulnerable groups like the elderly, the young, the disabled and the homeless. It will also harm arts and culture, after-school activities, environmental groups and churches. The result will be higher rates of crime, drug abuse and the like -- which will be reflected in rising social and economic costs. The problems will be compounded by the incipient recession, since GPI Atlantic's studies have shown that the loss of jobs and income during economic downturns also increases social unrest, illnesses and crime, especially robbery.

To avoid those ill-effects, says GPI's Executive Director, Ron Colman, Nova Scotia should “reduce and redistribute working hours rather than laying people off.” It should also upgrade its infrastructure, and “build a more resilient and self-reliant local economy.” Yes, those actions will cost money -- but inaction will cost us even more.

The same is true with environmental issues. Nova Scotia's pioneering solid-waste program once seemed unaffordable -- but it actually created jobs and businesses, and now saves Nova Scotia at least$32 million annually. By the same token, meeting the greenhouse gas reduction targets in the province's ambitious Environmental Goals and Sustainable Prosperity Act will ultimately save us more than $800 million.

If you don't know where you're going, said Yogi Berra, you'll probably end up somewhere else. The Genuine Progress Index tells us where we're going -- and how fast we're getting there. It's a compass pointing towards a satisfying and sustainable future. Getting there is up to us.

-- 30 --