Stiglitz - It's Time to Ditch GDP

Justin Trudeau, Bill Morneau and every other perpetual-exponential-growther, or PEG'er, are joined at the hip to GDP, gross domestic product. They are GDP's high priests. It is, to them, the ultimate measure of success or failure, how they justify most of their increasingly bad decisions. That puts them with the dinosaurs which, oddly enough, happens to be where we might all wind up if we don't change course.

Joe Stiglitz is a fascinating character. He did his doctorate on the perils of inequality. He rose to be chief economist at the World Bank. He was awarded the Nobel Prize in economics. He's campaigned against rising inequality most of his life.

Joe believes it's time for clear-headed leaders to 'retire' metrics such as GDP.

So what if GDP goes up, if most citizens are worse off? In the first three years of the so-called recovery from the financial crisis, about 91% of the gains went to the top 1%. No wonder that many people doubted the claims of politicians who were then saying the economy was well on the way to a robust recovery.

...If our economy seems to be growing but that growth is not sustainable because we are destroying the environment and using up scarce natural resources, our statistics should warn us. But because GDP didn’t include resource depletion and environmental degradation, we typically get an excessively rosy picture.

These concerns have now been brought to the fore with the climate crisis. It has been three decades since the threat of climate change was first widely recognized, and matters have grown worse faster than initially expected. There have been more extreme events, greater melting of glaciers and greater natural habitat destruction.

It is clear that something is fundamentally wrong with the way we assess economic performance and social progress. Even worse, our metrics frequently give the misleading impression that there is a trade-off between the two; that, for instance, changes that enhance people’s economic security, whether through improved pensions or a better welfare state, come at the expense of national economic performance. 

Getting the measure right – or at least a lot better – is crucially important, especially in our metrics- and performance-oriented society. If we measure the wrong thing, we will do the wrong thing. If our measures tell us everything is fine when it really isn’t, we will be complacent.

And it should be clear that, in spite of the increases in GDP, in spite of the 2008 crisis being well behind us, everything is not fine. We see this in the political discontent rippling through so many advanced countries; we see it in the widespread support of demagogues, whose successes depend on exploiting economic discontent; and we see it in the environment around us, where fires rage and floods and droughts occur at ever-increasing intervals.

Stiglitz argues for new metrics that are relevant to the climate change epoch. The post-war era is over and our politicians need to accept that. They must stop governing as though we were still in the 80s because we're not. That era is gone and it's not coming back.

It may not feel like it but we're in a fight for survival. The stakes couldn't be higher. Global warming and severe weather events of increasing frequency, intensity and duration; ocean acidification and deep ocean heating; species extinction and migration; the proliferation and spread of infectious diseases; overpopulation; resource depletion and exhaustion; desertification; deforestation; the decline by more than half in global populations of both terrestrial and marine life; degradation of arable farmland; the rise of autocracy displacing liberal democracy; inequality and austerity dissolving the bonds of social cohesion; social unrest and upheaval; nuclear proliferation and terrorism. Growing the GDP answers none of these things. Carrying on as though we're still in the 80s only deepens our vulnerabilities.

We've got to stop focusing on quantity and, instead, address quality. That means addressing inequality, in all its permutations. That means coming to grips with automation, robotics, artificial intelligence, income and wealth redistribution.  It means recognizing that our present isn't a continuation of the past so much as the onset of a very different future for which we'll pay dearly if we don't get it right. Change is coming. Change is happening. It's up to us to decide if that change will be on our terms.