How and why we are moving beyond GDP as a measure of human progress
How we track our economy influences everything from government spending and taxes to home lending and business investment. In our series The Way We Measure, we're taking a close look at economic indicators to better understand what's going on.
Ever since 1944, Gross Domestic Product (GDP) has been a primary measure of economic growth. It's in the news regularly and, even though few can define what it means, there is general acceptance that when GDP is growing, things are good.
There are problems with this simplistic formulation.
GDP measures production only. It does not capture collapsing fish stocks, increasing obesity and diabetes, or new types of synthetic drugs. When people choose to work part-time to have a better work-life balance, GDP actually goes down.
This narrow focus distorts our perception of progress. It guides our representatives to focus only on certain things - what is measured - and allows them to ignore what isn't quantified and regularly reported.
But a new set of measures is slowly being established, which aims to capture a wider range of human experiences and reset our idea of "success". Called the UN Sustainable Development Goals (SDGs), these aim to include all the main pillars of a progressive society, from physical safety through to economic opportunity and good health.
SDGs will force action by highlighting what is currently covered up by the narrow measures of how our economy and society are faring.
A new way of framing progress
The SDGs arose out of the expiration of the Millennium Development Goals in 2015 (which focused primarily on poverty reduction). Out of a growing awareness of the ecological limits of the planet, and a desire to ensure that progress is fair and accessible to all people, attempts were made at creating a comprehensive set of national goals for all nations.
Although the goals are non-binding, they have received unprecedented support. They were ratified by all member states of the UN General Assembly in 2015 and endorsed by international leaders such as Pope Francis and Bill and Melinda Gates.
The SDGs are accompanied by significant international diplomatic pressure. Each country is expected to commit resources and to gather and share data on progress towards each goal.
For decades, countries and international agencies, such as the World Health Organisation, World Bank, United Nations Development Program and UNHCR, have collected and shared data on various aspects of life. A mass of data has accumulated but never been organised into a framework that can be used as a national scorecard.
This leaves a substantial gap between the detailed data we have on the actual lives led by people around the world, and the indicator national governments use to measure progress.
Measurement leads to action
The focus on GDP leads to mantras such as "jobs and growth" with an urgency that implies that there is not the time nor the resources to make economic growth fair or sustainable. Further, short election cycles make quick-grab economic gains more attractive than putting in place long-term plans for a more sustainable and fairer future.
Once there are set targets for goals like renewable energy we should expect that these issues will attract more attention from politicians. Once established and regularly reported, measures for targets like renewable energy and accessible green spaces in cities will create incentives for politicians to act. If they don't, the public will have relevant information to track progress.
The SDGs are an important step to quantify and force progress.
We're under way
Institutions with longer time horizons - universities, NGOs, statisticians and think tanks etc - are already on board. SDGs are now on the agenda of conferences across sectors of society from the National Farmers Federation through to the Australian Bureau of Statistics and the Department of Foreign Affairs and Trade. They touch all sectors and every institution has a place within one of the goals.
With the goals and targets in place, work is being undertaken across institutional stakeholders to develop policy tools and frameworks. This strengthens the opportunity for evidence-based policy that relies on past data, present benchmarking and quality evaluation. SDG networks and associations, such as SDSN Australia/Pacific, have been formed to foster the development of the actual metrics.
SDGs will filter out to the public one headline and press release at a time. Expect to see headlines like "Norway, number 1 in education, what are they doing and what can we learn from it?". Unlike our current metrics, the SDGs will be a common set of goals and measures able to track progress and provide real baselines and comparisons of what matters most.