Adopting alternative indicators to GDP

Argumentation and justification

GDP growth ¹In Europe and France, growth in GDP, which is equated with growth in a country’s wealth, is the alpha and omega when it comes to judging the success of an economic policy. However, numerous critical studies have shown just how irrelevant this indicator is for determining the health of an economy. GDP is not a good indicator of social health; it in no way reflects an economy’s dependence on natural resources. ² and does not take into account the ecological damage caused by economic activity. It is therefore clearly inadequate for steering a nation.

The problem lies not so much in the availability of alternative indicators, as demonstrated by the many indicators used to assess the Sustainable Development Goals (see box at the end of this article), as in their use.

The French example is quite emblematic in this respect. Passed in 2015, the SAS law requires the government to submit an annual report to Parliament presenting the evolution of new wealth indicators, as well as an assessment of the impact of the main reforms undertaken with regard to these indicators. Following this law, work was undertaken to identify 10 wealth indicators ³.

Unfortunately, this law has had no political impact: the annual reports are published ⁴ but they do not serve to enlighten and evaluate public policies, starting with the mobilization of public finances. This is what economist Eloi Laurent notes in a note that looks at the implementation of the SAS law. ” The French budget debate is currently governed by the GDP growth target, which is itself a determining factor in the application of and compliance with European public finance rules (calculated as a percentage of GDP). Apart from the breakdown of GDP and a few macroeconomic indicators relating to the labor market, the information provided to national representatives when it comes to allocating public spending and charges is far from sufficient to grasp the social state of the country and its challenges for the future, particularly in terms of the environment. . ” ⁵ This is a far cry from New Zealand’s wellbeing budget.

The same is true of the European Union. GDP remains at the heart of European economic coordination, whether through the growth objective or the budgetary indicators limiting States’ room for manoeuvre (debt and deficit measured as a percentage of GDP). Social and ecological transition objectives are at best secondary, if not totally absent from the process.

Finally, three prerequisites seem fundamental if alternative indicators to GDP are to become truly structuring for public policy.

• The process of selecting indicators must be transparent and open to wide public debate.
• The number of indicators must be limited: the 231 indicators adopted by the UN to assess the Sustainable Development Goals are useful for providing data, but far too numerous to counterbalance the impact of GDP in terms of narrative.
• Last but not least, indicators must be genuinely used to guide economic policies, starting with the mobilization of public funds.

How this relates to global issues

This reform would make ecological and social objectives much more decisive in shaping public economic policy.

Origins and support for the measure

Alternative indicators to GDP have long been promoted by critical economists, researchers, think tanks and public initiatives. Here are just a few of them, without claiming to be exhaustive.

For example: Dominique Méda, Florence Jany-Catrice ⁶Jean Gadrey ⁷Eloi Laurent ⁸Tim Jackson ⁹Joseph Stilgitz ¹⁰Amartya Sen ¹¹ etc.

In particular, the Well-being Alliance (WeALL) highlights and supports initiatives on alternative indicators to GDP.

Since 2016, the Sustainable Development Solutions Network (SDSN), a think tank attached to the United Nations committee in charge of the Sustainable Development Goals, has published the Sustainable Development Report, a study that uses a synthetic index (the SDG index) to assess where each country stands in terms of achieving the Sustainable Development Goals.

Global Footprint Network, an international NGO founded in 2003, produces and disseminates research on the synthetic ecological footprint indicator.

France’s Insee is working on possible in-depth changes to the way GDP is calculated. ¹².

As part of its Better Life Initiative, launched in 2011, the OECD publishes an annual report on well-being, examined in a wide variety of dimensions, with a country-by-country review, and offers the Better Life Index, whose weightings between the various criteria are set by the user. In 2019, the OECD has also organized a conference entitled ” Putting Well-being Metrics into Policy Action “, which highlights concrete public initiatives.

In the early 2010s, the European Commission produced a communication and an action plan as part of the Beyond GDP initiative. Today, however, the process seems to have stalled.

Legal and political feasibility)

The measure involves no legal or technical difficulties.

Politically, it assumes that an elected government understands its significance and brings it to life.

Other resources on The Other Economy

To better understand this measure, we recommend the following readings

In the modules

• the module on the economy, natural resources and pollution, in particular the first part (Essentials 1 to 5), which deals with the ecological crisis; Essential 8 on the blindness of our accounting tools; and Received Idea 3 on the possibility of infinite growth.
• GDP, growth and planetary limits module

In the articles

• Cod in Newfoundland and Lofoten, two stories against the tide: to understand why GDP is not an indicator for preventing economic disaster through resource depletion.
• Nauru’s island tragedy

In Resources, you will find numerous resources on GDP critiques and alternative indicators by clicking on the ‘indicators’ filter in the themes section.