Guest Article #12

Beyond GDP: Measuring the Future We Want

Nobel Laureate Joseph Stiglitz has argued that, “what we measure affects what we do. If we use the wrong measures we will strive for the wrong things.” The world is struggling to achieve sustainable development, and appropriate measures of progress are urgently needed. Gross Domestic Product (GDP), which became the dominant measure of countries' progress, was recognized from the outset by its chief architect, Simon Kuznets, as an insufficient measure of the welfare of a nation and the well being of its citizens.

Despite its serious limitations as a proxy for assessing human progress, GDP has been used, among other things, as the basis for classifying countries and channeling official development assistance.

Equity, dignity, happiness, sustainability – these are all fundamental to our well being, but absent in the GDP measure. Progress needs to be defined and measured in a way that accounts for a broader picture of human development and its context.

The late Senator Robert Kennedy provided a rationale for why this is appropriate when he wrote: “[GDP] counts air pollution and cigarette advertising… the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl… Yet it does not allow for the health of our children [or] the quality of their education. It measures neither our wit nor our courage; our wisdom nor our learning; it measures everything, in short, except that which makes life worthwhile.”

The first global Human Development Report (HDR) launched by UNDP in 1990 defined human development as the process of enlarging people's freedoms, choices, and capabilities to lead lives they value. This paradigm shift led to the development of the Human Development Index (HDI), which since its inception has incorporated health and education components alongside GDP per capita to measure development.

UNDP is not alone in looking for alternative measures. Some other recent examples are the Kingdom of Bhutan's Gross National Happiness Index, the United Kingdom's “Happiness Index," and the Sen-Stiglitz-Fitoussi Commission's attempts to measure economic performance and social progress alongside GDP to create a more holistic measure of well being.

On environmental sustainability, green national accounting adjusts GDP to take into account the environmental costs of economic activity.

The Ecological Footprint of the Global Footprint Network looks at the natural resources required to maintain current consumption patterns. Its key message is that patterns of consumption and production are unsustainable at the global level and imbalanced regionally.

The Environmental Performance Index, developed by Yale and Columbia universities, ranks countries on 22 performance indicators spanning 10 categories, tracking environmental health and ecosystem vitality.

The New Economics Foundation's Happy Planet Index captures the degree to which people are able to live long and happy lives, per unit of environmental impact. It uses life expectancy data from UNDP's Human Development Reports, well being data from the Gallup World Poll, and ecological footprint data to rank countries according to their ability to promote human well being while ensuring that their environmental impact is minimized.

UNDP believes that the Human Development Index could also be a starting point for a more comprehensive measure of sustainable development. Over the past two decades, it has become a mainstream tool, used by governments, civil society, and researchers. Recent global HDRs have added new indices in an endeavor to capture nuances of human development better and reflect inequities.

UNDP has begun exploring how to adjust the HDI to capture more dimensions of sustainable development, asking a series of questions:

• What should be measured, and what indicators could be used which would be relevant to policy makers and internationally comparable?

• What are the overriding principles, such as equity and human rights, which could help guide this work?

• What do policy makers need to know in order to craft sustainable development pathways, and could a new measure help provide such information to complement traditional measures such as GDP?

The High-level Panel on Global Sustainability (GSP) appointed by the UN Secretary-General recommended that “the international community should measure development beyond GDP and develop a new sustainable development index or set of indicators.”

UNDP will be an active contributor to the debate about how this can be done.

Helen Clark is the Administrator of the United Nations Development Programme and the former Prime Minister of New Zealand.