GDP’s narrow snapshot of success

Episode 6 of the EarthRights Podcast dealt with the juxtaposing socio-economic and cultural makeups of the ‘Western’, Northern Atlantic world, and the developing world – in particular Latin America.

Much attention was paid to the convoluted global financial system and its treatment of the developing world. Detrimental impacts of the system can be traced back to the end of WWII; the Bretton Woods Conference in 1945 hosted 44 nations, which met to agree the rules for the international monetary system after the war, paving the way for a capitalist boom.

Controversially, the conference established the IMF and World Bank. These two institutions keep international finance in balance and determine the values of the various currencies around the world. The problem with this was that Latin American, and other developing nations, were excluded from the critical discussions determining how the system should function.

The future of developing nations was thus to be decided for them. Indeed, the World Bank has worked with developing nations to offer help alleviating them from shattering debt, including Ecuador. ‘Help’ refers to privatising industries, opening up economies to the international system and thus enabling them to ‘increase GDP’ – as though it were that simple…

Robert Kennedy during his 1968 presidential race had traditional economic measures in his sights. He took umbrage that Gross Domestic Product (GDP) “measures everything except that which makes life worthwhile and it can tell everything about America except why we are proud as Americans.”

More than 50 years later this complaint carries even more relevance. Whilst Kennedy was lamenting the exclusion of intangible, cultural assets such as art and literature from the measures of economic success, the dials have shifted, and campaign groups are now calling for the inclusion of Nature into economic measures.

So much damage has been caused to the natural world by the dominance of humans, that we are now living in the anthropocene – a geological age moulded by human activity.

In order to induce companies and individuals to make decisions that consider their environmental impact, a revolutionary attitude reversal needs to take place. The Milton Friedman Doctrine establishes that when the goal of a company is to maximise returns, it does not encourage responsible enterprise amongst shareholders. Therefore, the attitude shift must come from the top and governments need to prioritise other economic metrics before the traditional ones.

Covid-19 has spurred governments across the world to rely on new measures to demonstrate their successes and give context. When setting interest rates and economic policies over the past, Westminster and the Bank of England have given primacy to figures such as the number of daily vaccinations, hospitalisations, and the mysterious ‘R’ number.

This has shown us – ignoring the macabre backdrop – that other measures can be used to demonstrate a country’s economic, health and emotional outlook and direction.

Moving on from Covid-19, the biggest threat to human life is the effects of anthropogenic climate change. To surmount this challenge will require a herculean effort across the Board.

Joe Biden’s pledge for the US to have a net-zero carbon emission target by 2050 in fact means more than 80% of the global economy will have such a target. Some may argue that 2050 may be too late, but regardless, to do so will come at great cost.

It will necessitate the clawing-back or, at the very least, redrawing global supply chains, the total reconfiguration of the world’s energy mix, and a transportation revolution. This will incur a short-term, dramatic hit to the beloved GDP. Should GDP continue to hold primacy over other determinants of success, then net-zero pledges will soon become unpalatable to governments, and voters.

GDP thus provides only a snapshot, a still image in time, and fails to show the impact of unbridled growth on a country’s fortunes throughout history. We are therefore in need of a measure that can communicate the impact of economic policy on the environment, people as well as the wider impacts further down the line.

A new critical approach to economic growth and how it is measured is needed.

Latin America is an important incubator of new approaches. Buen Vivir (the ‘good’ life) is a new concept of conceptualising success and fulfillment. Buen Vivir is firmly rooted in indigenous cosmologies and philosophies such as sumak kawsay of the Kichwa of the northwestern Amazon. These beliefs attach intrinsic value to nature, reject the western idea of development, and promote the peaceful coexistence of humans within its enlarged community, that is, alongside and NOT superior to nature.

Buen Vivir can be understood not as a prescription of measures but instead a reaction and outright critique of the established model of economic subjugation of the global south by wealthy northern Atlantic economies. This subjugation is based on the non-reciprocal extraction of resources from Latin America over hundreds of years to enrich the developed economies of North America and Europe.

The result has been increasing geographic inequalities and transactional relationships whereby environmental damage is inflicted on delicate ecosystems and cultures in Latin America to supply the factories and refineries of the West.

And so, Eduardo Gudynas, a leading scholar on the degrowth movement says that Buen Vivir ensures “people’s quality of life, in a broad sense that goes beyond material wellbeing and the individual, as well as beyond anthropocentrism, to include nature”. A new economic system that tears down the separation between mankind and nature, and values nature as the source of all life, in fact affords  humans a fulfilling, and more important, a sustainable future.

It is perfectly adequate to recognise that there is an issue with our current understanding of economic success, but what should be done instead?

We have seen interesting experiments across the world to find alternatives, including with the introduction of the Rights of Nature as a legislative device in Ecuador, but this, so far has been limited. When implementing this legal concept, there has been a large gap between rhetoric and reality. A more radical overhaul is needed, one which does not just recognise the Rights of Nature, but a legal structure that prioritises the health of the planet before anything else.

And afterall economics does matter; a fall in GDP does signify an impact on the lives and therefore wellbeing of individuals…

GDP is not a bad measure – it is an imperfect one. 

Our utilization of GDP is reflective of society’s tendency to prioritise the short term over the long term. Hopefully the Davos Agenda will provide the much needed start for system-change at the global and inter-governmental level.

With the shadow of the effects of climate change looming large, it is increasingly important for us to reconsider our responsibility not only to ourselves, but also our responsibility to our enlarged community.