More than economic growth

How do we think about ‘progress’ today, and how do we measure it?

For the best part of the 20th century, it has been widely assumed that progress was synonymous with economic growth; and Gross Domestic Product (GDP) became the dominant  way in which the world measured and understood progress.

As the OECD said recently, ‘the world today recognises that it isn't quite as simple as that. This approach has failed to explain many of the factors that impact most on people’s lives’.

In recent years, financial instability, increasing inequality, the erosion of supportive community structures and the declining state of our natural environment have given rise to a growing sense of unease about our future as individuals, and as a nation. In a recent national survey almost two-thirds of us felt that ‘the future we pass on to our children and grandchildren  will not be better than that handed to us’. We are beginning to understand that real progress is much more than economic growth and that beyond a reasonable level of material comfort, wellbeing improvements are negligible.

GDP was never designed to measure the overall progress and wellbeing of the nation. It is the sum total of the goods and services bought and sold in our economy. Certainly, it is an  important statistic in its own right for reasons such as national economic planning. But as a measure of the overall progress and wellbeing of the nation, it is not just inadequate but  misleading.

GDP doesn’t distinguish between those things that add to our wellbeing, and those that diminish it. It doesn’t account for the depletion of our natural resources and treats spending on crime, divorce, and massive oil spills as economic gains. It fails to take into account many of the activities that we value - like volunteer, leisure and family time. It counts the total income produced but ignores inequalities in its distribution.

In sum, GDP measures the quantity of our national economic production and not the quality of our society, our lives or our environment. It fails to capture the full story of what is happening in our society and diverts the focus of governments and communities away from other important aspects of wellbeing and from the social and environmental costs that  economic activitybrings with it.

It is clear we need a new model of progress for Australia, a new way to measure it and a new way to engage citizens in this process.

“Part of the objective of rethinking our measurement systems is to generate a national and global dialogue on what we care about, whether what we are striving for is achieving what we care about, and whether that is reflected in our metrics”.

From Measuring Production to Measuring Wellbeing, Joseph E Stiglitz, Presentation to the Productivity Commission, Melbourne, 29 July 2010

What’s in a name?

ANDI has been the working name for the index through its formative stages. However, the validity and marketability of the name will be further tested in 2011. The final name will reflect the aim to engage Australians in an ongoing debate about progress in Australia.