Media Clipping — November 2004, The New Zealand Herald

Number-crunchers can be guides to a better future

By Ronald Colman

New Zealand has gone much further than most other countries in trying to account fully and accurately for its real wealth as a nation. Its excellent social reports, municipal quality of life indicators and sustainable development measures recognise that New Zealand's assets go far beyond the economic resources generally measured to assess prosperity, and include its abundant natural wealth and the health and wellbeing of its people.

But have New Zealand's new social and environmental measures changed policy in fundamental ways? Have they pushed New Zealanders to consider the trade-offs between today's income and the wellbeing of future generations?

And are they helping to protect the environment, strengthen communities, improve health and security, reduce poverty and narrow socio-economic gaps between Maori and Pakeha? Can and should measures and indicators help to achieve such ambitious agendas?

The architects of the national income accounting used to measure economic growth warned more than 60 years ago that it should never be used the way it is today to assess the welfare and wellbeing of a nation; that if we want to assess our wellbeing, we have to look carefully at what is growing.

Who today looks at the fact that imprisonment is a "growth industry", with one of the fastest-growing segments of the United States economy?

Gambling is another big growth industry, a $50 billion-a-year business in the US; divorce adds $20 billion; car crashes another $57 billion. Prozac sales have quadrupled since 1990 to more than $4 billion. Are these signs of progress?

Overeating contributes to economic growth many times over, starting with the value of the excess food consumed and the advertising to sell it. The diet and weight-loss industries add another $32 billion a year to the US economy, and obesity-related health problems another $50 billion.

But 20 million people around the world, mostly children, die every year from hunger and malnutrition.

The pharmaceutical industry openly calls diabetes a "growth industry". The sicker we are, the better off we are financially. We end up valuing our sickness rather than our health.

To its great credit, New Zealand has recognized that to assess how it is doing it needs a broader, more comprehensive and more accurate set of measures that value its human, social, and natural wealth along with its economic assets.

New Zealand now carefully tracks the health and security of its population; its livelihood security and educational attainment; the strength, peacefulness and cohesiveness of communities; the quality of the country's environment and the health of its natural resources; and whether the gap between Maori and non-Maori is growing.

Yet in Canada, we have found that all this is not enough to change the direction of policy. The economic growth statistics, based as they are on a set of national accounts, still shape policy and dominate policy discussions.

No election is fought on whether greenhouse gases have risen or fallen since the Government was elected, whether rates of teenage smoking have gone up or down, whether the gap between rich and poor has grown or shrunk, and what the Government has done or failed to do to stem the epidemic of obesity that threatens the health of large segments of our population.

In Canada, we have come to the conclusion that three things are needed to ensure the new measures are used fully and properly to inform policy:

(1) The new indicators cannot simply be produced alongside existing growth measures, but must challenge the misuse of the gross domestic product (GDP) for that purpose. Economic growth statistics will always be needed to tell us whether the size of the economy is getting bigger but governments should stop using the growth statistics to assess the wellbeing and progress of the nation.

(2) To influence policy effectively, the new measures must be fully integrated into one coherent framework that will allow clear analysis of inter-generational trade-offs, and assessments of whether aspects of today's wellbeing are being bought at the expense of future generations. This differs markedly from New Zealand's practice of reporting wellbeing separately from sustainability. New Zealand also reports separately on quality of life in the country's eight largest cities.

(3) We must quickly move to a new set of national accounts. To stop counting the depletion of the country's natural and social capital as economic gain, we have to redefine the notion of capital to include human, social and natural assets, to value those assets accurately and to account properly for their depreciation.

A genuine progress index (GPI) we have developed in Nova Scotia builds this system of accounts on top of its measures of progress. It translates its findings into economic terms through a system of full-cost accounting that includes social and environmental benefits and costs.

Thus we not only report volunteer participation rates and hours, but we assess what it would cost to replace volunteer services in the market economy and to provide the same services for pay. We found that Nova Scotians contribute the equivalent of $1.9 billion worth of voluntary services a year, a value that is invisible in the conventional economic statistics, which register only market transactions.

We not only look at crime rates, but assess the economic costs of crime in Nova Scotia ($1.2 billion annually) and point out that, unlike the conventional growth statistics that register spending on police, prisons, lawyers, burglar alarms and security guards as economic gain, the GPI registers these expenditures as costs that could be avoided through lower crime rates.

We not only assess the health of our population, but calculate how much tax-payers would save if Nova Scotians had healthy weights, exercised regularly and did not smoke. That prompted the Nova Scotia Government to establish an Office of Health Promotion separate from the Health Ministry.

We also assessed the healthcare costs of poverty and educational inequality.

We reported not only on air pollution and greenhouse gas emissions but on their economic costs and damages. And we found that the province's new solid waste resource management system saves at least $31 million a year when a full range of benefits and costs is considered, in sharp contrast to the conventional accounting that assessed the new system as costing $25 million more than the old one.

We are convinced that the new measures can begin to enter the mainstream and to shape the policy agenda in ways that benefit the wellbeing of generations to come. The high quality of New Zealand's latest indicator reports has already succeeded in creating Government commitments to social goals and to concrete targets for achieving those goals. We look forward to the next step to create measures that will help to shape policies and hold governments accountable.

Indicators are powerful. More than ever the world needs measures that genuinely reflect what we value and that assess honestly our progress in leaving a decent world for our children.

Copyright © 2004, The New Zealand Herald

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