WHAT'S HOT?GPI
THE GENUINE PROGRESS INDEX (GPI)

  1. GPI Atlantic is a non-profit research group which is currently constructing a Genuine (GPI) for Nova Scotia - integrating social and environmental factors into our economic accounts:
    1. What's wrong with our current measure of progress, the GDP
    2. What is the GPI - A measure of progress that integrates social, environmental and economic factors?
     
  2. GPI press releases and major background papers on the GPI
     
  3. MAI Mathematics - Is there an Alternative? A paper delivered by Dr. Ronald Colman, Director of the GPI Atlantic Project in Nova Scotia, at the MAI Inquiry held in Halifax, Nova Scotia, November 28 1998. [In this paper Dr. Ron Colman shows GDP/MAI type economic equations as a kind of Math that misleads policy makers and elevates materialism to the primary social ethic]

 
MAI MATHEMATICS: IS THERE AN ALTERNATIVE?
  Ronald Colman, Ph.D., Director, GPI Atlantic

Why is the MAI so important to some? We must begin by acknowledging that according to a certain kind of mathematics it is very attractive. It can be shown to increase production, to expand trade, to lower production costs, and to keep inflation low.

It is the same mathematics that measures economic strength and social well-being according to GDP growth rates, and that focuses tremendous attention on related market statistics like interest rate changes, currency exchange value fluctuations, and gains and losses on the Toronto Stock Exchange.

It is the same mathematics where the numbers go up the more fish and timber are sent to market, that counts the depletion of natural resources as economic gain.

It is the same mathematics where the numbers go up the more crime, the more toxic spills, the more divorce, the more gambling, the more car accidents there are, because all these generate economic activity which adds to growth. It is a mathematics that makes no distinctions between economic activities that contribute to or detract from welfare.

It is the same mathematics that ignores growing inequality, the value of unpaid work - including voluntary work, household production and child-rearing, overwhelmingly performed by women throughout the world, and the value of leisure time. All are omitted from the equation in GDP / MAI mathematics.

It is the same mathematics that 20 years ago hailed GDP growth rates in Brazil as an "economic miracle," while half the country got poorer, and infant mortality rates sky-rocketed.

And it is the same mathematics that today holds Chile up as a model for the developing world, because its economy is growing and it is paying back its loans to the IMF, while its forests are being cut down, its fish stocks depleted, its rural population sprayed with toxins long banned in Canada, and its inequality growing.

Interestingly, if you or I used this kind of mathematics on our income tax forms, Revenue Canada alarm bells would sound and we would be hauled in for interrogation. Imagine a factory owner counting the sale of his machinery and capital equipment as profit, the way our national accounts count the sale of our natural capital assets as economic gain!

Yet that is the mathematics, selectively counting, measuring and valuing only the quantity of market production, that justifies the MAI, because it increases production at low cost. It is a mathematics that makes no distinction: whether foreign investment protects or destroys the resources of the host country; whether investment is in clinics or casinos, in schools or gun-running; whether investors use child-labour or sweatshops or adhere to safety standards or poison their workers by violating environmental regulations; whether the investment feeds people or undermines the food security of the host country by converting self-sufficient farms to cotton plantations or shrimp farms or sugar and cocoa plantations for consumption at western dinner tables; whether security, equity and environmental quality are enhanced or diminished.

It is a mathematics, in short, that omits long-terms costs and benefits completely from the equation. It is a mathematics, unfortunately, that is still taught in our classrooms, and that is the foundation of every Economics 101 text. It is a mathematics that misleads policy makers, rewards environmental destruction, elevates materialism to the primary social ethic, and, for the first time since the Industrial Revolution, makes it highly likely that the next generation will be worse off than the present one.

There is a Better Way of Counting

Here in Nova Scotia we are engaged in a modest project to count some of the important factors omitted from GDP / MAI mathematics, and to include them in the equation.

GPI Atlantic is a non-profit research group that is currently constructing an index of sustainable development for Nova Scotia, a Genuine Progress Index, that measures the value of our natural resources, of unpaid work, of equity, of human and social capital, in addition to market statistics. And it subtracts rather than adds the costs of crime, toxic pollution and other activities that detract from well-being.

By integrating social, economic and environmental variables into a comprehensive set of accounts, it becomes possible to find out whether welfare is actually being enhanced or diminished by current economic policy. It can send more accurate signals to policy makers and help them identify measures that can contribute to genuine progress, well-being and prosperity. It can let citizens know how we are really doing as a society, and how we can live sustainably so that future generations will not be worse off because of our actions. Counting some of those missing numbers can actually change the policy agenda. If our natural resources have no value in our accounting system, we will not give policy priority to supporting sustainable timber harvesting. While we measure the quantity of market production but not investments in human and social capital, we will continue to give tax breaks to business, and view education and health as costs that need to be cut. Our current system of selective mathematics actually determines what makes into the policy arena.

If I tell a class of students that they should devote great effort to their research paper, that they will learn a lot from it, that it will hone their research skills, that it is the most important part of the course, and that it is worth 5% of the final grade, then the students may be forgiven for putting all their effort into the exam instead. What we count signifies what we actually value far more potently than what we say.

No one today argues publicly for a degraded environment, for greater inequality, for more crime or less job security. But we can talk ourselves blue in the face and profess adherence to all the right principles. Until we officially count and measure them in our core accounts, they will not be seen as having real value, and they will never make it to the top of the policy agenda.

The time is more than ripe to change our accounting system and to adopt a more genuine and comprehensive measure of progress. And there is probably no region in the country that is more fertile ground for this change than the Atlantic provinces, for three basic reasons:

  • No one in this region needs convincing that counting natural resource depletion as growth can be economically disastrous. Maybe in British Columbia enough people still believe that resources are forever. But here we have actually seen the loss of a resource come full circle back into the economy as a catastrophic cost. Through TAGS, through 40,000 unemployed fishermen, we are now actually paying the price in hard cash for failing to value our fisheries as a capital asset.

    What policy-maker, of whatever political stripe, would not welcome an early warning system that allows a timely, graduated response to a depreciating asset before we are faced with another crisis? The question is not theoretical. A year ago, the National Round Table on Environment and Economy warned that our Maritime wood lots could be on the verge of a collapse, analogous to the period preceding the collapse of the cod fishery.
     

  • Secondly, there is no illusion here that conventional economic mathematics has ever really worked for this region, at least in the last 100 years. There is perhaps a greater openness here to an alternative system that values our true assets than in a region like Upper Canada that is more firmly yoked to the TSE, the Bank of Canada, to company headquarters and to the other institutions of blind growth.
     
  • Thirdly, for some reason, the materialist juggernaut has not irrevocably paved this region over, at least not yet. Community values are still remarkably strong. There is still a gentleness, straightforwardness, generosity, and willingness to help our neighbours that has not yet succumbed to greed and egoism. Visitors feel it. Locals who leave for greener economic pastures often return after some years, drawn back by a mysterious magnet that has more to do with quality of life than quantity of possessions.

    But we are not immune. Small community schools are being replaced by massive private-public partnered crowd control enclosures. From a fraction of the national average 30 years ago, crime rates are rising fast to meet national standards. Government-supported gambling is eroding the social fabric. Free trade brings Walmarts to replace small local stores. And yet, we still have a narrow window of opportunity. It is still possible here, I am convinced, to garner overwhelming public support for an index of genuine progress that reminds people of their true values.

Cutting Through MAI Math

This local project can, I think, contribute to the MAI debate, because even a small move towards fuller cost accounting, that begins to consider social and environmental variables in the equation, can demonstrate how spurious MAI math really is. For example, the math of globalization shows that transporting goods over vast distances can keep prices lower than producing those goods at home. Sobey's can sell a California lettuce for less than it costs a local farmer to grow one.

But what is missing at the checkout register? That price excludes energy subsidies, the true costs of transportation, the cost of greenhouse gas and other emissions from refrigerated trucks and warehouses, soil erosion from monoculture growing methods, the health effects of pesticide residues, the loss of local jobs, the loss of potential local inputs into production.

When all that has no value, when it is not counted at the checkout register, then the California lettuce looks very attractive. It appears cheap to the consumer, profitable to the producer, and it creates enough intermediate economic activity to keep the growth figures climbing. Sadly, all the hidden and forgotten costs will be paid, many of them by the next generation.

Cynics might say that people will always go for the lowest price, the greatest personal convenience, the best bargain. That is the MAI logo. But I don't think so. I am convinced that if Nova Scotians know all the numbers in the equation, and not just a selective few, they will naturally incline to wise choices.

We recently spent $112 million on the 45-kilometre Cobequid by-pass on Highway 104. That $112 million could have closed the poverty gap for 25,000 of the 46,000 Nova Scotia children who live in poverty. Would Nova Scotian motorists be willing to drive a few kilometres an hour slower on the old road or take a few extra minutes on their journey to help eliminate child poverty in the province? If they knew those few extra numbers, currently invisible, I'm convinced the answer would be a resounding "Yes."

Not only that, eradicating child poverty would be a good economic investment for the province. Numerous studies show that child poverty is directly correlated with poor health, premature death, and poor educational attainment, which translate directly into higher social costs and poor workplace productivity down the road, and which come back to the economy as costs as surely as the depletion of the fishery.

This is not rocket science. It is street-sense economics. Ordinary Nova Scotians can understand it, and respond with wisdom and compassion.

I may be hopelessly nave. But I do believe that even those most firmly convinced of the value of MAI-type agreements would see the equation differently if just a few extra numbers were added to the accounts.

I recently read an interview with the Chief Executive Office of Philip Morris, who earns a tidy $4 million a year. Using the selective MAI / GDP type mathematics that is confirmed by all we're taught and read in the press, that man looks "rich." His apparent wealth is envied and emulated, he may receive honorary degrees from universities he supports, or may head the local United Way, like the President of Imperial Tobacco in Montreal. Not only rich, but a respected citizen! Even if we discount the social costs of what he produces and sells - (Personally I can't do that, because I feel a pain in my heart every morning when I see the 13 and 14-year-old schoolgirls puffing away on the street corner as they wait for the school bus, or when I read that the number of teenagers who smoke regularly has tripled in recent years) - but even if we can't expect the Philip Morris CEO to count these costs, there are others he can not so easily ignore.

In the interview he reveals that he arrives at the office at 6am every morning, and leaves at 10pm. He works weekends. "What else do you do, aside from work?" asks the interviewer. "Sleep," he replies. An impoverished lifestyle, methinks. No time to listen to music, to read a book, to play with children, to walk in the woods. (And how easy it must be to cut down a forest when there is no time to enjoy the trees and trails.)

Even the CEO of Philip Morris must understand the meaning of a few extra numbers - the costs of overwork, the health effects of stress, no time with family. If his account books reflected just the value of time and health, in addition to sales and profits, I don't believe he would remain unmoved.

Thirty years ago, almost to the day, just before he was assassinated, Robert Kennedy said: Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things..The GNP counts air pollution and cigarette advertising and ambulances to clear our highways of carnage..Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play..It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion or our devotion to our country; it measures everything, in short, except that which makes life worthwhile.

Of course, it would be a much more direct path to a decent society if policy-makers recognized fundamental human, social and environmental qualities as having intrinsic value in their own right, and if these values were considered in all policy decisions. But until then, and while money and economic criteria still dominate the policy arena, and the consumer ethic guides the behaviour of ordinary citizens, a genuine progress index at least can demonstrate convincingly that these non-material values are also the living basis of true wealth and well-being.

There is no doubt that if the full social, economic and environmental costs of the MAI were included in the equation, we would see through the simplistic, narrow, spurious mathematics of the globalization dogma in an instant, and begin investing in genuine security, humanity, community strength and ecological resilience, that are the actual basis of wealth and prosperity, and, at a more profound level, that give life meaning and make life worthwhile.
 

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