by Ida Kubiszewski

“At present, we are stealing the future, selling it in the present, and calling it GDP.” — Paul Hawken

Imagine if a corporation used Gross Domestic Product (GDP) accounting to do its books: it would be adding all its income and expenses together to get a final number. Nobody would think that's a very good indication of how well that business was doing.

Herman Daly, a former senior economist at the World Bank, said that, “the current national accounting system treats the earth as a business in liquidation.” He also noted that we are now in a period of “uneconomic growth”; where GDP is growing but societal welfare is not.

The good news is that there are several alternatives to GDP being actively developed, discussed, and used. One of these is the Genuine Progress Indicator (GPI).

GPI starts with personal consumption expenditures — a major component of GDP — and adjusts it using 25 components. These adjustments include incorporating the negative effects of income inequality on welfare; adding positive elements not considered in GDP, such as the benefits of household work, volunteer work, and higher education; and subtracting environmental costs and social costs like the costs of crime, unemployment, and pollution. In doing so, it paints a more accurate picture of how far we've come over the last three decades.

Regional level

In the United States, the states of Maryland and Vermont officially report their GPI annually. In 2010, Maryland was the first state to officially adopt the GPI as an alternative to GDP. The state's goal was “to measure whether or not economic progress results in sustainable prosperity”.

Since its beginning, Maryland governor Martin O'Malley has actively implemented policies to encourage the increase of GPI. The media has also taken up the challenge of shedding light on the true picture of societal welfare, with media coverage now regularly reporting on changes in GPI.