Want to know how society's doing? Forget GDP – try these alternatives
Written by Mark Rice-Oxley via The Guardian
Here are the week’s leading indicators. The Dow Jones industrial average topped 20,000 points for the first time. British GDP grew 0.6% in the final quarter of 2016. The FTSE 100 and Germany’s DAX 30 persisted close to record highs, while US GDP softened slightly.
Bored yet? I am. As a former financial journalist, I’m well acquainted with the merry-go-round of indicators that blip in and out of our lives like digital dopamine, telling us how well we’re doing. As a human being, I’m increasingly alarmed that these are just irrelevant numbers that have little or no bearing on how well we are really doing.
Stock market indices have long been decoupled from what is happening in the real world. All they reflect is the performance of big private pension pots belonging to the haves (in Britain only 58% of people have private pensions and the majority of those really very small), and how big the bonuses of a few thousand money men (yes, mostly men) will be this year.
Indeed, a company’s share price rising might be an indication of a round of redundancies or other cost-cutting which makes shareholders richer at the expense of staff. The number of people who should celebrate the Dow hitting 20k is truly tiny. Most of them wouldn’t be much fun to go out for a beer with.
As for GDP, has there ever been an acronym as spellbindingly dismal as this? GDP goes up if you sit in traffic for an hour with the engine ticking over. It doesn’t if you stay at home, caring for a sick child. GDP has soared in China over the past 20 years. Now its people wear masks in the street to filter the smog. GDP can’t measure the things that are really important to us – our health, relationships, environment – but can and does measure when industries strip-mine the Earth to make gimcrack that nobody wants but which people buy anyway, and then throw away.
Instead, I’d rather suggest a series of other metrics that give a clearer indication of where humanity is at. Perhaps these are the key performance indicators we should hardwire into our reporting calendar:
One of the lessons of the 20th century was that inequality breeds revolt and revolutions never end well. One of the lessons of the 21st century is that people seem to be determined not to learn the lessons of the 20th century. The Gini coefficient is a crude measure of how unequal societies are becoming. Some economists have been toying with another measure, the Palma ratio, which is better at discerning how much richer the richest cohort are getting, compared with the poorest. Both tell us much about our direction of travel.
If we must focus on financial instruments, edible commodities are surely more interesting than stock and bond prices. You can’t eat a three-month Treasury bill, after all. In 2007/08, a wave of riots swept the developing world as the cost of basic foodstuffs soared. Governments fell. A dotted line joined that manifestation of unrest with the Arab spring four years later. Food matters. We routinely write that as many as a billion people on the planet are hungry, malnourished. That’s far more than the number with Dow Jones tracker funds.
The most scary dataset of all. It goes up every year. And so do global temperatures. If this carries on for another couple of decades, people won’t be inspecting their portfolios – they’ll be foraging in the woods. Has anyone read The Road?
A veritable bellwether for so much – from the wretched state we’re in psychologically to the inadequacies of our healthcare systems. Prescriptions have doubled in England in the past decade. An interest to declare: I take them, and believe they work for me. But I also firmly believe they are prescribed far too readily, by overstretched GPs who have only six minutes to speak to patients and little recourse to anything other than pills. Personally, I’d be willing to shave a couple of points off GDP in return for a more comprehensive programme to address this 21st-century epidemic.
Not just in the UK, where it’s risen for six years in a row, but in California, Paris, Moscow. Surely, one of the first questions a newly arrived alien might ask upon landing in Britain would be “why do so many of you earthlings live outside?”, and not “how are my BT shares doing?”
Admittedly, this is not a thrilling one to monitor as it doesn’t move much. But it is moving – and in the wrong direction for lots of developed countries. The dependency ratio is the number of working-age people compared with the number of children and those over retirement age. According to the Resolution foundation, there are currently seven dependants for every 10 working-age Britons, but this will increase to eight in the 2020s and nine by 2050.
I’ve barely scratched the surface. Everywhere you look, there are better benchmarks than these tired old financial yardsticks. Let’s retire them, and find a new set of data to measure the performance of our leaders.