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The World Needs a Better Way to Measure the Well-Being of Nations

09/25/2015 08:44 EDT | Updated 09/25/2016 05:12 EDT
Sergey Galushko via Getty Images
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by: Craig and Marc Kielburger

The world's second-worst oil spill, the Deepwater Horizon disaster in the Gulf of Mexico in 2010, killed 11 people and poured 750 million litres of crude oil into the ocean.

But it was a boon for the U.S. economy.

Capping the underwater oil geyser and cleaning up the spill created 4,000 jobs and as much as $6 billion in economic activity. Even subtracting the jobs lost in local tourism and fisheries, there was a net gain of 1,000 jobs. From the perspective of the gross domestic product (GDP), the disaster offered a four-year economic boost for America. The same can likely be said of the more than 30 major oil spills and other natural and man-made disasters that have occurred around the globe since.

We struggle to wrap our heads around this seeming contradiction. How can any form of accounting place such tragedies in the black? How can clean oceans -- how can people's lives -- have no inherent economic value?

How the well-being of nations is measured may seem like a snore-inducing topic for policy wonks. But tracking progress is critical to building a better world. We are part of a growing crowd, including economists, who believe it's time to change the measure we use to assess the state of nations.

Simon Kuzents, the economist who developed the GDP measurement in the 1930s, warned it was not a good meter stick for national well-being. Still, that's exactly how the GDP has been used globally since the 1940s.

Like most economic concepts, GDP is complicated. Distilling it down, GDP is the total value of all the goods and services a country produces in a year. So, creating jobs and producing equipment to clean up an oil spill, for example, adds to the GDP. As does producing guns and bombs for war. GDP is blind to factors like unemployment, living conditions and environmental degradation.

Think of it like this: you make $100,000 a year and your neighbour makes $50,000. But you're up to your eyeballs in debt, you have no leisure time and raw sewage keeps backing up into your basement. Your neighbour has little debt, lots of free time and a clean, comfy house. Apply the GDP measure and you are better off than your neighbour. Make sense? Not really.

Around the world, people are building better meter sticks.

In the early 1990s, the United Nations combined average individual incomes, education and life expectancy rates to create the Human Development Index. HDI is most often used to track the progress of developing countries. And while it's an improvement over GDP, HDI still only covers a limited range of factors that influence people's lives.

Ten years ago, a new method appeared called the Genuine Progress Indicator (GPI). It assesses the sustainability of a country's income by deducting factors like income inequality and environmental degradation from GDP. The GPI also includes the estimated economic benefits of unpaid housework and millions of annual hours of volunteering.

Four U.S. states -- Vermont, Maryland, Washington and Hawaii -- now formally look at GPI as part of their budget development process.

And then there's Bhutan's gross national happiness.

While it may sound like a warm, fuzzy tourist slogan, Bhutan has developed hard metrics to gauge its happiness as a country. In 2010, the Bhutanese government conducted a survey asking its citizens about income, assets, employment, leisure time, daily hours of sleep, health of the local environment, education and more. The government uses the results to create local programs to address specific issues -- such as not enough social or cultural activities -- across the country.

All these different methods have their advocates and cynics. Meanwhile, most economists and world leaders stubbornly refer to GDP.

Whether it's genuine progress, national happiness, or a system that blends the best of both, the global community must agree on a more holistic way to measure our nations' progress that doesn't just count the money we make.

Because we don't want to live in a world where an oil spill counts as progress.

Brothers Craig and Marc Kielburger founded a platform for social change that includes the international charity, Free The Children, the social enterprise, Me to We, and the youth empowerment movement, We Day. Visit we.org for more information.

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