Judith Robertson: GDP a soulless measure for wellbeing

Too many are without work: for every job vacancy in Scotland, there are more than five people unemployed. Too many are in work that doesn’t pay – more than 60 per cent of people in poverty are now in working households. And too many are in jobs that place unreasonable demands on them: long hours, short-notice changes to shifts and poor working conditions all create stress and disrupt family life.

And underpinning all of these problems is a fundamental unfairness: the wide and growing chasm between the richest and poorest. Government changes to our social security system will only increase that inequality. So – as we look around the wreckage of our broken economy – where do we go from here?

Last week, the American economist Joseph Stiglitz – former chair of President Clinton’s Council of Economic Advisers and a current member of the Scottish Government’s Council of Economic Advisers – gave evidence to the Scottish Parliament’s Economy Committee as part of its work looking at how we should measure economic success.

For too long, that success has been judged by just one thing – economic growth measured by gross domestic product. This is wrong. Economic growth on its own does not have a strong impact on poverty. Wealth does not trickle down in a way that allows everyone to have a fair share of our collective prosperity.

GDP fails to measure important things such as unpaid work, or time spent caring for children and the elderly. It also doesn’t capture how growth is impacting on our environment. Instead, we need an economic measure that focuses on those areas of life, development and growth that truly enhance the prosperity of communities.

Stiglitz agrees. He quoted Robert Kennedy, who said of GDP: “it measures everything except what makes life worthwhile”. Stiglitz said we need an alternative measure that doesn’t simply look at growth in market prices, but at wider economic wellbeing – and especially on how wealth is shared in our economy.

That’s important because, as Stiglitz said: “We pay a high price for inequality. It weakens our economy, undermines our democracy and divides our society.”

Last year, we made a start along that journey with the Oxfam Humankind Index for Scotland. Stiglitz called it “a commendable example”. We asked people to create a road map, telling us what they need to live well in their communities. We focused on areas of deprivation and on groups that civil servants might term “hard to reach”. We made time for them to reflect and discuss priorities.

They told us that it’s what growth delivers that’s important. Good health and housing are top priorities. Quality of environment is key, as is the strength of our friendships and the safety of those we care about. Work satisfaction and a secure, sufficient income were high on the list.

We were very pleased that Stiglitz welcomed our approach. We were also pleased to hear him recommend moving from an economic model that rewards practices that don’t contribute to our prosperity, but simply seek to extract profit.

He said: “When bankers brought the economy to the brink of ruin, they weren’t contributing to the economy. What they were doing – with predatory lending, abusive credit card practices and manipulation of the markets – was simply taking money from others, not making the economy bigger.”

Oxfam Scotland agrees with his assessment. At the moment this kind of economic practice is measured as success by GDP. A new measure of economic well-being would unmask its destructive nature. We don’t claim that the Humankind Index for Scotland is perfect. We don’t claim to have all the answers. But we are absolutely resolute in our belief that the principles that underpin the Index are vital and needed.

We hope the Economy Committee continues its work in this area. It is important and far-sighted. We hope the Scottish Government will follow this approach as part of a wider review of its National Performance Framework – which still has economic growth, as measured by GDP, at its heart.

And we hope this is the start of a journey towards an economy that allows us all to benefit from growth. «

Judith Robertson is head of Oxfam Scotland