Op/Ed Draft: "Time is right for reform of national accounts" - Stephen Posner

The time is right for reform of national accounts

Unless real reform is made to improve the way that federal government accounts for social and environmental conditions in this country, gross domestic product (GDP) will continue to mislead us in an erroneous pursuit of economic growth, regardless of the consequences.

As our country’s leading economic indicator, GDP has consistently proven to be an inaccurate measure of prosperity. GDP omits key parts of the economy that contribute to high quality of life such as volunteerism and household work. It also counts many detrimental costs as though they are good for society, as in the way it increases due to money spent cleaning up human-caused pollution, commuting long hours to work, and depleting nonrenewable resources.

The metric is still used to represent national performance and overall well-being, though organizations and countries around the world are increasingly recognizing the need for better measures of progress. Among them are the Organization for Economic Cooperation and Development, which has hosted a series of global forums on measuring the progress of societies; the European Union, with its Beyond GDP Initiative; Bhutan, an Asian country where Gross National Happiness is an official government statistic; and France, which recently convened a commission on the measurement of economic performance and social progress.

In the US, several efforts are underway to provide better information about environmental and social conditions to citizens and decision makers. These include the Genuine Progress Indicator, which has been applied in several states and is now reported by the Maryland government, and the State of the USA indicators due for release in 2010 by the National Academy of Sciences and other high-level organizations. The hard work will be to determine how to use these new sources of information to make budget decisions and evaluate policies.

Our continued industrial-age pursuit of consumption despite increasing environmental and social costs will leave future generations bewildered at our shortsightedness and selfishness. It is time for us to balance the checkbook, and revised national accounts that value social, economic, and environmental assets are a major step toward a more sustainable form of economic well-being.

Stephen Posner is an associate ecological economist with the World Resources Institute.