Their mission? To draw up the new financial world order – one that satisfied their appetite for an open-market system.
Among their initiatives, which included the creation of the International Monetary Fund, they agreed to adopt gross domestic product as the international yardstick of a nation’s output.
By extension, GDP – the value of goods and services produced by a nation during a specific period, usually a year – came to reflect human progress.
Robust GDP crudely equated to a nation with a high standard of living – a strong economy normally manifests itself in a blossoming jobs market, improved infrastructure and better access to health and education services.
Seventy years on, however, economists and academics alike are casting doubt on the value of the measurement as a singular marker of national prosperity. And the chorus for change is growing louder.
Robert Costanza, public policy chair at the Australian National University, says the shortcomings of GDP are clear when assessing rapidly changing values – namely an individual’s quality of life and a nation’s sustainable wellbeing.
Prof Costanza is lead author of a paper on the issue that was published this month in noted science magazine Nature.
“GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality,” Prof Costanza writes in the paper, called Time To Leave GDP Behind.
“Increased crime rates do not raise living standards, but they can lift GDP by raising expenditures on security systems.”
Prof Costanza says relying on GDP to paint the full picture of a nation’s wellbeing is akin to assessing your health by looking only at your daily food intake.
“It’s not that food intake is bad, but if you only worry about food intake (and try to maximise that) you are going to be in a heap of trouble,” he says.
“Your overall health is a much more complex thing and many of our economies are now obese from overconsumption of the wrong things with negative side-effects.”
The challenge in unseating GDP lies partly in the worthiness of any successor.
The United Nations,
through its Sustainable Development Goals program due for submission later this year, is aiming to garner something nearing consensus on what else is worthy of measuring.
It could be as simple as happiness.
In 2011, a resolution was passed by the UN’s General Assembly requesting all member countries measure happiness – just as the remote Himalayan kingdom of Bhutan had done by tracking Gross National Happiness since the 1970s.
In Bhutan, happiness is the central plank to their way of living.
Although the average Bhutanese earns just $480 a month, they have embraced pursuits beyond the purely material.
Their elaborate GNH index measures, among many things, an individual’s psychological wellbeing, health, education and use of time – deemed the bedrock on which happiness is built.
It purposely divides citizens among the “happy” and “not yet happy” and has led to government policies banning advertising, plastic bags and even traffic lights.
And it’s catching on.
British Prime Minister David Cameron has asked his statistics boffins to measure national wellbeing, while former French president Nicolas Sarkozy proposed a series of happiness indicators revolving around work-life balance, chores, moods and the frequency of traffic jams.
Back home, the Australian Unity Wellbeing Index is an annual survey that claims to fill the gaps left blank by GDP.
Whether the highly subjective concept of individual bliss – in its many guises – has any globally comparable value, let alone economic worth, is up for debate.
According to last year’s UN-commissioned World Happiness Report, there are major benefits behind the grin. Happy people live longer, are more productive, earn more and are better citizens.
Another measure, the Genuine Progress Indicator, starts with the cost of personal consumption then makes additions and subtractions based on an individual’s volunteer and household work and the cost of their impact on the environment through, say, pollution.
Crucially, world GPI has flattened since 1970 even while GDP continued to climb.
Prof Costanza acknowledges that “none of the current alternatives are sufficient on their own” but says they all form different pieces of the puzzle.
Yet merely replacing GDP with a separate metric would be a big call.
HSBC Australia chief economist Paul Bloxham says that while GDP is “not a perfect measure of human welfare” it is consistent and globally recognised.
“I’d be saying don’t throw the baby out with the bathwater. GDP has its limitations but is a good starting point to extend to the broader measures of welfare and productivity,” Mr Bloxham says.
“GDP figures have been put together for many countries for decades, so there’s some real value in that; if we want to understand what an economy looked like back in history, there’s a limited set of indicators available to us, and GDP is one of those.”
For an alternative metric to catch on, it would need to capture what happens outside the marketplace, such as “what’s happening in terms of homemaking, domestic chores, those sorts of things that have no value in terms of GDP measures”, Mr Bloxham says. “A lot of environmental measures are not consistent with GDP reporting. Natural capital is not always appropriately market-priced, so any new policy would need to capture that.”
In recent years, Treasury has defined the value of wellbeing to the Australian economy.
Through working parties it has established the various factors that lead to healthy living, such as the opportunities available to people, and the allocation and sustainability of those opportunities.
Taking the next step and actually recommending an alternative measure to GDP is not yet on the agenda.
Behind all the buzz for change, the metric powers on; the December quarter GDP reading is due for release on March 5 and, as ever, will be rigorously dissected and discussed.
Despite working well past retirement age, the statistic to rule them all appears to have plenty of days to come at the economic coalface.
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