In this post from CASSE Eric Zencey explains how the Genuine Progress Indicator (GPI) has been adopted as a measure of success by Vermont’s ‘Comprehensive Economic Development Strategy’. It aims to improve the GPI  by 5% over 5 years.

The GPI subtracts from GDP the social and environmental costs of economies, and includes other measures of value and prosperity, which are left out by the measures broadly used to gauge economic success, like GDP and its regional variant GVA.

The GPI takes into account the costs of crime, pollution, commuting and inequality, and the value of education, volunteer work, leisure time and infrastructure.

The above all sounds pretty agreeable and also un-exceptional for ‘community strategies’ or ‘economic development strategies’, isn’t this the kind of stuff public policy makers weigh up already?

The significance of bringing these social and environmental factors into a single metric like GPI, which is not without its dangers, is nevertheless demonstrated in graphs like this below.

Globally GDP and the broader measure of progress GPI rose in tandem to a peak in the mid 70’s after which the relationship breaks down with the GPI going into reverse. The increases in incomes are cancelled out or outweighed by increasing environmental and social costs. GDP growth, or the aggregate economic development pathway pursued, has arguably become uneconomic.

The graph for the UK where recession, unemployment and austerity in the 80’s caused a lurch in the GPI followed by a recovery, shows the fragile and complex relationship between economic stability and genuine prosperity. GPI cannot be restored by simply sending GDP into reverse.

Recession and austerity destroyed progress in the GPI by an order of magnitude higher than the downturn in GDP. This highlights the importance of a post-growth economics being about a coordinated approach to employment, incomes and well-being. Not, as it is sometimes misconstrued by those unable to see outside of the orthodoxy, a blasé attitude to recession.

Nevertheless, although GPI eventually recovered in the UK there has been little progress in the 20-30 years since the 70’s, despite continuous growth; GDP has not been a very good measure of economic progress for quite some time.

It demonstrates what economists are so familiar with at the micro-economic level, that diminishing marginal returns result in an equilibrium condition and an optimum size for an economic enterprise.

The national and global economies are the total of economic enterprise, subsets of the planetary eco-system and also have an optimum size defined by the finite nature of the planet. In developed countries we have exceeded our share.

This does not mean economic development ends. We must have more economic change not less and improve the social and ecological inefficiency of our uneconomic system. There is still plenty of room for the deployment of more ecologically efficient technologies, but most importantly, and most often overlooked, qualitative development in the organization of employment, well-being and quality of life. We need to work and consume less and focus on equality.

The adoption of GPI as a measure in Vermont, Maryland and Oregon is a good example for regional and local government in the UK to focus on economic development that better serves there citizens, as opposed to a blind pursuit of GDP. It is not however a fix-all.

Vermont’s Economic Development strategy still aims for growth in GDP, incomes and jobs alongside an increase in the GPI. Which as Zencey points out, suggests a failure to realise the impossibility of infinite GDP growth. It is nevertheless an important step in re-examining the way economic development is pursued.

The adoption of GPI won’t make bring a sustainable, prosperous, post-growth economy into being by itself. There are significant national and international reforms needed to do that. But a focus on genuine progress would be a vast improvement on current regional economic development policy making.

It would be interesting to see how Manchester has performed in relation to the GPI in recent years, I have yet to come across an attempt to measure this. What priorities for economic development would it now throw up?

Chances are it would throw into question some of the priorities currently taken for granted under the deceptive idea that Economic Growth is still a relevant measure of economic progress or prosperity.