We continue the serialisation of our intervention, The Viable Economy, this time with Chapter 12, “About Living Well and Its Measurement”, in which we ask what the economy is for, and how we would know if it was working well. In this we purposely avoid problematic terms such as “progress” and “development”.  In seeking measures of economic, social and ecological well-being, we recommend ones that express the interconnection among these three spheres.
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About Living Well¹ and its measurement

The problem

Just as the unviable economy is organised around the pursuit of aggregate economic growth, its economics uses the size and growth of the Gross Domestic Product (GDP) and the related statistic, Gross Value Added (GVA) as measures of economic well-being². and they are even used as a proxy for social well-being too³. GDP is calculated by adding together the monetary values of all the goods and services produced in an economy. Doing this involves a lot of assumptions and estimates⁴.

A focus on GDP growth, then, encourages us to value the amount of goods and services that are exchanged for money rather than their value to people and society. Economic growth as measured by GDP fails to distinguish between economic costs and benefits, or to account for uncosted things such as environmental destruction and unpaid work, for example looking after family members, neighbours and sustaining community.

These measures have two problems. Firstly, it is only clear to specialists what is actually being measured and this means that changes in GDP, although taken to indicate changes in economic well-being, do not necessarily indicate anything of the sort. GDP rises with cigarette advertising, armament sales, house prices, the credit-funded purchase of imported goods, encroachment on the green belt and traffic congestion, but it does not reflect those things that really matter to us. Desirable economic changes, such as a reduction the proportion of people in poverty, or the increase in real incomes, are not picked up. Secondly, the narrow focus on GDP determines economic policy: since success in steering the economy is judged in terms of changes in GDP, its increase becomes an end in itself with devastating impacts on the environment, as the 2014 IPCC report makes clear⁵.

The viable alternative

The viable economic approach uses statistics that reflect key aspects of economic, social and ecological well-being. Rather than treating each of these three domains separately, though, measures are chosen that reflect their inter-connectedness. So, the proportion of money spent and re-spent within the local economy indicates the success of that economy in protecting its wealth, its success in promoting local activity and jobs, and ultimately its ability to source things locally rather than from across the globe, with the associated carbon emissions. The share of income going to the poorest 10 per cent of people indicates their relative prosperity while also reflecting the level of economic inclusion. A more equal society in income and wealth also means less trivial consumption of high-energy goods and services (since the richer strata disproportionately spend their surplus on these things).

Some viable policy ideas

• Consider developing a ‘genuine progress indicator⁶‘, or similar, for the city region to measure and direct economic development towards social and ecological viability. This should include social and ecological measures such as well-being, inequality, work/life balance, commuting times and carbon emissions per person.

• Develop integrated reporting on economic, social and ecological well-being.

• Devise measures that capture,

• The bio-regional multiplier (money spent and re-spent in the region)

• Income and wealth distribution

• Credit and investment, broken down by sector

• Employment, unemployment and working hours

• Resource use and re-use

• Energy use – carbon generating versus carbon-neutral

• Estimates of carbon release and sequestration

• People’s use time, contrasted, for example with working time and work-servicing time (e.g. commuting).

• Unpaid work which contributes to individual and social well being.

• If presenting figures on growth, always break them down into component areas, e.g. manufacturing, agriculture, property sales, domestic consumption, etc.